I am new to investing. I am 21. I have some money saved up I want to invest and am interested in real estate. I am searching for pros and cons on multi family or single family. Also new or used since I have some land here I could build on. My home town is growing quite quickly and is turning into quite a tourist hot spot. It also has good rent demand. From what I understand this would be a good location buy in. I have looked at a few just to get my feet wet. This is one that stands out to me. Any advice on any numbers I may have missed would be great. Also If this looks like a decent deal.
The asking price is 135,000 but I have already decided 135,000 would not make sense. I am wondering if 100,000 would. Its a 3 bed 2 bath. finished basement with 2 rooms in the basement listed as bonus and office. It doesn't need any work.
7% vacancy= 77
5% repairs= 55
I would like some pros and cons on cash or finance also. I can do cash or finance. But personally don't see the advantage to cash. After going over all the numbers I will get a lot better return on MY money invested if I financed it with 20k down. Correct me if i'm wrong.
expenses with financing (monthly)
total expense + mortgage= 784
net cash flow= 745 (if paid in cash)
cap rate= 8.9%
cash on cash= 15% (if financed at 5% with 20k down and 5k closing costs)
This is my first time doing this so any advice would be great. Any numbers i've missed please tell me and if this seems like a good deal. If not why not and what should I look for in the future. Thanks a lot!
Generally you are going to make more money, longer, if you use smart leverage. If this is your first deal, and that's all your savings, you would definitely want to leverage, because you never want to be hard-asset rich and liquid-asset poor. The trade-off in a little less cash flow and paying interest allows you to a) do more deals, b) have a bigger safety liquid position.
Whether the house makes sense is hard to say. It looks like it should if you got it at 100k based on what you put down on here. My advice if this doesn't work out is to think about sticking to SFH until you get some legs under you. It diversifies your risk of vacancies, neighborhood devaluation, and other issues that may be beyond your control, and also opens you up to more possible buyers if you ever want to sell. Only investors will buy MFH, and they want a deal unless you find a sucker.
I highly recommend you leverage minimizing your out of pocket expense so you can buy additional properties and have a cash reserve. I also recommend you determine the desired ROI and buy only at that price point. The best advice I can give you is the following ... "You make all your money on the buy"... If you over pay you can usually never get that money back so be patient and find the right deal. Happy hunting!
P.s if you email me I will send you a cash flow calculator that factors in both debt vs cash side by side to help make good decisions.
Thanks to both of you for the info. Both make good sense to me. I appreciate it.
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