All Forum Posts by: Jeffrey Donis

@Jeffrey Donis Yes, mostly looking for properties that meet the 1% rule. With multi family the numbers will obviously differ slightly. However, I am just gauging locations that would qualify this.

@Zaid Bender I assume you are referring to the interest rate on multifamily loans. I don't try to predict interest rates or cap rates in the future. We use current rates and then apply sensitivity analysis for an exit period that shows us a range of potential outcomes depending on macro forces that are outside out control.

Cap rates and interest rates, specifically the US 10 year treasury are relatively correlated, with cap rates lagging behind rate movements. This is because your typical Fannie/Freddie loan will base their rate on a spread over the 10 year treasury - if rates are low you can borrow more money cheaper which facilitates higher prices with relative yield, driving cap rates until there is more equilibrium. 

Predicting rates over the next year or over the next 10 years is next to impossible. 

That being said we do know that the Federal Reserve is committed to keeping the benchmark Fed Funds rate near 0 for the foreseeable future. The Fed has more direct influence on shorter term bonds, although if later maturing bonds like the 10YT start to rise quickly for whatever reason, the Fed could ramp up their purchasing over those notes to control the yield curve and prevent rates from running.

There is massive incentive from central banks and governments to keep rates low for as long as possible, and only raise them in the face of rampant inflation. There is far too much debt in circulation that cannot be serviced if interest rates rose dramatically and borrowers had to refinance at higher rates. The biggest borrow, the US Federal Government, is acutely aware of this, so is the Federal Reserve. 

I imagine rates will stay low, with some fluctuations up and back down. Rates have been declining since they peaked in the mid 1970's, which was an aberration from a multi century long trend of declines. They will rise again, at some point, which will likely topple the house of cards that the global economy is built on. But is that 1 year, or 100 years? It's such an unknown that it is almost not worth considering.  

Hey everyone,

Quick question that will definitely have more than a single answer.

I am a college student in Minnesota.

I have a remote job lined up when I graduate and want to purchase a duplex, triplex, or fourplex for my first home with an FHA loan. Because my job is remote I am wondering which states and cities are the best for this? In which the rent to price ratio consistently meets the 1/2% rule. Thank you!

@Jeffrey Donis this would be my very first time in this situation. But i beleive i wil. I am the cash buyer and the seller doest have an agent. Who would be the right person to ask about zoning aswell. The units are currently being used for office spaces 800 sq fr each. They all just need to be upgraded to become 1 bedroom units

@Pablo Vidlak You might find a partner by posting hear on BP, but it is long shot. It is great that you have some experience, that should give you a much better shot at finding a partner than the newbie. I think most real estate investors and entreprenuers in general start with the three F's... Family, Friends and Fools. These are the people most likely to give you money for investment  or a new business. Over the years we have worked with several friends as private lenders. It allowed us to grow our business and we were able to pay them a good return on their cash. If you don't have connections with any of the three F's, you are probably back to partnering with hard money lenders and banks.

Mike