Some questions about podcast #4 with Frank Gallinelli

Starting Out
9yFollow

Some questions about podcast #4 with Frank Gallinelli

Lucas Mills
Physical Therapist Assistant · Springfield, MO · Member since 2017 · 131 posts · 28 votes

In this podcast, Frank says the following:

"People don’t buy a single family house or even a duplex for its ability to produce income. They buy it as a place to live and maybe they get some income besides. But people buy the larger properties, the five and greater, for their ability to produce income."

It seems to me that a popular strategy of BP members is "house hacking" or, buying a 2-4 multifamily property, living in one unit, and renting the others. To me, this seems like an obvious choice to make if you are currently paying rent (why not move out and get your tenants to pay rent for you?). Additionally, I know that people work from there, continuing to buy and rent multifamily properties with great success. So, I was wondering what forum members think of this statement by Frank, or perhaps I'm misinterpreting it?

Furthermore, Frank said this:

"In forty years of dealing with real estate investors and ten years of dealing with grad students who are learning this sort of thing I think I find the one issue they have the hardest time wrapping their head around is the notion that a property, if it’s a true income producing property, its value is based on its income stream, not on comparable sales."

How do I determine the income stream of a property?

0Reply
32 views

Most Popular Reply

Frank Gallinelli
Rental Property Investor · Southport, CT · Member since 2008 · 160 posts · 137 votes
9y

from the horse's mouth...

@Lucas Mills

Q1: I should have opted for clarity instead of sound bite. What I meant is that one will usually buy a 2-4 family property at a price that is based on comparable sales (similar to single family) rather than being based on the value of the income stream (specifically, the NOI).

Q2: I've also spent those same 40 years writing and teaching about that topic. If I get too specific (and rhapsodic) here about that and about my CV, I'll probably end up breaking forum rules against self-promotion. But feel free to contact me directly if you're so inclined.

Best,

Frank

2Reply
See this reply in the discussion

5 Replies

Jump to latestLatest
  • Frank Gallinelli
    Rental Property Investor · Southport, CT · Member since 2008 · 160 posts · 137 votes
    9y

    from the horse's mouth...

    @Lucas Mills

    Q1: I should have opted for clarity instead of sound bite. What I meant is that one will usually buy a 2-4 family property at a price that is based on comparable sales (similar to single family) rather than being based on the value of the income stream (specifically, the NOI).

    Q2: I've also spent those same 40 years writing and teaching about that topic. If I get too specific (and rhapsodic) here about that and about my CV, I'll probably end up breaking forum rules against self-promotion. But feel free to contact me directly if you're so inclined.

    Best,

    Frank

    2Reply
  • Lucas Mills
    OP
    Physical Therapist Assistant · Springfield, MO · Member since 2017 · 131 posts · 28 votes
    9y
    Originally posted by @Frank Gallinelli:

    from the horse's mouth...

    @Lucas Mills

    Q1: I should have opted for clarity instead of sound bite. What I meant is that one will usually buy a 2-4 family property at a price that is based on comparable sales (similar to single family) rather than being based on the value of the income stream (specifically, the NOI).

    Q2: I've also spent those same 40 years writing and teaching about that topic. If I get too specific (and rhapsodic) here about that and about my CV, I'll probably end up breaking forum rules against self-promotion. But feel free to contact me directly if you're so inclined.

    Best,

    Frank

    Hi Frank - thanks for the reply!

    As it relates to my first question... So you're simply talking about how people evaluate those mutli-family properties - not necessarily saying that they're a bad way to "produce income" for the investor - right? In other words, as someone with maybe 20-30k to invest, do you think this is the way to go in the beginning?

    It would potentially eliminate my rent payment of $600/month and potentially provide additional cash flow on top of that. But even if it just saves me rent, that's $7200/year that I just saved from moving to a multi-family property, which I can then put back into investing into another property. Am I thinking about this correctly?

    As it relates to my second question, I have actually stumbled upon your site already, in which you offer online courses which (I think) cover this issue. I am currently considering this.

    0Reply
  • Frank Gallinelli
    Rental Property Investor · Southport, CT · Member since 2008 · 160 posts · 137 votes
    9y

    I agree entirely. In fact, back almost 45 years ago we sold our little single-family cape cod and bought a 3-family, which we lived in for a number of years. It's a good way to learn some landlording and property management skills, too. 

    1Reply
  • Lucas Mills
    OP
    Physical Therapist Assistant · Springfield, MO · Member since 2017 · 131 posts · 28 votes
    9y
    Originally posted by @Frank Gallinelli:

    I agree entirely. In fact, back almost 45 years ago we sold our little single-family cape cod and bought a 3-family, which we lived in for a number of years. It's a good way to learn some landlording and property management skills, too. 

    A bit off-topic, but I have a couple questions if you have the time:

    1. I work a full-time job and can't leave in the middle of the day in case an issue arises. First, in your experience, what are some issues that may arise which might require one to visit the property, and secondly, what is a cost-effective and reasonable way to handle these things if I, personally, am unable to? I don't think I have any friends who I could recruit for this kind of thing, either.

    2. One issue that concerns me are "threat to life" situations; for example, if the heater goes out at 8pm in the dead of winter, what would you do? Call a 24/7 service and eat the cost?

    0Reply
  • Frank Gallinelli
    Rental Property Investor · Southport, CT · Member since 2008 · 160 posts · 137 votes
    9y

    Maintenance and repairs are part of the cost of doing business -- and indeed are part of the deal even if you own a single family home with no tenants. If you're living in the multi, you should have a pretty good handle on things and can anticipate most routine maintenance issues. 

    Once you buy your multi, you might start off by finding a good plumbing and heating outfit, and hire them to do a seasonal maintenance check of your heating system and water heaters. Then if you have an urgent problem -- plumbing or heating -- you have someone you can call. Most repairs other than no heat or a broken pipe are usually less urgent, so a good handyman should fit the bill.  Most multi-families are in a neighborhood of similar properties, so you can probably get recommendations from nearby owners as to whom they use for repairs.

    2Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free