All Forum Posts by: Dan Bernstein

@Joshua Hilliard You might want to consider using your VA to purchase a 4 unit. I'm not sure on Piscataway, but the loan limits on VA and FHA in DC are over 1.2 Mil since we are in a high cost of living area. That means you can purchase a residential multi with a very cheap loan. If you have a lot of equity in your DC home, you might consider selling and buying a larger commercial multi near campus. I would also line up some property managers if you are considering renting the property. It will be difficult to manage your property out of state.

@Derek Schwarz...I have helped Phd grads buy right out of college... I believe the standard is you have to be in the same field of endeavor for 2 years.  There are many misconceptions out there...most of what you read on the internet is false or misleading.  I would meet with a reputable lender (get a referral) because it sounds like you will have no problem.

@Dang Tran...if you are willing to live in the property, you could get a cheap FHA loan 3.5% on a 2-4 unit in DC. The loan limits on a 4 unit in DC go up to $1.2 Mil. For under 50K, you can buy a $1.2 mil property assuming you can work in closing cost. Assume 2.5% of the purchase price in closing cost.

@Immanuel Sibero Leverage effects cap rate. The cap rate is NOI (net operating income)/ Price of the property.

With Leverage (calculated over 1 year): (NOI-(Cost of the loan))/($ down) = Leverage Adjusted Cap Rate or COC (cash on cash return)

Depending on the interest rate of the loan, you can have a decrease in leveraged cap rate or an increase.  Since interest rates are so low, in many cases, as long as rents are high and stable, you can increase your cap rate with leverage.  The loan cost is usually the determining factor on whether an investment makes sense, not the hard Cap Rate, since most investors use leverage.

@Ryan Ingram...When we look at Multi, we basically consider three major metrics.  One, as you mentioned, what is the value based on the income approach.  (Income-expenses)/(cap rate), the condition of the property, and the potential to stabilize (increase value) in the asset.  

I think 50% expenses is way too much in Multi...I generally consider the condition of each property individually.  A renovated or new property will have very little expenses in the first 10 years.

When you value a multi, its great to be able to find comps and use both the income approach and the comparable approach, however generally it can be difficult to find enough recent comps that are statistically viable.  

@Matthew Haase...For residential multi, there is one additional factor many people don't consider and that is the cost of acquiring a loan.  In residential multi, you are able to get a very cheap loan on a property if you live in the property...and once you consider leverage, your cap rate increases.  In this scenario, you should analyze the stability of the rental market.  Nothing is without risk, however buying a residential multi and living in one of the units, in my opinion, is one of the best ways to start investing in real estate.

@Lewis Anderson Hi Lewis, are you currently wholesaling or looking for fix and flips.   Happy to chat, I will PM you.

@Devin Wynn You can buy a duplex in DC for under 400K but its going to be in a transitioning neighborhood. I would consider looking into 4 units with a cheap residential loan. You will spend more, but due to the increased rents you will probably cover a larger percentage of your monthly mortgage. You will need over 600K in DC, but you can use an FHA loan up to $1,223,475.00 for 4 unit...3.5% down. Good luck!

@Andrew Leung FHA loan limits on a 4 unit are $1,223,475.00.  This allows the potential to buy a residential multi with 3.5% down in high cost areas with high rents.  If you can find a good one, move into a 2-4 unit small multi...live in it for the required time period and try and buy another one.  You can also go single family homes as others have mentioned, but you will be limited in passive income unless you are willing to have roommates.  

First thing I would do is talk to a lender and get pre-approved.  If you have good credit, high income and some savings you will most likely have no problem getting a cheap loan for a single family, townhome or small multi.  Some of the 4 units going for 600-800K in DC have high enough rental incomes to cover most of your mortgage.

@Worth Styles...I agree with @Ben McMahon ...There are several local meetups in and around the Metro Area.  Start going to meetings and find someone to partner up with.  By the way, those numbers sound like Dale City.  Tons of people making money on flips down there.  

Can you do the construction on your own?  Do you have a team of contractors?

@Julius F. Why 1031?  You can sell a primary residence and take $250K out tax free and $500K if you are married.  A 203K loan can work in Alexandria during the slow season, but when the season picks up, there generally is too much competition (multiple offers) to work in a 203K rehab into the purchase.  I live in Alexandria and know the market well.  PM me with the property address and I can run some quick comps. 

Last time I checked with one of my lenders, you just have to live in the home for 6 months before you sell.  If a 203K loan isn't possible, there are several other options post closing.  Good Luck!