All Forum Posts by: Edward Liu

Although you live in 1 unit and will property manage, your numbers should assume you are not living there (unit is rented out) and some cost for property management.

You have 0 down and 2% interest for this purchase.  Unless you have a rich uncle, such number is not possible.

Likely you are over-estimating this property's appreciation potential over time based on your numbers.

This property seems to be in Upstate NY. Based others who posted here previously, you should get higher than 1% rent and CAP that is closer or higher than 10. Your numbers don't reflect such (maybe it will change once you add in rent for the 4th unit). Not sure if this one is over priced. Run some real comp reports.

With CA prices, my advice is look somewhere else outside of CA.  Generally you will have negative cash flow in CA.

Investors, that buy and then rent out, likely have limited affect on the housing price.  We will drive price higher a little, but once it gets to certain point, we slow down the investment.  

Another type of investors, buy and let the property sit empty, will literally take the inventory out of the market.  Those will drive up the cost for everyone else.  These tend to be in major cities, such as DC, NY, etc.  Some countries is trying to limit this type of investments.

For example: 

- A recent report states that over 100k homes sit empty in the San Francisco metro area.  

- My wife has some super rich clients who purchased 1000+ SFH with cash in Dallas and Houston area around 3 years ago, and all of them sit empty since purchase. They don't want to deal with renters or management companies, they treat these investment same as gold. Most as asset protection/diversification for long term.

The same concept is similar in stocks.  Many companies do stock buy backs, which will take out liquidity in its stocks.  This tends to drive up its own stock price as everyone is bidding on less number of available stocks.

If you are looking at Houston only, it will be extremely hard or near impossible to find 1% deals.  All my Houston houses were brought 4+ years ago.  Now, I don't even bother to look at Houston or Austin.  The cash flow is not there.  Those who found deals recently likely don't meat 1% rule.

However, MLS or similar sites are good tools to use. I use them to find many deals in other cities.

Based on the pictures, the repairs for 1 unit inside is way more than $5k that you expect.  How is water heater, furnace, AC?  More cost on top of rehab cost.

Honestly I suggest you walk away from this deal, especially for new investor.  With that much cash to fix them up, you can find better deals.  The condition of the unit suggest location of this property is not that good.  

Since you are in NC, about 2 weeks ago some duplex listed for ~$50k south of Greensboro where both sides are rented, needs work, but at least livable.  Looks to be much better deal than this.  

$2k for repair and maintenance is not real for 7 units.  Even based on 5% maintenance, still higher than $2k.  For 125 years old building, need to assume higher than 10% maintenance.  Don't trust the numbers provided by seller - unless they can provide 3 years of tax return on the property. 

No matter how old the building, you will have issues, whether it is building, tenant, or contractor related. Upgrade to higher number of units likely won't make it easier. Higher unit buildings typically have more tenant issues vs. duplexes or SFH.

What you really need is get good property management so you don't have to deal with all these day to day issues.  No matter if you decide to keep this building or upgrade to another, sounds like you are tired of managing buildings.

For all my LLCs, owner is the trust, not wife or I.  This set up is in case 1 or both of us pass away - as property will be passed on to our kids based on our will and trust.

The trust is treated as you and wife, so there are no K1s. Your tax return should include LLC P&L - so sale proceeds/gain/loss are all reported through LLC. This assumes the trust 100% owns the LLC.

Even after you sign the deal, based on inspection report, you can ask for price discounts - using inspection report as basis.