First property starting with a 4Plex
28 Replies
Michael Rodriguez
from Bay Shore, New York
posted over 3 years ago
Michael Rodriguez
from Bay Shore, New York
replied over 3 years ago
Jennifer D.
from Houston, Texas
replied over 3 years ago
Hi Michael,
I’m originally from rochester, ny and wanted to know how the job market was there? Are there enough jobs to justify rental for a long period (passive income)? Also, from my personal perspective, the majority of those I knew from rochester have moved away either due to college, jobs, or just plain trying to leave. So, from your research, do you think there really is an opportunity there? If so, I’d like to know in order to consider investing there. My parents still live there and so I’m still occasionally visiting.
Thanks a bunch!
Jason D.
Rental Property Investor from St. Petersburg, Fl
replied over 3 years ago
Michael Rodriguez
from Bay Shore, New York
replied over 3 years ago
Michael Rodriguez
from Bay Shore, New York
replied over 3 years ago
Jason D.
Rental Property Investor from St. Petersburg, Fl
replied over 3 years ago
Julien Walthour
from Rochester, New York
replied over 3 years ago
I️ can grant you access to the MLS if you would like To do some researching of your own
Ben Leybovich
Rental Property Investor from Chandler/Lima, Arizona/OH
replied over 3 years ago
Hey, so the question you didn't answer (or even think of) is what will your exit look like?
In other words, will it appreciate in price? Why will it appreciate in price? prove it :)
Michael Rodriguez
from Bay Shore, New York
replied over 3 years ago
Great question, @Ben!
I'm not sure about appreciation to be honest. What I do know is that I've done researched comps amd the property is actually worth $115,000 currently. My long term plan is to hold this property While purchasing other properties and paying this one down early so we don't hit the 8 property limit. My goal is 20 properties totaling no less than 50 units in the next 7 and a 1/2 years. From there, I intend to either Use the equity that I have in properties for a portfolio alone on a larger multifamily purchase or development (25+units). My backup plan is to sell off some of the properties (lowest cashflowing) for money towards the down payment on the large multi.
My primary intentions are all cashflow based with tax writeoffs along the way.
Matt Finneseth
Accountant from Fargo, ND
replied over 3 years ago
Originally posted by @Michael Rodriguez :
Great question, @Ben!
While purchasing other properties and paying this one down early so we don't hit the 8 property limit.
What do you mean by "8 property limit"?
Dan Heuschele
Investor from Poway, CA
replied over 3 years ago
I think it looks like a good investment if the area is not declining. However, where did you get that cap expense estimate? Typically I see only people that want to artificially show higher cash flow than what is likely reality with cap expense estimates that low. 4 units for $250 is $62.50/unit. I show a kitchen at almost $50/month. Maybe you meant $250 per unit which depending on size of the units, location, class of tenants, etc could be a good conservative value.
My own spreadsheet that started with one originally provided by @Ben Leybovich shows that I can project $250/month per unit.
Apartment buildings according to surveys can project with maintenance cap expenses near your numbers but they have a different volume.
Still it looks likely to be a good purchase.
Michael Rodriguez
from Bay Shore, New York
replied over 3 years ago
Originally posted by @Matt Finneseth :
Originally posted by @Michael Rodriguez:Great question, @Ben!
While purchasing other properties and paying this one down early so we don't hit the 8 property limit.
What do you mean by "8 property limit"?
There is a cap @4 on the number of mortgages one can have at any given time. My fiance and i can each do 4 which allows us to get 8. This will amd can be offset by home equity loans and paying down mortgages early to free up a few.
Aqil Dharamsey
Investor from Rochester, New York
replied over 3 years ago
Hi @Michael Rodriguez and welcome to Rochester. I am guessing this is your first property. Where abouts did you purchase did? Wow 5% down!! That is truly unheard of. Anyway you can share the lenders information? Also who's managing these for you? Take care and good luck!
Jody Newman
from Honolulu, Hawaii
replied over 3 years ago
Originally posted by @Ben Leybovich :Hey, so the question you didn't answer (or even think of) is what will your exit look like?
In other words, will it appreciate in price? Why will it appreciate in price? prove it :)
Ben doesnt like Cheap *** properties. They really dont make money. LISTEN 2 BEN.
Hard to believe a B 4-plex property is under $100k but so be it!
Michael Rodriguez
from Bay Shore, New York
replied over 3 years ago
Originally posted by @Jody Newman :Originally posted by @Ben Leybovich:
Hey, so the question you didn't answer (or even think of) is what will your exit look like?
In other words, will it appreciate in price? Why will it appreciate in price? prove it :)
Ben doesnt like Cheap *** properties. They really dont make money. LISTEN 2 BEN.
