Rochester NY · Member since 2018 · 33 posts · 16 votes
Hello,
I have a question regarding making my first Rental Property investment. Should I buy a Muli-family home that is very high quality and needs nothing done and has potential to convert the attic into another unit. This property also has a potential to produce $1600 dollars in Rent per unit (2 total units at this time). Or buy a lower price property that needs some love that has 4 units that would rent out for around $800-900 each. The catch is that I will need to live in whatever property I pick because I am getting a 3.5% FHA loan. For the High price unit I might just be breaking even but after the first year has the potential to make almost $22,000 in net income a year VS the Lower price unit that I can start making cash flow on while I live in it about $10,000 in net income per year.
I have a unique situation. I would love the feedback and any wisdom you can share with me.
I'm looking to buy multifamily properties in B or C+ neighborhoods that need rehab or have another value add feature available. I'm in a unique situation because my current employer is going out of business in 4 years.... Challenge Accepted! So I need to recycle my funds in order to acquire more properties in a short amount of time. My plan is to use Brandon Turner's "Stack Method" and acquire 8 doors this year, then so on.
My long term goal is financial freedom, I spent my 20s grinding away thinking all debt was bad and the stock market would do it for me. But more specifically, to acquire the doors necessary to not be forced to find another job in 4 years.
I'm new to BP and RE investing (I've made several offers but no deals secured yet) so take my advice with a grain of salt but I think what you're going to get a lot of is... "it depends."
The experienced investors may be able to help out more if you clarified what your end goal/strategy is. Are you looking for quality or quantity on your properties? Appreciation or cash flow? How much work are you willing to do, etc, etc...
My two cents; I prefer to be leveraged and want to use the velocity of money to my advantage. I think the most advantageous way to do that is to find value add properties that I can force appreciation. And I believe cash flow is king; appreciation is a nice added bonus. So, I'd personally choose the 4 units. Hope that helps.
@ DerekBailey
Hey thanks for the suggestion. I think your correct. Im looking for cash flow. Im trying to buy a home that will allow me to make enough cash flow so I can then buy higher quality homes in the future and build up my portfolio of properties. I think it would be best for me to buy a home at a great price and make cash flow rather than gamble on what if's and buy a higher price home and not realizing any cash flow after I just bought it. What kind of properties are you looking to buy? Whats your long term goal?
I'm looking to buy multifamily properties in B or C+ neighborhoods that need rehab or have another value add feature available. I'm in a unique situation because my current employer is going out of business in 4 years.... Challenge Accepted! So I need to recycle my funds in order to acquire more properties in a short amount of time. My plan is to use Brandon Turner's "Stack Method" and acquire 8 doors this year, then so on.
My long term goal is financial freedom, I spent my 20s grinding away thinking all debt was bad and the stock market would do it for me. But more specifically, to acquire the doors necessary to not be forced to find another job in 4 years.
@Derek Bailey
That's sweet. Im not working with much cash but I have a friend who believes in me and is willing to invest money towards my cause which is amazing. I like the stacking idea as well. If you read Brandons book on Invest in in Rental Properties you'll see he has a ten year strategy where you slowly build up your doors each year over ten years with the equity and cash flow from those properties. Im super excited but have a lot of analysis to do before I make any offers. Good luck man and you got this!
@Frank Leone that's great man. Having a supportive cast is crucial. Thanks for the vote of confidence! It'll be a fun journey at the absolute least. I've made a few offers (and have a few waiting responses right now) but haven't closed a deal yet. Soon though.
I just bought that book of Brandon's last week actually, I'll be reading it shortly.
@Jacque Sacramento
The tenants would be better quality and would pay twice as much. But if im living in one of the two units I wont be seeing any cash flow until I move out a year later.
Dennis is right. When it comes to multi-family buildings, the biggest factor is the number of units. You should be looking at more doors, ideally one that needs renovations. If you're buying top-notch poverty, that takes some value out of it from an investor point of view.
Example: I own a 76 units property that was valued at 5M$. The property in particular had no work done by the previous landlord, it needed roofing, intercoms installed, painting, and so on. So I put in 400k$ to rehab the property over 2-3 years, and today, I had it evaluated at 9.5M$, which allowed me to refinance into another property this summer.
Key: Look for more doors that needs rehab.
Oh and NY isn't particularly the best place to start real estate investing in lol (the city's meant for the rich). But good luck!
It really depends on your long term goals, your own personal risk tolerance, personal management tolerance etc. Both kinds of properties can make money but they do it in much different ways.