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Updated almost 10 years ago on . Most recent reply

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John Warren
  • Real Estate Broker
  • 3412 S. Harlem Avenue Riverside, IL 60546
5,073
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6,025
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Go small or go big?

John Warren
  • Real Estate Broker
  • 3412 S. Harlem Avenue Riverside, IL 60546
Posted

Hi everyone,

I have done a ton of reading on buying both 2-4 unit properties and I have also done a good amount of research on buying apartment buildings. I believe that the larger apartment buildings is where I want to end up, however, I was wondering if now is really a great time to jump in or if I should be looking for more 2-4 unit properties for now. Here is my thought process:

1. I may not have enough money to get into some of the larger apartment complexes where economy of scale starts to take affect.

2. I can lock in 30 year loans at silly rates right now. I currently have one four-unit building at 4.2% for 30 years.

3. Interest rates are going to rise... I feel like prices may be a bit inflated due to the last 4-5 years of low interest rates. Won't prices fall once interest rates rise?

I would love to get peoples opinions! I would love to get into some 5+ buildings so I can do a value add strategy, but I am definitely worried about the interest rates rising on those commercial loans in the next few years!

  • John Warren
  • Most Popular Reply

    User Stats

    353
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    213
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    Dale Stevens
    • Investor
    • Downers Grove, IL
    213
    Votes |
    353
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    Dale Stevens
    • Investor
    • Downers Grove, IL
    Replied

    I attended a group a while back and heard a great analogy there. When starting out, how big should you go. Well, the answer was interesting.

    When you are learning to drive or taking your driver's education road test, did you do it in a BUS? A SEMI? A RV? A Conversion Van or a small compact car?

    If you are just starting out, imagine if the first time you drove was a School Bus, dealing with the worrying about where to do, the rules of the road, how wide to take a turn, and then dealing with the kids fighting among each other. In this scenario the kids were related to tenants in an apartment building. If you haven't deal with real estate, then you are thrown into the neighbors complaining about noise, garbage, parties, walking loudly, etc. You could be in for a long ride.

    But if you get a single family home, to test the water, it is much easier. If you don't like it, it is usually far easier to sell a SFH usually.

    I thought that was a great analogy so I wanted to share it here.

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