All Forum Posts by: Account Closed

Sorry, add to the first year $1,920,000 profit the first years increase in rent $120,000 = $2,040,000 is what you make the first year.

Sorry, but anyone recommending SFR's over multi-unit properties doesn't have a clue and most-likely never owned multi-unit properties. I started my real estate investing career in 1968 while working for some of the richest multi-unit investors in the country. You won't see Donald Trump looking for SFR's on Zillow.

I own both SFR's and multi-unit properties in several states and the tenant turnover is the same for SFR's as multi-unit properties. The SFR's cost far more to maintain. You can visit 100 tenants in a multi-unit property in one trip, or waste your life making 100 appointments and 100 trips to meet with 100 SFR tenants. Lots of luck beating that one. That is why I am selling my Las Vegas SFR's. From the south end where I own SFR's to the North end where I own some the distance is about 30 miles, plus my 300 mile trip from Los Angeles to Las Vegas. I cannot visit all my SFR's in Vegas in a single day, but I can visit one 40-unit property and be out of the property in less than 2 hours.

You can have a manager manage 100 units all within 1 minute of his doorstep, or have him drive hundreds of miles and spend several weeks trying to meet up with 100 SFR tenants.

Multi-unit properties cost less to purchase, less to maintain and take less time to manage.

No 100 SFR's will every match or beat multi-unit properties because when you increase the rent on a SFR the value of the property is the same. When you increase the rent on multi-unit properties the value of the property increase 10 to 18 times the rent increase due to the Gross Multiplier.

I

f you have a 100 unit building with a GRM of 13 (very average) and you increase all the rents by $100 you just made a profit of 100 units x $100 per month x 12 months X GRM 13 = $$1,560,000 INSTANT increase in property value.

First year profit = $1,560,000 + $300 / month cash flow x 100 units x 12 months = $360,000 = $1,920,000.

If you increase the rents a tiny $50 every year your profit for the one building is $40,320,000

You cannot even do that with SFR's because they don't increase in value when the rent is increased.

profit just by + you earn an extra cash flow every year = $120,000. So for the first year by increasing the rents $100 you made a profit of $250,000 + you make the $120,000 increase in rental income every year afterward and by the end of the 10th year you made $1,330,000 assuming you never increased the rents again for 10 years, but if you increase the rents only $50 every year, at the end of the 10th year you will make a total profit of 

I would be super careful with out-of-state properties with the exception of when you can get them for a steal and when you are fairly positive they will appreciate.

Otherwise, while some out-of-state properties look like they are cash-flowing well when all the counting is done after a few years the inefficient things will bury you e.g. the additional cost for property management, the inefficient management by management companies, the fact that management companies don't visit your property enough to know the tenant turned your property into an animal rescue center, etc.

As for whether SFR or multi-units are better, I find that multi-unit properties always have the best ROI. I live in Los Angeles and own several SFR properties in Las Vegas. When a tenant moves and this is myself doing the work with one or two workers, my cost to paint a SFR, replace carpets, repair plumbing, clean the yard, trim trees, haul trash to the dump, etc. is $6,000 to $8,000. I had to clean and get a property ready to sell in Idaho and my cost was $18,000. I had to paint the entire inside, outside, replace 3 broken bathroom sinks, reface the kitchen cabinets, trim trees, install a new stove and dishwasher and it took myself and one employee 13 day and we worked 12 hours every day.

As for multi-unit properties, they cost less per unit, often get the same or more for rent than SFR's, we don't have to trim trees and clean yards every time a tenant moves, we always have tile floors and never replace carpets, we are always finished withing 3 days and our average cost to make an apartment look like it was just built is less than $3,000 and usually no more than $2,000.

Believe me when I say it is like walking into a nightmare when we first walk into a 3 to 5 bedroom SFR just after a tenant moves out. Some of the properties we own have 20-ft high ceilings. The cost to replace the carpets in one SFR we did a few weeks ago was $4800 and I buy medium grade carpets.

One more thing I don't like about SFR is it takes a serious amount of time to visit every property scattered all over the place and you can visit more units at the same time with multi-unit properties. This time-saving is serious to know which tenants just moved in two large dobermans, or which tenants moved in 5 friends with vehicles pouring gallons of motor oil in your driveway.

I spend most of my life crunching numbers to get the highest ROI. Generally (not always), the only time a SFR will beat a multi-unit is if the SFR appreciates, significantly, or if you purchased the property for a low price and the rent is high.

