First Investment Property

[Tony P.]

Hello Everyone,

I am looking at buying my first investment property. I have read the guides on this site and they have been very helpful. I have a few questions hopefully you guys can give me some insight.

I am looking at multifamily homes. I think it will be easier to manage a single property and it will cash flow more than a sfh 

When you look for a realtor do you look for someone with expertise in investment properties? I know several real estate agents but to my knowledge, they deal with residential properties. 

Would you go through the bank for a conventional loan or use a mortgage broker or other source of funding? I am pre-approved through my bank but I see most people investing in properties are using a mortgage broker or other source of funding

Do you calculate exact expenses when looking at a deal? I'm running the numbers on a few properties to give me an idea but without knowing the exact expenses I can't be sure of how much it will cash flow. I use the 50% rule, look up the property tax, 3.5% interest rate and $2500 closing fee. I don't know how much the utilities and insurance costs 

When you rent a unit out do you include utilities? 

What kind of cash flow would you expect from a multifamily home investment? 

[Huong Luu]

Hi @Tony P. These are all great questions. For your 1st MFU, I would suggest you team up with someone who already is doing MFU. This way you will see 1st hand all the ins-outs without taking on 100% of the risk (and you get free coaching at the same time). The other option of course is to pay for MFU training/courses. There are tons out there. I would suggest listening to Charles Dobens MFU podcast (US based but info is valid for Canada) and looking into Edna Keep's program. 

'Easier to manage a MFU'. This depends on your pt of view. If you have a 4 plex, that's 4 stoves, that can brake, 4 sets of tenants to deal with, etc. You get the point. The cashflow is usually better with MFU. 

Yes, when looking for a REA, find 1 that is an investor too. Not just focuses on working with investors. 

If you got pre-approved by a bank, then go that route. Although it would be good to start looking for a mortgage agent you can count on. At some point the banks will not lend to you. Building a STRONG relationship with a mortgage agent is important if you plan on getting more than 4 doors and if your own funds are limited. Some mortgage agents are better than others. As well, find an agent that is also an investor with multi-doors.  

For your calc's you should use actual numbers were possible. Keep in mind, the seller usually will present numbers in their favor, so take the numbers with a gain of salt. 

Include 

- utilities unless you are 100% planning on having the tenants pay, 

- 8.33% vacancy even if the area is lower, 

- % for capital expenditures (2-10%)

-% for property manager even if you plan on doing this yourself (8-15%)

-if you don't know an expense put in your best guess. Your REA should be able to you give you a estimate too. 

- etc, all the other normal expenses

In terms of $net profit/unit/month this is a personal choice. Some people are happy with $50/door, others want $100. For me personally, I target $100 np/u/m.

I think I got all your questions. Send me a mgs if I missed any or if you have further questions. Good luck.