All Forum Posts by: Kyle Wells

My biggest regret is not house hacking on my first home purchase. I would recommend househacking for your first investment property as it'll allow you to be more hands on for your first learning experience. You'll be able to avoid paying 10-12% for PM (although you should build this into your analysis for when you move out), while you would be relying on a team if you decide to invest from a distance. Trust me, NO ONE will manage your properties or analyze deals/market rent like you will. 

I would consider a gradual increase. You could tell the tenant that market rents are currently $900 for comparable units. Tell the tenant that you are willing to work with them being a long term renter and increase rent to $850 for first 6 months of lease and then to $900 for month 7 and going forward. It will come across that you are reasonable and make her feel like she's receiving a discount for those first 6 months while only hitting your wallet for $300. 

I have two rental properties in Kansas City. My fourplex currently rents for $4,190 (soon to be $4,390) and I purchased for $365k in Sept 2018. My SFH isn't quite as good, but it was originally my personal residence converted to rental. That rents for $2k and I purchased for $258k back in May 2017 (built in 2016). Mortgage, taxes, and insurance come out to about $1,600.

That's a blanket statement and isn't always the case. Some own properties from out of state and have full time jobs, so it might be beneficial to pay 10% vs. Handling it all yourself and traveling to advertise properties. 

You may want to look into an umbrella policy first instead depending on the equity you have in your properties. I utilize this and it offers up to $1mil in protection, which is good enough for me for the time being (as I only put down 25%). My plan is to transfer some of the assets into LLCs once the equity grows beyond the $1mil, but that is some years down the road most likely. 

My target is $200/month/unit after everything at the start assuming 25% down. Over time, I would expect that to grow as rent increases since P&I are fixed for the lending I utilize. Depends on your market though as certain markets have limited cash flow opportunity. 

Thanks guys. Four plex is located in Kansas City, KS very close to the KU Med Center and West port area. We were pretty fortunate on this property as the previous owner had handled everything himself and had no idea his rents we so far below market. 

The 30-year fixed originally closed at a 5.65% interest rate after putting down 25%. However, interest rates have since dropped, so we're refinancing into a 5% interest rate. Drops our monthly mortgage pymt by about $110/month. We're actually using Community America Credit Union for our refinance and they offer a profit payout to all of their customers at the end of the year that have three categories of services (checking, savings, CDs, mortgage, auto loans, etc.). Basically, all balances of $100k receive about a $200 profit payout annually. Our break even point on refinance cost with profit payout and lower monthly payments is only about 2 years. Seemed like a slam dunk to me. 

Are you guys invested in the KC area/midwest?

There likely won't be any taxable income once you include the depreciation of your tax basis in the property (purchase price of property plus closing costs). If you formed a partnership, any taxable income would be passed onto the partners on a Form K-1. 

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $365,000
Cash invested: $111,250

This side-by-side four plex has two 3-bed/2.5 bath and two 2-bed/2 bath units. Each unit has a single car garage.

What made you interested in investing in this type of deal?

The ability to purchase a multi-family with well below market rents at a discount that had one problem unit that required an investment of about a $12k. Property was renting for $3,135 pre-sale and is now renting for $4,190 with built in rental increases bringing gross rents to $4,390 by August 2019.

How did you find this deal and how did you negotiate it?

My realtor and I had been looking at properties for a couple of months with no luck finding a property in a good location for the right price. Then this deal came along.

How did you finance this deal?

30-year fixed conventional loan with 25% down.

How did you add value to the deal?

Remodeling two units. New floors/carpet, new paint, new kitchen appliances, new countertops, new bathroom vanity.

What was the outcome?

Still in the process. So far the two renovated 3-bed/2.5 bath units went from renting at $750 and $795 respectively to $1,300 each. The renovations totaled about $20k, meaning we'll break even by month 19. Estimated forced appreciation about $50k.

Lessons learned? Challenges?

Plan rehabs as soon as inspection is completed. Our PM did not properly motivate or stay on top of contractors as needed and two of the units were vacant for 2-3 months (one contractor was fired). Granted, we were able to significantly raise rents once completed.