Found a 4-plex with great cash flow but I’m stuck
Shane DuncanPro Member
Rental Property Investor · MO · Member since 2024 · 24 posts · 23 votesFound a 4-plex with great cash flow but I’m stuck
Most Popular Reply
Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 379 votes
2yYou're going to need to reach out to the people you know for a potential partnership.
Remember, this is also only a 4plex so you are still able to only put down 3.5% -5% if you house hack it. Might be a good way to get your foot in the door, not having to partner with anyone, low downpayment and a cash flowing asset.
48 Replies
- Rental Property Investor · Grant, FL · Member since 2015 · 18 posts · 15 votes2y
- 2yKonstantin GinzburgPro MemberMember since 2021 · 376 posts · 242 votes
Quote from @Jimmy Bartlett:
Quote from @Konstantin Ginzburg:
If you are willing to move into the property for a period, you can try to look into primary residence loans such as FHA which have a 3.5% down payment requirement. To meet the terms of a primary residence loan, you will need to live in the property for a year. After the year, you can move back to your current house while keeping the FHA loan.
Can you expand on this? How do you prove that you have changed primary residences? This is intriguing to me and I'm sure others as well. I've been in my primary residence for 20 years and am building up cash now so I could see myself in this same position.
Any input you can give on this unique "hack" would be great! :)It's not difficult to do. It depends on the lender but it typically just requires you to sign a document provided by the lender that states you are intending on moving to the property and staying for a year. Keep in mind though, you should follow through with this agreement and move to the property since you can be liable and risk the lender coming after you if you decide not to move following closing.
- Member since 2016 · 17 posts · 6 votes2y
Quote from @Shane Duncan:
@Nicholas L.
That is a great point. I’m going to visit the property tomorrow and he is taking me through each apartment. I’ll be able to ask some in depth questions about everything. So far, he said responded to some of this questions with,“All new interior remodel, new electrical, new plumbing mostly new HVAC. $120,000 spent in repairs over the last 4 months. Exterior needs very minor cosmetics. New roof.” My first instinct was skepticism but it seems legit. The owner is aging and consolidating his rentals to a single area. This is the last one he has in this remote location.
As someone already mentioned, is seller financing an option? Many people who are looking to simplify like seller financing for the passive income stream.
- Rental Property Investor · Rochester, NY · Member since 2016 · 303 posts · 154 votes2y
@Shane Duncan buddy this is really great news. You have found the deal which is the most difficult part especially in todays market. 20k saved is awesome and although not enough to pick this up, I would continue saving up. In the mean time I would do a subject to with this winner you have and flip it even if you make 10k on it. This will give you a revenue boost to actually buy the next best thing that comes your way sooner.
Listen 175k for a 4 family is cheap but not that cheap. Yea everyone has an opinion here about the neighborhoods but at the end of day you buy what you can afford and can handle the stress that comes with it. C markets are perfect to invest in with excellent cash flow.
I wish you good luck and keep climbing!
@Shane Duncan= move into 1 unit ...house hack ...both conv and FHA loans are available with 5% or less down payment
- Rental Property Investor · MO · Member since 2024 · 24 posts · 23 votes2y
Quote from @Andrey Shostak:
Quote from @Shane Duncan:
@Nicholas L.
That is a great point. I’m going to visit the property tomorrow and he is taking me through each apartment. I’ll be able to ask some in depth questions about everything. So far, he said responded to some of this questions with,“All new interior remodel, new electrical, new plumbing mostly new HVAC. $120,000 spent in repairs over the last 4 months. Exterior needs very minor cosmetics. New roof.” My first instinct was skepticism but it seems legit. The owner is aging and consolidating his rentals to a single area. This is the last one he has in this remote location.
As someone already mentioned, is seller financing an option? Many people who are looking to simplify like seller financing for the passive income stream.
Unfortunately, no. I tried that already and the owner isn’t interested.
- Real Estate Consultant · Tampa, FL · Member since 2018 · 31 posts · 35 votes2y
Hi Shane,
I do investment loans everyday for people and it is really a simply process. If you have a good credit score and a business entity, you can use the equity from for your primary home to make up the difference in down payment. Or you could find a partner to put up the remainder. A DSCR loan requires no personal income documents, it is based on credit, reserve funds and property income. I would also suggest you reach out to someone who has experience in the BRRR method of
investing. Reach out to @Jorge Vazquez he has a wealth of knowledge and would be very happy to speak to you about this method and how it has worked for him. Good luck to you. - Rental Property Investor · MO · Member since 2024 · 24 posts · 23 votes2yThank you. I will reach out to him.
