Net Rents per Month at $125/unit?

Question

I'm finding most loans on small multi-families require 30% down, based on my rule of a net income (after debt service and expenses including vacancy and management) of $125/unit/month, 30% down can skew this compared to the 20% down I used on SF properties.

So I'm basing my small multi #'s on a 20% down payment even though I will likely need 30% down to keep my cap rate and ROI consistent.

(properties in Salt Lake County)

Thoughts?

Joel Owens · Answer

My thought would be your expected return for your aggravation.

Being a Dentist keeps you busy. Most of my doctor's as clients not only look at yield but demands on time for the investment.

I had investments in the past that were jobs. Even if it did throw off a higher percentage of return it wasn't worth it. The reason is my highest return is running my business transacting commercial real estate. So everything I look at today has to produce yield on it's own. For example I would much rather have a relative headache free 15% annual return then an intensive 20 or 21%. The 5 to 6% extra annual perceived yield isn't worth the time it takes away from my business where I produce the highest income.

If you are buying class A properties with class A tenants locally then it might not be that hard to handle. Right now your profile says you have a couple of properties. When you scale that up demands on your time will increase and the business / investment balancing act will get tougher especially with SFR.

Russell Tidaback · Answer

SFR are different in lenders eyes. It will be interesting to see what you receive as feed back.

For me, I find property that fits my lender(s) requirements first. It saves time, IMO.