4 unit multifamily deal

[Elvin Luccon]

Hi. I wanted to ask if this is a smart move. 

I am just starting and I want to own a 4-unit multifamily in Los Angeles, CA. This will be an expensive purchase. I plan to put 50% down to get some positive cash flow on the property and to save long-term on the interest. The numbers will not work if I get more than 4 units with a higher interest being a commercial loan that could put me on a much risky side. At this point, because property valuation is already too high I do not foresee that I could pull out any equity for this in the next 3 years for another property. The goal is to pay this off eventually and use cash flow to save for the next property. Does this purchase sound reasonable? I feel times have changed and what worked before will not work today, especially in areas like Los Angeles. Any advice would be much appreciated. 

[K S.]

Quote from @Adam M.:

Hello Elvin!

Thank you for sharing your plans to invest in a 4-unit multifamily property in Los Angeles, CA. It's great that you're taking a thoughtful approach to financing and considering the potential challenges and opportunities in the current real estate market. Here are a few points to consider:

1. Owner-Occupied FHA Loan: Have you considered an FHA loan, especially if you plan to live in one of the units? FHA loans often require a lower down payment compared to traditional commercial loans. This could free up some capital that you might use for other investments or to strengthen your financial position.
   
2. Down Payment Consideration: While putting down 50% can indeed provide positive cash flow and reduce interest costs, it's worth exploring other financing options. With a lower down payment, you may still find properties that cash flow well. This approach would allow you to preserve capital for potential future investments or unexpected expenses.
3. 
   Property Valuation and Equity: Given the high property valuation in Los Angeles, it's understandable that pulling out equity for another property might be challenging in the short term. However, keep an eye on market trends and potential opportunities for refinancing or leveraging your equity down the line.
   
4. Cash Flow Strategy: It's wise to focus on positive cash flow, and your plan to eventually pay off the property using the cash flow is a solid one. Make sure to factor in all potential expenses, including property management, maintenance, and vacancies, when assessing the cash flow potential.
   

Ultimately, each investor's situation is unique, and your approach should align with your financial goals and risk tolerance. If possible, consulting with your real estate broker familiar with the Los Angeles market-- that could provide valuable insights tailored to your specific circumstances. Hope this is helpful!

Did you just copy and paste this from chatgpt? It's not how humans speak and write to each other on forums.