Quote from @Vanessa A Martin:
Hi Shane,
I do investment loans everyday for people and it is really a simply process. If you have a good credit score and a business entity, you can use the equity from for your primary home to make up the difference in down payment. Or you could find a partner to put up the remainder. A DSCR loan requires no personal income documents, it is based on credit, reserve funds and property income. I would also suggest you reach out to someone who has experience in the BRRR method of
investing. Reach out to @Jorge Vazquez he has a wealth of knowledge and would be very happy to speak to you about this method and how it has worked for him. Good luck to you. - New to Real Estate · MI · Member since 2024 · 70 posts · 22 votes2y
Hi Shane, I'm sort of in your boat. However, I haven't found a property yet. But if and when I do, I'm perfectly fine with a FHA loan and living in the property for one year. I can handle that!
- 2ySteve CastagnettaPro MemberMember since 2023 · 22 posts · 10 votesYes look at moving into one of the units as your primary then the amount is very small down . If it’s a 2 bed then house hack abd rent the other room .
Quote from @Shane Duncan:
I've been trying to find possible partners but it's proving difficult. This being my first deal is a real sticking point for them.
- 2yJorge VazquezBusiness MemberReal Estate Broker · Tampa, FL · Member since 2017 · 1k+ posts · 700 votes
Hi Shane, I have several recommendations: JV, Equity Sharing, Lease option, Sandwich Lease, owners financing with Wrag around, and Novation, to name a few..... But here is my first option:
My recommendation involves thoroughly analyzing the seller's financial and tax situation to determine whether receiving a lump sum payment is more beneficial than periodic payments. Suppose you find that regular payments are advantageous for them (which is the case for most landlords with several properties). In that case, you can then articulate the benefits of seller financing to them where they do not take the income all in one year and lessen the tax budesonide by spreading it for a few years.
If they push back and need more icing on the cake, consider offering an equity share arrangement. Such an arrangement could be modest, ranging from 1% to 5% for the seller, and would only come into effect in the future upon the sale of the property.
Sellers will likely have concerns regarding the assumption of liability. In this case, you can introduce the concept of a wraparound mortgage as a solution. A wraparound mortgage could mitigate their liability concerns, as it involves creating a new mortgage encompassing the original one, offering layered protection. This strategy addresses their apprehensions and demonstrates the potential for a secure and beneficial arrangement for both parties involved.
In the end, if it does not work, partnering with someone with the funds to buy it with you would be my second-best option! Better 50% of it than 100% of nothing! Good luck!
Graystone Investment Group519 Reviews - Rental Property Investor · MO · Member since 2024 · 24 posts · 23 votes2y
Quote from @Jorge Vazquez:
Hi Shane, I have several recommendations: JV, Equity Sharing, Lease option, Sandwich Lease, owners financing with Wrag around, and Novation, to name a few..... But here is my first option:
My recommendation involves thoroughly analyzing the seller's financial and tax situation to determine whether receiving a lump sum payment is more beneficial than periodic payments. Suppose you find that regular payments are advantageous for them (which is the case for most landlords with several properties). In that case, you can then articulate the benefits of seller financing to them where they do not take the income all in one year and lessen the tax budesonide by spreading it for a few years.
If they push back and need more icing on the cake, consider offering an equity share arrangement. Such an arrangement could be modest, ranging from 1% to 5% for the seller, and would only come into effect in the future upon the sale of the property.
Sellers will likely have concerns regarding the assumption of liability. In this case, you can introduce the concept of a wraparound mortgage as a solution. A wraparound mortgage could mitigate their liability concerns, as it involves creating a new mortgage encompassing the original one, offering layered protection. This strategy addresses their apprehensions and demonstrates the potential for a secure and beneficial arrangement for both parties involved.
In the end, if it does not work, partnering with someone with the funds to buy it with you would be my second-best option! Better 50% of it than 100% of nothing! Good luck!
Wow, thank you. That is great information.
- Rental Property Investor · MO · Member since 2024 · 24 posts · 23 votes2y
Wanted to post an update. I secured financing thanks to contacts I made because of this post. I love BiggerPockets. As I was preparing to structure my offer, I got a call from the property manager informing me that the owner had traded this property to a friend for an RV and an ATV! I’ve never heard of such. I reached out to the new owner and he has no interest in selling. Wow, pretty disappointed to have missed this but I learned a ton and met some great people. Thank you for all your help!
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
thanks for coming back to let us know what happened. i really don't think you "missed" anything here, this deal didn't add up and i am not at all surprised that this is how it ended up "selling."
on to the next one.
