All Forum Posts by: Jaysen Medhurst

@Shanelle Jones, those numbers could work. Figure you'll have to put in ~$650/month (could break even if you self-manage) as an owner/occupier, until you satisfy the FHA / VA requirements (1 year, I think). Here's how I got there:

$6800 GSR 
-$1700 Owner's unit (you'll be living in one unit)
-$2890 Expenses (42.5% of GSR - left out CapEx, included management)
-$2863 Debt Service ($582k @ 4.25% for 30yrs - that's 3% down on $600k)

Total $653 cost to you each month

Once you move out, you'll see ~$1050/month CF, which isn't bad. Especially when you consider your very small investment. That works out to nearly 70% cash-on-cash return.

I think you'll have some challenges with financing if you don't have construction experience. Have you considered partnering with a contractor on a deal like this?

@Greg Gaudet, sounds like you've got a pretty sweet thing going there in paradise!

My area of focus is Central / Eastern CT. 4-plexes go for ~$200-250k; 2-bed units rent for ~$1100, 1-bed for ~$800. I look for value-add opportunities with CF of $150-200/door/month.

Not sure what you're asking, @Vladimir Baron. How do investors analyze deals?

@Daniel Urban, a commercial property's value is based on how much money it IS generating, not how much it COULD be under ideal circumstances (there are exceptions, of course).

If you're serious, I would determine it's value based on the information you have and generate an offer based on that.

It's not unusual for an owner to refuse to release financials until an offer is made. Just make sure you have plenty of clauses in your offer, so you can pull out if necessary, and be ready to do a lot of due diligence.

Finally, if the numbers work, the numbers work, a bank won't hold back because of that. The bank will want to see your personal history, though. They need to be confident that you know what you're doing. If this is your very first RE deal, you will have trouble with financing--i.e. you won't get bank financing.

Hi @Shanelle Jones, you're going to have a VERY difficult time making this happen. I assume you have never done anything like this before, so getting a bank to take a chance on you with so little equity in the deal is going to be next to impossible.

There's  reasons you don't see a lot of new 4-plexes going up. In many places they have been "zoned out" of local cities, meaning the town won't allow any more to be built (unless a replacing existing). More importantly, the finances are very hard to make work. With land prices comparatively much higher than when most 4-plexes were built, the numbers just don't work out.

This is why when you do see new rental units being built they tend to be large (40+ units) and class A. The developers need both economies of scale and top-end rents to make the numbers work.

Post some more details, location and your financial breakdown, and the community will help you walk through whether this is actually a viable plan. 

@Greg Gaudet, can you share the financials of the condos you referred to? $500-600/ month CF on a $100k purchase sounds too good to be true. That's ~36% cash-on-cash return, assuming 20% down. Even if you self-manage and have no actual vacancy, you should be accounting for those in your financials to account for a downturn in the rental market or your decision to no longer self-manage. Make sure you're seeing the whole picture.

The knock on condos, of course, is the lack of control. Your common fees could go up at anytime, you could get hit with a big assessment, the board could impose a rule limiting the number of rentals or length of time an owner can rent. 

I would stay away from a duplex, unless you find a smoking deal. It's very hard to make the numbers work, since you only have 2 units to spread the expenses across.

Hi @Krystal Stone, it really depends on your goals. Considering that you could probably purchase $800k-$1MM property with the equity you have, it's important to get clear on what you want to achieve.

Out-of-state multi-family is probably the best bet for maximizing returns and minimizing costs. Start analyzing some markets, I would recommend places that you are familiar with and have "boots on the ground" in some way. 

Come back with some more details and the community will surely help you work through your questions.

@Jorge Leon Jr, I understand the ease and sense of security that comes with not having a mortgage, but from a purely financial POV, it isn't ideal. Of course, you don't want to be over leveraged. 

Having cash at the ready through a HELOC is great. But as you wait to deploy that capital, the return on equity (ROE) is very low. Your home value will go up the same amount no matter how much equity you have and it could be making you money somewhere else. This is why I suggested holding index funds instead.

@Kadeem Swenson, put yourself in a good cash position now. Make sure your credit is as solid as possible. When the market dips there will be opportunities to buy and you want to have the resources to make smart purchases.

@Christine P., with flipping you buy yourself a job, with buy & hold you buy financial independence. If your goal is $6k/month, that's 40 units making $150/door/month. Very reasonable.

I suggest using the profits from your flips to fund buying B&H. Use your flipping skills to zero in on properties where you can add value and use the BRRRR method.