Washington DC 4 plex

[Adam Bush]

Hello BP, I am just beginning my real estate journey and have been doing tons of reading and listening to BP podcasts, along with eagerly searching for my first investment property. I do not have much capital, about $10k and also have a credit score of 750-760. I do have some debt but nothing crazy. I have been paying it off like a mad man which is also part of why my capital is low at the moment. I am born and raised in the DMV (DC, Maryland, Virginia) particularly Northern VA, however I have been living in the San Francisco Bay Area for the past 4 years. I have support and a great investment minded agent back in DC who I have been bouncing all my ideas and potential properties off of for his opinion. Also I do know the area pretty well and have a good idea of the market and I travel back "home" once-twice a year. Anyway, I found what I believe is a great investment property in Washington DC, an area that is growing exponentially and will continue to grow in the coming years. Due to my capital being low I am looking for some ideas on how to creatively finance/fund this possible deal. This is a bankruptcy sale so I understand this will get bid up from the $200k start price, my prediction is as high as $350k-400k, I would hope for much lower, but I am mentally prepared for these price levels. This property is also located in the opportunity zones of DC, which offers tax incentives for investors. I am going to view it on June 20th to see how much work it may need. I am under the impression that some units may be considered uninhabitable so they may need substantial work. I have no experience estimating rehab costs, but I will take whatever I come up with and double it. Should I bring a contractor with me when I go to view it? Also, I am not familiar with bankruptcy sales, I will start to do some research on how they work but if anyone has any feedback on that it would be much appreciated.

All units in this 4 plex are 1b/1b and the average rents in the area are about $1100 a month for a 1b/1b according to rentometer, but lets say 1000 even. That brings the gross income to $4k a month. A lender I have been speaking with gave me numbers of if the property went for 250k and it was bought with 20% down, payments would be around 1400/month. Using the 50% rule $4k-$2k(monthly expenses, vacancy, CapEx, repairs, management, property taxes, etc) = $2k. $2k - $1400(P&I) = $600 cash flow, obviously that's just a quick analysis, but I have put multiple different scenarios of numbers through BP rental calculators and the possible cash flow potential looks like it could even be better than that, it just depends on a lot of things as you already know, such as if I self managed, which I'm not against to start off, would save $200-$400 monthly. My thoughts are all over the place just looking for some insight because I am super anxious to get started, just looking for a great deal that I can actually afford and get into. I look forward to any constructive responses, good or bad.

[Geordy Rostad]

@Adam Bush

$10k doesn't really sound like enough to tackle that deal on its own. I would say you should find yourself a partner you can trust for either an equity stake or private funding. Think about all the people you might know who you would trust in a partnership of some sort and who have some money.

Another thing about this deal you might not be considering is that since it's a bankruptcy, it could take a long time to close it. This means you're potentially going to be totally out of the market and tied up for some extended period of time before you can even start working on the deal.

Find a private lender or partner, make your offer, inspect it, etc but don't fall in love with this deal and be ready to move on quick if it doesn't work out. Don't chase it up too far and end up in the same situation as the current owner.