Plan after the military investing in a 4 plex analysis

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Plan after the military investing in a 4 plex analysis

Oswaldo Arriasola
Edinburg, TX · Member since 2020 · 4 posts · 3 votes

4 plex analysis

Property is located in Edinburg, Texas

- Income generated per month from my job will be $6100

I am looking into one property at the moment for when I get out of the military next year and become a state trooper in Texas. I want to start investing in real estate within rental properties.

One of the properties I’m interested is as follows:

- The property is located close to an elementary, a Walmart and a university

- The property current asking price is $340,000

- The property is 4,778 square feet • 1,194 per apartment built in 2006

- Currently the property is currently leased for 750$ each and is generating $3,000 per month

- The property has a potential to have the rents increased to $850 meaning $3400 in total based on the surrounding rents being charged around in the market

- Estimated monthly cost

$2,227

- Principal & interest

$1,508/mo

included with no down payment

- Mortgage insurance

Not included since not required by VA loan

-Property taxes

$550/mo

-Home insurance

$119/mo

-HOA fees

$100/mo

Garbage lawn care and other services

-Utilities

Tenants pay for utility bills

- $2,250 a month in total on average

I plan on living in one since VA loan required me to vacate one apartment...depending on the rate of the income and the amount being generated and with the steady flow of tenants I can continue to get another apartment in the near future

- At the moment it is generating $3,000

- Since I’m living in one, the amount generated will be, $2,250

3000-750= 2,250

- Enough to pay off the property expenses and live for free

- if I increase the rents based on the location to $850 I will be generating $3400 but again since I’ll be living one I will be making $2550

- so 2,550-2,250= 300

- $300/mo will be generated in cashflow every month CAP rate of 6.7%

- When I'm able to rent the 4 plex fully the total cash flow would be $1,150/mo with a total CAP rate of 9.6%

After a year or two of seeing steady tenants and rent increase I will do the same process but this time I will not be living in one generating the full amount having more cap rate within my second property and have my money generated within my job to be able to back up the payments in case of vacancy and repairs

- Goal

Invest in real estate and have my money generates throughout my income to maintain a property

Own 5 properties within 5 years

Buy 4 plex’s

20 rental apartments in total in 5 years

Is this too much or should I look for something smaller to start off with, and does this seem like an attainable and realistic goal according to my calculations.

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Moises R Cosme
Flipper/Rehabber · Leominster, MA · Member since 2020 · 667 posts · 384 votes
6y

Oswaldo, 

Do this now!!!  I wish I was in your shoes & had the opportunity to start with a property like this...  If I was in your position based on what you describe I would purchase immediately.  

My prior experience has taught me:  take the profits from year 1 & 2 and update HVAC (if its within 5 years of its useful life), Roof (if its within 10 years of its useful life), Plumbing (make sure the system is in the best possible working condition) and Electrical (make sure system is in the best possible working condition).  HVAC & Roof updates - when you replace these you will be able to work with your accountant to receive a tax credit based on depreciation.  By re investing in the property early when you do not need the money, you are setting yourself up for future success by limiting future major unexpected expenses.  

I hope this helps !!!  Good luck brother!!! 

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  • Moises R Cosme
    Flipper/Rehabber · Leominster, MA · Member since 2020 · 667 posts · 384 votes
    6y

    Oswaldo, 

    Do this now!!!  I wish I was in your shoes & had the opportunity to start with a property like this...  If I was in your position based on what you describe I would purchase immediately.  

    My prior experience has taught me:  take the profits from year 1 & 2 and update HVAC (if its within 5 years of its useful life), Roof (if its within 10 years of its useful life), Plumbing (make sure the system is in the best possible working condition) and Electrical (make sure system is in the best possible working condition).  HVAC & Roof updates - when you replace these you will be able to work with your accountant to receive a tax credit based on depreciation.  By re investing in the property early when you do not need the money, you are setting yourself up for future success by limiting future major unexpected expenses.  

    I hope this helps !!!  Good luck brother!!! 

    1Reply
  • Joseph Ryan
    Mcallen, TX · Member since 2019 · 55 posts · 41 votes
    6y

    @Oswaldo Arriasola

    How many bed/bath? How old? How did you get your rent comps (Rentometer, Craigslist, calling signs, prop mgmt companies). I know brand new quads in Edinburg that are trying to get $850. Quads in the same area that are a couple of years old have rent more like $775-815. Remember to account for expenses also (rule of thumb is 50%) in addition to closing costs and adequate reserves.

    Yes house hacking is the way to go and Va with low Interest rates sounds great.

    Good luck!

    1Reply
  • Oswaldo Arriasola
    OP
    Edinburg, TX · Member since 2020 · 4 posts · 3 votes
    6y

    @Moises R Cosme

    Awesome thank you for the advice! I’ll make sure to keep you all updated on the progress of this rental property within my first year of investing!

    1Reply
  • Oswaldo Arriasola
    OP
    Edinburg, TX · Member since 2020 · 4 posts · 3 votes
    6y

    @Joseph Ryan

    Hey! I’ve been looking into the recent market where the newer 4 plex’s going for 400k have been going for $1000 a month from near the university of rio grande valley, this one that currently seeing is 0.4 miles away from an elementary a Walmart and a university, the size of the property is 4778 square feet giving it the price per feet worth it in my opinion and with the size of it rents could be potentially increased with a little work

    1Reply
  • Oswaldo Arriasola
    OP
    Edinburg, TX · Member since 2020 · 4 posts · 3 votes
    6y

    And the rent comps that I’ve getting are from current owner and the tenants that have lived there and it’s 2 bed 2 bath built in 2006

    1Reply
  • Jake F.
    South Padre Island, TX · Member since 2018 · 81 posts · 69 votes
    6y
    Originally posted by @Oswaldo Arriasola:

    @Joseph Ryan

    Hey! I’ve been looking into the recent market where the newer 4 plex’s going for 400k have been going for $1000 a month from near the university of rio grande valley, this one that currently seeing is 0.4 miles away from an elementary a Walmart and a university, the size of the property is 4778 square feet giving it the price per feet worth it in my opinion and with the size of it rents could be potentially increased with a little work

     That's a huge apartment for Edinburg. There are many fourplex communities around the university. The rents they are charging will limit what you'll get in rents despite your extra square footage. 

    We just bought a fourplex half a block from the university. Three 2br and one 3br. The 2br rent for 675 with about 900sf. Gross rents for building is 2800 and average purchase price about 90k lower. Neighborhood average for 2br is 650, which is common for the area. The budding was built in 2005 and is well kept. 

    Your plan is solid, but I think $850 is a bit high for the area. Make sure you can justify the purchase price with rent. Also, like Joseph said don't forget to set aside for maintenance and cap ex. 

    1Reply
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