New in real estate investing, looking to get my first multi family property by 2024

[Tripp Piperi]

Hey y’all, I am interested into getting into multi family renting to get myself some cash flow for more investments (essentially looking to start my real estate portfolio).  I have around 5 - 10k available to invest and I’m currently in Austin Texas.  Do y’all have any tips on good financing options and finding the right property.  I’m new to this, just looking for help!

[Albert Bui]

Quote from @Tripp Piperi:

Hey y’all, I am interested into getting into multi family renting to get myself some cash flow for more investments (essentially looking to start my real estate portfolio).  I have around 5 - 10k available to invest and I’m currently in Austin Texas.  Do y’all have any tips on good financing options and finding the right property.  I’m new to this, just looking for help!

Sure Tripp,

Aim for a good RV ratio, (rent to value). There is entry RV ratio which is the gross rents the seller has on day 1 or today divided by the price you see in front of you (4000 per month / 600,000 price = .66% RV ratio per month).

There is CARV or cost adjusted rent value ratio, This is just the proforma rents divided by the cost to buy plus cost to fix up (IE 5500 / 750,000 = .733%) which can show you a couple of things that you can take to the bank, 1) that there is room for improvement and that the incremental amount of capital used to improve the property might have “merit,” also that the cash flow can potentially be improved.

The other thing it can tell you is how much the property can produce today and into the near future so you can plan out your property operations to make sure you’re not negative cash flow or if you’re negative that you’re not negative for too long (reasonable future prospects).

As for FHA, you'll have to make sure your property qualifies for FHA SS or self sufficiency rule if you decide to house hack 3-4 unit properties. Given that you're in Tri state area (cinnanati, Lewisville, Indy) you should be able to meet SS rule with much more ease than if you were on the west or east coast (due to RV ratio to price is very low on the coasts).

The FHA SS rule is all the gross rents of a 3-4 unit building including the unit you’re living in X 75% must be equal to or GREATER than your entire monthly payment or PITIA (principal/interest/taxes/insurance/assessments).

With rates going up, which increases the PITIA calculation and FHA SS rule calculation, it has made things much harder to meet this rule.

Hope that gives you some good pointers to start.

Best,

@Matthew Kwan 

@Carlos Valencia