Do you mean cheap as in purchase price, current condition, or low income neighborhoods?
It definitely is a lower price point neighborhood.
The neighborhood is working class. The price is a steal for the quality. AND much of it condition wise was replaced in 2015 dueto a fire. All windows amd floors amd the roof were replaced.
Please clarify
Jennifer D.
from Houston, Texas
replied over 3 years ago
From what I understand, Rochester doesn’t really have new or old businesses there. After Kodak left, most that worked for them left. I’ve met several former Kodak chemists in Houston.
There seems to only be 2 employers there, wegmans and U of R. So what concerns me is that Rochester isn’t a growing market, at best it’ll stay stable. How are you planning on gaining long term? Rochester seems risky to me but you see opportunity, and I want to know what it is you see that I don’t?
Aqil Dharamsey
Investor from Rochester, New York
replied over 3 years ago
Hi @Jennifer D. Glad toy asked that question. You are correct most large employers have exited rochester Market. Being said that, this place is decent for cash flow. Because of low price point, the cap rates are generally in double digits. It's doesn't grow as much as Florida Texas etc but it's stable. This is a market you invest for mainly monthly passive income rather flipping for appreciation.
Jennifer D.
from Houston, Texas
replied over 3 years ago
hi @Aqil Dharamsey thanks for the clarification!
L. Matthew Perry
Real Estate Investor from Plainfield, NJ
replied over 3 years ago
@Michael Rodriguez - Congrats on your first acquisition target and welcome to Rochester! I have been investing in Rochester and Buffalo since 2008. Couple things I wanted to point out regarding your monthly numbers:
- Your maintenance estimate seems a bit low. I realize you consider the units in great condition since much of it was recently redone, but don't forget the tenant factor. Given the neighborhood rating you provided, you may not always get the best class of tenant that will take care of the units. Keep in mind, if you take on any RHA or DSS tenants, you will absolutely have higher maintenance costs.
- Property Management Fees are usually 8-12% of rents. So unless you are self managing or have a nice connection who is giving you a break, the $150 seems low to me.
- Water is tricky because tenants in multifamily units tend to be inefficient with the use of water. And it's hard for an owner to control that or even know which tenant might be the culprit. In my experience with my four families properties, the bill each quarter is between $150-$225.
- I would suggest if possible, you keep the tenants on a month to month to gauge their performance before you commit long term even though the treatment center is paying the rent. You just don't know the type of tenant you might get and it may make sense to have flexibility on when you can ask them to leave.
- When you calculate taxes, make sure you account for the change in assessed value which would impact your Monroe and City tax bill. You can usually call the city and get an estimate on how much your taxes would change based on the purchase price since Rochester claims to assess at market value.
- You should also consider a vacancy rate in your analysis - usually 10%. Keep in mind, even with the rehabilitation facility as a source of tenants, you'll need time in between tenants to make rent ready which means you aren't getting paid.
Overall from a cash on cash perspective, it seems like a good deal with room for the unexpected.
Good luck and congrats again!
PS - 5% on an investment property is a good deal.
PSS - You mentioned having a goal of 8 properties with 4 in your name and 4 in your fiancee's name. Keep in mind that once you get married some banks view you two as one and may limit your combined holdings. Consider putting a few in an LLC once they season. That way you can continue to buy in your name.
Chris Connery
Rental Property Investor from Cherry Hill, NJ
replied over 3 years ago
Paychex is a fortune 1000 company headquartered in Rochester.
Aqil Dharamsey
Investor from Rochester, New York
replied over 3 years ago
Thanks @Chris Connery for pointing that out. Although paychex is still based in rochester majority of the big players are gone such as Kodak, Bausch and lomb, etc.
the largest employer is probably U of R.
Chris Connery
Rental Property Investor from Cherry Hill, NJ
replied over 3 years ago
You're right. My point was it's definitely not a bleak situation in Rochester, IMO. Which I'm sure you already know.
Ray Lai
Investor / Vendor from San Diego, CA
replied over 3 years ago
Make sure you have some good insurance since these are people in rehab. You know what happens when someone fails during rehab? They get back into drugs and copper is something that people strip from buildings to sell for cash to buy drugs with.
The numbers look good because your endeavor is a high risk endeavor. Make sure you know why your 'friend' is selling because when numbers are TGTBT, more analysis is required.
If everything is correct and you add in at a minimum a 5% vacancy rate (10% to be conservative), then cool. Also, your Capex for a place that has 4 seasons seems awfully low for a multi fam even if most of the stuff is only 2 years old.
Thaddeus D.
Investor from New York, NY
replied over 3 years ago
What’s the specific neighborhood this is in?