We have a lot of SFR properties because we purchase them for 30 cents on the dollar at auctions in 2008. They more than doubled in price in the past 12 years. Starting a few months ago, I crunched the numbers and the cost to clean them has been so high I sent every tenant a notice telling them that I am selling the properties. So far, 5 tenants moved out and I cleaned the houses and sold all 5 of them. I am waiting for the rest of the tenants to move and I am selling every out-of-state SFR.

The prices for SFR and multi-unit properties in California are super high, but for the money I get from every property I sell in Las Vegas I can purchase a single unit in a multi-unit property for about $250k to $300k and I can actually get more rent for a 2-bedroom apartment than I was getting for a 5-bedroom house in Las Vegas. Believe-it-or-not, my beautiful 5-bedroom house in Las Vegas has a maximum rent of $1,350 and sale price of the house was $280k. A 2-bedroom apartment in Los Angeles costs about $250k to $300k and rents for $1,900 to $2,100. So, even though California has some of the highest prices in the country, California still has the most-profitable investments.

All your current interest rates as so close to the same I can't see taking cash out of one property to pay another. The only thing that makes sense to me is to re-fi your primary and bank the $300 per month. Or, I am missing something.

I would do some serious calculations for the property in Texas. Out-of-state properties are great when they appreciate in value, but they can be a serious sore thumb when they don't appreciate, when rents are low and when you have to pay a property manager. 

I think the answer depends on how much equity you have relative to the purchase price for your personal home. If you have $2 million in equity and you want to purchase a $1 million home then your building that much equity is what you worked for.

If you don't have a large amount of equity then there are a lot of your own personal factors you need to consider, but my personal business model is to move forward in one direction and not move one step forward and two steps back. I don't like the idea of having to pay the first on the rental property, a 2nd on the rental property, a mortgage on the personal home two car payments, credit cards and then have to worry about something going wrong e.g. sickness and my empire crashes like a stack of dominoes. I have seen this exact scenario maybe more than 100 times.

The only time I would take equity out of a property is if I needed the money because I found an investment property that would reap me a lot of profit I could not make without the equity loan. Then, when I have so much money I don't know what to do with it I would buy a home. 

There are thousands of regulations, building codes and most-likely you need someone experienced with these requirements who can draw blueprints that need to be approved by your city's building department.

For example. The new entrance door will need to be a specific width. The framing will have to be inspected. If stairs are required you will need blueprints for the stairs. There will be several inspections by the city for framing and water-proofing. You will need building permits and inspections for new plumbing, water, drains, gas to appliances, electric, walls and a lot more. 

Before you can divide units in many cities the building department wants to know where the additional vehicles will park and while you may think you lot has more than enough space the city has formulas and you may find you don't have enough space to park more vehicles. I have an apartment building with a 1/4 acre flat lot that has had nothing on it since the beginning of time and the city will not let my put anything on the lot because they said the building to parking area ratio prohibits even making the area a parking lot. Doesn't make sense to me, either!

You never know until after you ask.

This is a strange world we live in when it comes to businesses that have their hayday. I had a friend who started renting rooms when she had no money and within 7 years she owned 18 homes and her net worth was more than $2.3 million. She purchased homes and rented each home to 10 to 15 college students.

I haven't seen her since a little before the market crash in 2008 and always expected that she did well since she was still collecting rents and paying the mortgage. But..you should be able to guess where I am going with this since all the colleges have been closed for several months and I'm positive her college students bailed and went home.

For your question. I love the idea of buying homes and renting them by the room, but you had better be able to have serious House Rules and zero tolerance for breaking them because some tenants are just plain pigs 
and some tenants don't respect anything or anybody.

It is difficult to see why your software is any different than the thousands of others on the internet and why do you think you can create something better and something more useful?

A lot of money can be made with fire-damaged property, but since you are asking the question you probably don't have the experience to deal with contractors and end up coming on the top. Before the inspectors are done and after the contractor hits you with more Extras that the original contract you will wish you listened to me. The best investor for a fire-damaged home is an experienced contractor who does all the work himself and has a good crew.

Don't listen to me. Send some pictures, square footage, number of bedrooms, bathrooms, comps in the neighborhood and maybe we can come up with some sort of ballpark profit, or should I say, "LOSS"!

Waiting! Waiting! Waiting! I hope you are running on those batteries with the bunnies in their ads. It is going to be a long long time before prices drop.

It is great to have a ton of cash when the market hits the bottom like 2008, but I don't think that will happen again in our lifetime. 

Personally, I like to be in the game all the time. Since we can lose a lot of money while waiting for a downturn, I am constantly looking for other avenues e.g. buying at the live auctions, looking online every day just to keep up with prices, flipping trailer homes, or just working my regular job a little harder to make more money.