@Shane Duncan- thanks for the update and best of luck out there
- Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes2y
Quote from @Shane Duncan:
I have been devouring all real estate information for about a year. I’ve been scouring marketplace, Zillow, auctions, and have been driving around. I finally found a great deal that will cash flow and give me everything that I’ve been looking for, but I can’t get a loan without a bigger down payment than I can afford. The property can be bought for about 175K and it already has tenants and brings in 2600 per month. What can I do? How can I find a way to make this work when I only have 20K of my own funds to put in? And have a great credit score and a steady income but I have a mortgage on my primary as well. This would be a long-term rental and I would want to hold. The short term and balloon payments that seem to come with hard money are pretty intimidating. Does anyone have advice for me to finally take the plunge and be able to make this first deal work?
Just remember that on investment purchase (conventional) you wont be able to receive gifts to close the purchase so if you're going to buy and you want to bring in friends/family into the deal as a giftor, you'll need to be buying as primary most likely (allows gifts).
Also primary residences allow higher LTV's or lower down payments (same difference) 3-5% down versus 20-25% with non owner / investment occupancies.
This is to tackle the down payment issue you're experience above. However the next aspect is your income issue potential so in order to tackle this one we'd have to know what your approximatel income figures are to see if you have enough to qualify for the full 175,000 price ( or loan amount after taking into account down payment).
Some of that 2600 gross rental income might be able to be used to help you qualify for the property but only if this "property," has legal separate units (not one big SFR or house 1 unit, rather its 2-4 unit like duplex/triplex/fourplex). If its only a 1 unit property then you'll most likely need to qualify for this purchase with your own personal income.
Make sure you review all of your options (credit/income/assets) with a lender so you can determine this before you find deals that way you're not having FOMO looking at deals and not knowing how you can actually acquire them.
- Specialist · Frederick, MD · Member since 2017 · 475 posts · 454 votes2y
Quote from @Shane Duncan:
I have been devouring all real estate information for about a year. I’ve been scouring marketplace, Zillow, auctions, and have been driving around. I finally found a great deal that will cash flow and give me everything that I’ve been looking for, but I can’t get a loan without a bigger down payment than I can afford. The property can be bought for about 175K and it already has tenants and brings in 2600 per month. What can I do? How can I find a way to make this work when I only have 20K of my own funds to put in? And have a great credit score and a steady income but I have a mortgage on my primary as well. This would be a long-term rental and I would want to hold. The short term and balloon payments that seem to come with hard money are pretty intimidating. Does anyone have advice for me to finally take the plunge and be able to make this first deal work?
Bring in a partner by using an option. Divy up the benefits. If both parties agree, the option holder can be entitled to a share of cash flow and appreciation. There are members at MAREI (in Missouri) who understand this structure and might make good partners.
- Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes2y
Yes as @Marco Bario this is a good place to start at MAREI and @Kim Tucker she puts it on. It is the second tuesday of every month. We also have a multifamily meet up group that I help host next week in KC at strang hall on February 28th at 3 p.m. in Overland Park. Hope that helps!
- Member since 2020 · 12 posts · 4 votes2y
Quote from @Jimmy Bartlett:
Quote from @Konstantin Ginzburg:
If you are willing to move into the property for a period, you can try to look into primary residence loans such as FHA which have a 3.5% down payment requirement. To meet the terms of a primary residence loan, you will need to live in the property for a year. After the year, you can move back to your current house while keeping the FHA loan.
Can you expand on this? How do you prove that you have changed primary residences? This is intriguing to me and I'm sure others as well. I've been in my primary residence for 20 years and am building up cash now so I could see myself in this same position.
Any input you can give on this unique "hack" would be great! :)I'm not an expert. It's my understanding that you can now buy up to a four unit as a primary residence with a Fannie Mae/ Freddie Mac/ FHA loan. So you could rent out your current residence, buy a fourplex for 5% down, move into one unit and rent out the others. After a year, move back into your current residence and rent out the quadplex. No one will check that you moved, but if you buy it as a primary residence and don't move into it you've committed mortgage fraud.
- Flipper/Rehabber · Phoenix Arizona · Member since 2020 · 1k+ posts · 686 votes2y
I have not read all the responses to your potential 4 please
1- Maybe going to your Realtors Broker.
2-A 4 plex qualifies for a residential loan. You can stay in one for one night.
3- Get a great contractor to size it up on condition and repairs needed.
4- A Great Mentor on the above is well worth there cost.
- Lender · FL · Member since 2024 · 16 posts · 6 votes2y
Get a private money partner, e.g. they lend you the money for the down payment, get equity and cashflow. Cool thing with private money you can structure it like you want.
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