from 2 to 21 units!

[Kenneth LaVoie]

There's a little rambling here, but I want to get all my "facts" out and see if anything comes up about my logic and direction for the regulars here:

My plan was originally to acquire SFH for the appreciation only, maybe a little cash flow. The reason was my comfort zone -- however, I looked ahead and realized that I was willing to push my comfort zone a bit in exchange for a combination of instant equity AND cash flow. In other words, purchasing something at a discount that also cash flows nicely. (currently I own one house worth 90 that I got for 76 and it rents for 695 - about -500 per year cf and one I am closing on next week for 65k after repairs, rent for 795 and will cash flow just the opposite, or a little more, like $500-$600 per year) -- house is worth 85-95k

Now I'd stayed away frm anything over 4 units becuase I knew that if I didn't like being a landlord, I'd have tougher time dumping them due to more difficult financing (in general). Well, this week I said "F*** it!!" I put 2 offers -- one for an 11 unit for 198k and another for an 8 unit for 184k. Owner of 11k is very wealthy, just wants to get out of it, get his money back. Appriased 2 months ago for 255k, he paid 260k for it. 1 unit vacant in each bldg., each building "base case" cash flows at 12,500 per year using my "line item" excel calculator (it shows 57% expense to gross rent vs. 50) and when I do a 50% analysis, they cash flow 15-17k per year. (I have financing and inspection contingencies on both and my buyer's broker holding my hand a bit) --

with approx. 100k down, my cash flow return says 25%. I like this. It's VERY strange that 4 units in my area are going from 110-160k but these bigger places are at such a lower "per unit" price. I've found a few since, 5-7 units going for 140-200ish.

Financing at 5.75% / 30 year (5 year fixed) -- this is the thing I didn't know -- that there's almost no such thing as completely fixed commercial lending on bldgs over 4 units?? I'll need to put 20-25% down, depending on how the financials look. What I'd LOVE to do, because they seem to cash flow so nicely, is come up with a way to get my downpayment back -- My closing costs are very low ($500 give or take) so I don't mind closing then doing something after the fact -- any suggestions??

I'm doing margin loans vs. taking cash out for the DP -- I don't like the idea of liquidating that much (100 plus k) becuase the market went down, and I'd be selling toward the bottom (presumably) -- so I'm going to do margin instead for now which only accounts for 25% of what I have in there, so there's no margin call risk or anything.

A local property manager who's been mentoring witll take care of the 11 and 8 units -- but I plan to negotiate -- the man who takes care of both (and owns one) now, would charge me 10% for mgmt. but NO additional for getting tenants in -- whereas my "mentor" is I believe 8% on both ends. Hopefully with a sudden gift of 19 units (or 21 if I turn over hte houses) will earn a discount.

That's about it!! I'd love your feedback --