Glendale, AZ · Member since 2017 · 1k+ posts · 236 votes
Hey guys, what would you do if you had 50 K cash?
1) Pay off your house completely so you would be mortgage free (let’s pretend that’s your mortgage balance)
2) Buy a 250k multi family that brings you 1k per month in cash flow Close to big city (1hr away )
3) buy 10-20 single family ( which is almost the same as The same amount of units Multifamily )that cash flow’s $200 per door , which would roughly give you $2000- 4000 cash flow per month
Realtor · Austin, TX · Member since 2014 · 74 posts · 48 votes
8y
The downsides of a single large building are that it's less liquid and more vulnerable to sudden market changes.
That said, I would still go the small-med multifamily every time. It's significantly easier to plan, manage, and budget for one building than 20. When it comes time to 1031 into a larger property it's easier to sell the one building within the allotted time than trying to worry about 20 separate closings and this is before you take into account agent fees for all those buys and sales.
There are also more options in commercial real estate. For example, if you want the pros of multifamily but want absolute minimum management fees then you might look into a small self-storage space instead.
1) Pay off your house completely so you would be mortgage free (let’s pretend that’s your mortgage balance)
2) Buy a 250k multi family that brings you 1k per month in cash flow Close to big city (1hr away )
3) buy 10-20 single family ( which is almost the same as The same amount of units Multifamily )that cash flow’s $200 per door , which would roughly give you $2000- 4000 cash flow per month
Always begin with the end in mind. What do you want from the money. Have active do you want to be? The peace of mind of having no mortage payment? A cash flowing asset with built in management efficiency and vacancy risk mitigation? Potential high growth returns but likely more management headaches?
1) I always struggle with this myself and I lean toward no. The peace of mind is great and it has the potential to ramp up your savings rate, but the interest rate on my mortgage is 4%. Put the money to work earning 12%.
2) I would lean toward this option as it gives you some level of managment efficiency, plus income security with the multiple doors. Although, the downside is small multfamily can be harder to sell sometimes as the potential buyer pool is smaller.
3) Better cash flow but use caution, also a potential management nightmare.
Contractor · Lexington, SC · Member since 2015 · 62 posts · 50 votes
8y
For me and my market (Lexington SC) I would pay cash for a doublewide on land. Depending on where I buy it, I could get anywhere from 850 to 1000 rent. And I would have 0 debt service.
I know that's not popular to pay cash, but to each their own. I would much rather live stress free from owning this outright, rather than leveraging myself and laying down at night thinking about all the things that could go wrong.
After I have this rental set up, I would then look to do it again and again and again and build a business around it.
I know mobile homes get a bad name, but that is area dependant. Here they have just as much value as stick built if they are attached to land by themselves.
For me and my market (Lexington SC) I would pay cash for a doublewide on land. Depending on where I buy it, I could get anywhere from 850 to 1000 rent. And I would have 0 debt service.
I know that's not popular to pay cash, but to each their own. I would much rather live stress free from owning this outright, rather than leveraging myself and laying down at night thinking about all the things that could go wrong.
After I have this rental set up, I would then look to do it again and again and again and build a business around it.
I know mobile homes get a bad name, but that is area dependant. Here they have just as much value as stick built if they are attached to land by themselves.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
8y
If I had $50,000 in cash, I would very wisely invest in my real estate education. I would look around for good seminars to attend and programs to take advantage of. After all, I would probably be able to make my money back on my first deal! And the contacts I would make during these seminars would be absolutely invaluable.
As for which seminar program to attend, there's only one hard-hitting, serious choice for committed professionals, but I can't say what it is here, or I might be accused to promoting a specific product or brand of seminars.
For me and my market (Lexington SC) I would pay cash for a doublewide on land. Depending on where I buy it, I could get anywhere from 850 to 1000 rent. And I would have 0 debt service.
I know that's not popular to pay cash, but to each their own. I would much rather live stress free from owning this outright, rather than leveraging myself and laying down at night thinking about all the things that could go wrong.
After I have this rental set up, I would then look to do it again and again and again and build a business around it.
I know mobile homes get a bad name, but that is area dependant. Here they have just as much value as stick built if they are attached to land by themselves.
Just my 2cents
By double wide you mean a mobile home?
Yes a mobile home. But not in a mobile home park. Mobile home with land.
If I had $50,000 in cash, I would very wisely invest in my real estate education. I would look around for good seminars to attend and programs to take advantage of. After all, I would probably be able to make my money back on my first deal! And the contacts I would make during these seminars would be absolutely invaluable.
As for which seminar program to attend, there's only one hard-hitting, serious choice for committed professionals, but I can't say what it is here, or I might be accused to promoting a specific product or brand of seminars.
The absolute last thing I would do is pay off my house.
Personally i would pay off debt, but I would pay off debt that is at much higher interest rates than my home.
But what if market crashes, you lose few renters and because of that couple of your rentals are sitting empty...you lose your job, and have no money to pay mortgage for those rentals and to pay for your own mortgage?
Would not it be nice to at least have this peace of mind knowing that at least you are not gonna lose roof over your head because you paid off your house?
If I had $50,000 in cash, I would very wisely invest in my real estate education. I would look around for good seminars to attend and programs to take advantage of. After all, I would probably be able to make my money back on my first deal! And the contacts I would make during these seminars would be absolutely invaluable.
As for which seminar program to attend, there's only one hard-hitting, serious choice for committed professionals, but I can't say what it is here, or I might be accused to promoting a specific product or brand of seminars.
McRib International
Waikiki McDonalds. Never was all that busy.
Kiosks. go 👆. Busy all day long.
10-15 people waiting for orders right now. 8.30 pm.
The absolute last thing I would do is pay off my house.
Personally i would pay off debt, but I would pay off debt that is at much higher interest rates than my home.
But what if market crashes, you lose few renters and because of that couple of your rentals are sitting empty...you lose your job, and have no money to pay mortgage for those rentals and to pay for your own mortgage?
Would not it be nice to at least have this peace of mind knowing that at least you are not gonna lose roof over your head because you paid off your house?
This is why you have vacancy reserves. Many people seem to be calling their cash flow some figure higher than it is. I set aside 8% per month for vacancy in addition to 5% cap-ex, 5% maintenance, 10% PM (which they take directly), etc.
People laugh when I say my cash flow is between $125-$175/month per SFR. If I simply stated gross rents - PITI as my cash flow, it'd be about $375-$425/month. We all know the latter numbers generally aren't realistic (for turnkey rentals with zero work/involvement on my part). If anyone knows where I can get $200+/month per door with a reputable turnkey company, I'd love to hear from you.