New Member From Southern California

37 Replies

New the Bigger Pockets community and looking to increase my knowledge in the multifamily investing side of real estate investing along with purchasing 5 units a goal for my first year. I would love to concect with like minded investors who have "boots on the ground" learn as much as I can from them along with creating a team for each state that I am looking to purchase multi-families in.

Hey Julien,

Greetings from another SoCal investor. I actually grew up in Riverside off La Sierra. The quickest way to jump start your goal of 5 units in your first year is to pick up an FHA 3.5%-down fourplex first and foremost and then after that look for a SFR or two out in the IE where there's still cash flow to be had.

One thing to keep in mind when looking for an FHA owner-occupied triplex or fourplex is that 85% of the market rents on all the units (including the one you occupy) need to cover your monthly payment (principal, interest, taxes, insurance, and mortgage insurance). This is known as the self-sufficiency rule. It only applies to 3- and 4-unit properties (not SFRs or duplex) bought using FHA financing. I put together a spreadsheet here to help potential house hackers quickly analyze whether or not a property qualifies. There are other FHA requirements concerning which you should contact your local lender, but determining whether or not a triplex or fourplex meets the self-sufficiency rule is a good place to start as this rule will immediately eliminate many properties from your search, especially in expensive markets like ours.

Welcome Julien! If you are looking to expand your knowledge and learn from other amazing people who freely shares their tips and tricks, then you have found your new home with Bigger Pockets. It's a great mix of flippers and buy and holders here. Best of luck to you on your new adventure.

Wow thank you so much for you much needed expertise, input and advise. My strategy is to purchase my first 5 via cash. I currently working for a funding company and we have funded a couple of property management companies who have turnaround and used the capital to purchase multifamily units from the 15k-40k realm in the Cleveland area, south & central Florida area along with Texas. After speaking with the 3 property management companies we have funded they, advised they can facilitate the etire process for me, from the real-estate side of locating the property , rehab and renovation title services along with legal assistance and lastly the property management side of locating & qualifying renters for the unit. The price range I am looking to spend for my units are between 20k-30k each in these areas or suggested. They have advised me that, this price range is very doable. I am confident through the bigger-pockets forum and wealth of info along with the first set of purchase I will be able to get my feet wet and in the door to multifamily ownership. The next phase, would be that once I have acquired and went through the learning curve of the first five, is next to move upto a larger apartment complex of 10-20 units secured with a loan by using the collateral of the 4-5 properties that I own outright. I think that will enable me to do so, as I will have more leverage and lower my risk and out of pocket expense. But don't know the details and full intricacies so that's why I am here. Any input would be greatly appreciated.

Hi Julien! I'm a Real Estate Broker Associate in the Orange County area. I would be more than happy to talk to you about your real estate ventures anytime! I really enjoy talking with investors and assisting them with making their goals and aspirations come to life...feel free to PM me!

Hi Julien,

Welcome to BP, this is a great website and resource for all types of real estate investing.

I always recommend these 3 things to beginners:

1) Do a lot of research here, there are several discussions for investing out of state, read those, investing out of state is challenging.

2) Do not spend a lot of money with coaches, it would be much better to put that money to work and learn from experience, I'm not against coaches or education, but you need to be careful as there are some that are really bad.

3) There are many real estate clubs out there, visit them, select your favorites and meet other investors working your area. You can find info on clubs here and also you can look at meetup.com. Networking is key to success.

Cheers! see you around...

I have yet to to do research on the Connecticut market. What statistics do you have for the Connecticut area and do you have properties that you rent out in Connecticut. Thanks for connecting 

Originally posted by @Julien Rickard :

Hello Matt Motil,

Based on the Ohio area as a whole, what areas do you think are suitable/desirable (less headache) for my current price range.  Thanks for your input

 For your price range it's going to be very easy to get into a D class neighborhood. Need to increase up to 50-60K to get into the West Cleveland. 

Originally posted by @Julien Rickard :

Hello @@Federico Gutierrez thank you, would you consider the West End to be a A-C area and do you think the rent rolls reflect better. I am amusing so , but i know to never assume.

 West suburbs of Cleveland range from A-C areas. In A areas, it's not hard to get upwards of 0.08-0.1 of market value in rent. In the B-C areas, the rents are actually higher. The properties that @Federico Gutierrez could show you in the 50k-60k range would get anywhere from $750-1000/month depending on the home and area. 

I have worked with Federico on a number of transactions in the area and I highly recommend working with him if you consider investing in Cleveland. 

Originally posted by @Julien Rickard :

next to move upto a larger apartment complex of 10-20 units secured with a loan by using the collateral of the 4-5 properties that I own outright. I think that will enable me to do so, as I will have more leverage and lower my risk and out of pocket expense. But don't know the details and full intricacies so that's why I am here. Any input would be greatly appreciated.

 Why bother with the 5 unit if your plan is to go for 10-20? You can't use one property as collateral to buy another. You can use the free and clear property to get a loan. Then use that cash as a down payment on another, but you'll end up with less cash than you already have because you're not going to get 100% financing on a 5 unit property. If you already have the cash, just use it as a down on the larger property. I think you'll regret buying small apartment building, out of state at that price point. If you have zero property management experience, you're going from zero to "What the hell did I do?!" with one escrow. Low end tenants are as entertaining as they come, but you have to have experience and an understanding of what to expect. You also have to have a lot of knowledge on how to deal with and negotiate with people at this income level. I'm sure you're thinking, "I'm going to use property management," which is great. However, you'll be repeatedly disappointed when you open that envelope every 30 days and wonder why your check is so low. 

Thanks so much @Matt Motil & @Aaron Mazzrillo for your advise. I will definitely reach out to you Matt & Federico based on your experience/expertise in the Ohio area with your out of state investors

Aaron, yes that is my goal, to make multiple purchases through the course of the 2016 year as my funds increase through the year and once I have 5 separate multifamily properties which all will be owned outright, to use them as a collateral for a much larger unit. Hopefully I will be in a better position as time commences and will be able to buy my first complex closer to home., but at the end of the day the deals/properties have to make financial sense. I definitely know its not going to be all sunshine and rainbows but I do think there is some opportunity to learn, grow and expand my education in this area and financially instead of "parking" my money at the bank. Aron I would love to dialog with you more as well on your experiences.

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