All Forum Posts by: Jon Kelly

@Marta Cieslak Start with Excel for one property, especially if you're receiving financials from the property manager

@Tahira Haider The answer is: 1 property that cashflows $5k/mo. Or 2 properties that cashflow $2.5k/mo. Or 5 properties that cashflow $1k/mo. Or 100 properties that cashflow $50/mo. 

It's a silly answer, but at the end of the day you define your own criteria. 

My minimum requirement is a property that cashflows $100-200/mo (including all expenses and reserves)

@Kyu Kim it's up to you if you want them as 4 separate residential loans or 1 commercial loan. 

Commercial loan may have a higher interest rate but would likely have lower fees at closing than 4 individual loans. 

@Kisha Peterson Closing costs are similar to residential loans. Just for the lender portion I pay about 1% of the purchase price. 

For a 10-unit building I purchased in April 2021 I paid: 

1% - lender fees (appraisal fee is 70% of the fee) 

3% - title services 

@Kisha Peterson 4-5%. Closer to 4% the past 1-2 years 

@Susie Ivanov would you rather have $40k today or $300/mo? It will take you 11+ years to make $40k from $300/mo. 

It also depends on what you will do with the money... If you use the $40k to buy another investment property with 12%+ CoC return that would be a great option. If you use $40k to take a trip to Vegas and gamble your money away, then I would go with $300/mo.

I would take the most cash out as possible. Your lender may have limitations on how much you can take out. 

@Carter Mezzio It sounds like you have two different questions in the post: 

1) What's the best strategy? 2) Should you focus on cash flow or building equity? 

1) You already answered this question. You indicated you wanted to house-hack a multi-family property with your partner. I think a lot of people would say that's a great place to start. 

2) I don't think this question applies to you. You would typically ask this question if you're interested in learning what market(s) to invest in or discussing financing strategies. Your situation is a lot simpler. You already know your market (access to school or your jobs). You already know you will be sacrificing cashflow because you are house-hacking. You and/or your partner are living in one of the units or bedrooms and will not be receiving rental income for those. 

I would focus your attention on defining your goals of what constitutes a good deal. Most people look at COC return, IRR, monthly cashflow per unit, etc. Make sure you underwrite the deals as if you will be paying rent. This will tell you if it's a good deal when you move out and tenants take your place.

@Sachin Amin only 1-4 units, but you can shift towards commercial loans

@Sachin Amin Shift your focus to larger multi-family. Maybe start with 4-10 units. 

I would use your existing network of agents or however you are findings leads. You may need to begin networking with brokers in the multi-family space. 

Make sure you specific criteria established before you start looking (e.g. min-max purchase price, price per unit, monthly cash flow per unit, etc.) 

@Damien Anderson definitely not a deal breaker, but it's a risk and you should adjust the purchase price accordingly. 

You know you will not operate like the previous owner. I'm sure it won't be a smooth process to get all 4 tenants to sign a lease. You can expect at least 1 tenant to put up a fight and force you to go through the eviction process. You will lose a few months of rent and have to pay to turnover the apartment.

However, after 6 months when you have the 4-units straightened out you will be in great shape.