All Forum Posts by: Patrick P.

I appreciate everyone's feedback and the discussion that's going on. Very good input.

Now, Marco's post about his new construction props bring up another subject that I've been looking into as well but am still trying to wrap my head around. The properties are new construction and offering 8.8-9.5% cap rate which seems to be fair for that area. I'm sure the asking price includes a nice bit of mark-up for all the trouble they went through to acquire land, build the property, etc....

I've just started conducting research on which would provide more bang for your buck. Buying an existing "established" multifamily turn-key and running with it OR securing financing to build a 4-plex or smaller 6-10 unit apartment building/complex? It SEEMS it would be most cost effective to take that approach although I know that is a WHOLE other can of worms. I know all of this is speculation and depends on where you are, the markets, the outlooks, etc... but on the average, how much more cost-effective is it to build and hold than it is to buy and hold?

Also, another cheeky little idea that I haven't dedicated time to yet... mobile home parks! Not really my cup of tea, but I see a lot of them out there, and claiming big numbers. I'm sure most of it is due to fibbing on the seller/broker's part but...

Any thoughts?

Thanks again for everyone's time. I know you all probably deal with all of these newbie questions and are most likely kicking a dead horse for the 50th time.

Glad to hear you got rolling John. Sounds like your property is doing well for you. Your approach seems to be a bit more conservative and sensible than mine. As opposed to "graduating" to the next level (if you will), I've been hell-bent on diving right in. I guess my thinking has been that with more units per property, the risk is spread out a little more and the probability of profitability is increased slightly. How long did you search until you found your 1st prop if you dont mind me asking? Did you work with a buyer-agent or anyone else by chance or did you fly solo out of the gate?

Thanks for the input Marco.

I've thought about that approach as well. Spreading it out over multiple properties could mitigate some risk I think. But just for the sake of numbers, overall, what is a realistic expectation for a multifamily cap rate? I said 15% because based on glance-over analysis, there are several properties I've seen listed that could manage 15%. There are several listed as 20-30%. But I find it hard to believe that a property can perform that well without something being wrong with it (on its last legs, high vacancy, in an absolute warzone, Detroit-like abandonment from an area, etc). No matter how you slice it, factoring in leverage, the most you can leverage at best is 5:1 on your money right? In the multifamily arena, what are the pro's for in regards to a cap rate and CoC return? I imagine someone that's plugged in fairly well can find steals on the daily. But for the common folk, what's realistic?

Hello everyone!

I am no stranger to BiggerPockets, however I am a new member. I've been trolling the internet for a year or so now, studying real estate from most angles. I've dug into flipping, wholesaling, renting SFHs, and multifamily. Based on my goals, I think multifamily investing is the way forward. From what I've seen (keep in mind I'm very new to the arena), multifamily properties are cash-flowing fairly well these days and deals seem to be out there. I am less concerned about appreciation and am more interested in maximizing cash-flow. Not to bore everyone with my own background but here's a little blurb about my situation:

Single, 29 years old, no debt, $100k in the bank and a well paying job. I'm at a cross-roads with work but regardless at which route I take, I want to invest in multifamilies and get going with building my cash-flow and net worth. I'm a minimalist and don't require TOO much to get by. I'm basically looking to stash my cash into something that COULD eventually provide enough income to retire young (my ultimate goal). Based on what I can find, at BEST, lenders will only loan up to 80% LTV on commercial properties at roughly 5.25-5.5% (depending on terms and all that). My end goal is to receive somewhere between $50-100k/yr take-home cash-flow after all is said and done. I understand that this will be tough when starting out with just $100k (plus closing and fees). Assuming I can finance 80%LTV, it seems possible I could land a property for around $500k with a 15% cap rate which would probably net around $40-50k after expenses and debt service. If this were POSSIBLE, then I could easily hold and save the cash-flow for a couple of years and use that $80-100k to put down on a similar property which would then push my net income up to 80-100/yr. It all sounds nice and easy, but are properties really out there that perform as advertised? I know it takes alot of due diligence to ensure you're getting what's being pitched. Assuming it is feasible to acquire such a property, is this the correct approach to building up a solid cash-flow without overleveraging? The other school of thought is to buy-hold for a year or so, cash-out refi, and pick up another prop. But if you follow that chain long enough, you're paying more interest and getting less return than what it's worth. My thinking is that if I can manage to get 2-4 properties within say... 5-7 years, based on the numbers above, I should be styling. It's very easy to crunch numbers and come up with grand plans based on perfect conditions, but I'm just curious as to how many investors out there are actually succeeding and meeting the goals they have set? Am I dreaming here or is this simple strategy remotely possible?

If so, any thoughts on the best sources for finding the appropriate properties for an investor? Buying agents? Banks? Auctions? Gurus!? lol

I'm very open to criticism and discussion and would love to dig deeper into detail so please feel free to throw darts. I appreciate any feedback/advice/conversation I can get on the subject.

Thanks!