All Forum Posts by: Chase Gochnauer

Unless something has changed, you can get an owner occupant loan on a 4 unit, so that would be the way to go as it will limit your down payment to a small amount. Once you hit 5 units you'll be stuck putting 20% down. Just something to keep in mind.

Thanks everyone for the responses. So far the deal is looking good and it seems like I should qualify for the FMAC program, and my local bank may have something. We'll see how this goes!

Hey all,

I'm seriously looking at my first large multi-family, a 50 unit apartment complex. Approx $3m, 7-8% cap rate. Decent location. 

My question though, is in regards to terms for these size of loans. I have enough equity in other properties to use for 20% down. My bank that I do all of my SFH-8plex loans through is 4.5% & 20 year amort. Is it common to get 30 yr loans on these large complexes? Also, are rates typically higher or lower than a normal SFH investment loan? On my smaller properties I'm fine going the equity pay down route rather than extra cash flow, but on something this large, the extra cash flow would be nice.

Any guidance would be appreciated!

If your rate is less than 4 or 5% I don't see any benefit to doing this.

The Dave Ramsey snowballing approach makes sense on debt such as credit cards, etc, but IMHO doesn't make sense for investment properties. You'd be better off taking that $$ and using it as a down payment for another property.

But it's all about your risk tolerance.

Tyson, I have properties in Altoona. You will need to get a rental inspection/certificate from the city of Altoona before you rent. I don't see why you couldn't list it ahead of time, but you will want to be sure you meet their requirements and pass inspection before tenant moves in. Altoona is a little picky.

Same process with Des Moines.

Do you guys have HVAC rebates out there? We get about $1300 in rebates here for replacing furnace and ac

Water bill of $1607 means there's a problem, toilet running non-stop, leak, etc. 

What do you mean by "foreclosure company". Like auction.com, or a place actually offering turn-key properties that have been rehabbed?

6 months since you purchased and not ready, have you been fixing them? Who is getting them rent-ready?

Have you actually been to the properties?

I am in Iowa, in the middle of the winter, and I wouldn't pay more than a couple/few hundred bucks a month for utilities on a vacant house.

Wouldn't it have been easier to just remove a section of subfloor?

Two options. 1. Let him break lease and move on. 2. Put an egress window into the basement to make it a legal bedroom.

Also, I wouldn't let them sublease. Nor would I let them be the ones that put in the egress window.

If he's a halfway competent contractor to begin with, he would have already known that the basement bedroom is not legal without an egress window.

I would say it's indisputable that higher leverage, particularly at current rates, produces more income if the market is steady in most areas. It just introduces more risk in the event a market were to collapse.

The amount of risk that is safe to take, would be market dependent. Where I'm at here in Iowa, a 20% equity position in a property is a safe bet in my mind. Our "bubble" is not going to be as extreme as some much larger metro cities. 

If you were in a large market that were/are significantly inflated, then a 20% equity position might still be very risky as prices could drop 50%.

As far as tax consequences of paying interest, of course you don't want to spend money on interest simply for the tax deduction. But, it is something that you want to take into account, as when you have a mortgage at 3.5%, once you factor in the tax savings, say 30% tax bracket, you're really only paying 2.45% in interest after deduction.

So, when you pay off your $100k, 3.5% property, you're NOT saving $3,500/yr, you're only saving about $2,450/yr.