How to search 4plexes

Question

Hi BP,I am beginning my first few searches for 4-plexes. The issue is realtor.com and similar sites don't have an option that show me just 4-plexes. I want to have cash flow but not as expensive to purchase(less than 20k down). Is this realistic to get started with for a first investment?

Ray Johnson · Answer

@Cody Evans Why are your parameters set at 4-plex cash flowing at $800 a month? Everyone has reasons for why they buy the properties held in their portfolio. It seems like you're focused on the number of doors over cash flow if your cash flow target is so low. If you're starting with $20k it's cheaper, easier, and more manageable to start with a single or duplex property and cash flow at or above your $800 target. In the $20k down payment pool of investors you will find a lot of competition for a 4-plex and you probably can get more profitable properties as your initial investment going with a single or duplex property. An example: I have one property that cash flows at $585 per month, I purchased it with $20k down. While it's not $800 per month, the vacancy, and expenses are also far less should any issues arise. I know on this site, many podcast, and a lot of teaching Guru's often promote the get as many Doors in your portfolio as you can, while not teaching true fundamentals to the new investor population. What's your REI starting goal, cash flow or number doors?

Lisa Haney · Answer

Cody,John is right about realtor.com and typing in a multi-family search. I had the same issue til one day my little grey cells started working and I figured it out. But I would add be careful about putting 4 bedroom 4 bath as a search because I have seen where a Quad had studios units which are not technically bedrooms. So if you put 4 BR you may miss it. I saw a duplex a few weeks ago that was 2 studio units so bedroom were shown as 0. But you can't go wrong with the bathroom # approach. You may get some stray single family homes with 4 Bths in your search but you can eliminate them.

Lisa Haney · Answer

I know what you mean. It's a tricky thing in Detroit. I know I will have to basically case the area driving probably 3 blocks in each direction to see how those houses look compared to the one I want to buy.

Christian Hutchinson · Answer

@Lisa HaneyGood luck getting a mortgage in Detroit. So many issues with appraisals, the property itself, then actually being able to make money.Detroit is a cash game. I have had homes appraise over the what I had it contract for and have banks refuse to do the loan, because they see 5 houses 3 streets over sell for $1 or $500.

Lisa Haney · Answer

Cody Evans,I'm a little confused as well about the above advice. I'm a newbie like you (have only had 1 rental house before) so maybe I'm missing something. I'm like you and plan on purchasing a 4-plex in Detroit (no money down VA loan or perhaps using FHA and 203K loan). I plan on living in one unit and renting the other 3. I live in Detroit so I have the added benefit of knowing the area and being able to drive right to the street and see the surroundings, location, etc. Gotta be careful in Detroit. Some blocks are burned out but have one or two houses that look nice. You do not want to buy those! I have been checking out quads on zillow, etc. I'm not sure what the above posts are saying though. Isn't it mathematics that a Quad will give you more rent total monthly than a SFH? I think perhaps they are assuming a Quad in Detroit will cost double or quadruple a SFH? But in Detroit you can get a Quad for under $100,000. You may need a few thousand in repairs but this is not California! The bottom fell out of Detroit in '09. We are at the bottom of the RE food chain now.Based on what you said, you can put $20,000 of your money down and perhaps get a small mortgage and buy a Quad. Mortgage might be $600 at most. Rent 4 units at $600 each (low end) and that's $2,400! Deduct all your little expenses and that's still way more than the $800 profit you require monthly. I would like a response from our more seasoned brothers on this post. Perhaps I'm being naive here and my figures are all out of whack. I'm definitely here to learn.Regards,Lisa

Cody Evans · Answer

@Ray Johnson The reason my parameters are set that way is because the BP Newbie webinar I attended suggested this guide:http://www.biggerpockets.com/renewsblog/wp-content...Brandon Turner, the author, states he expects at least 200 cash flow from each unit he has and I reckon that is a highly conservative estimate. I do not know about what the actual cash flow is for many properties but I absolutely expect at the least the going rate for the market I am in (and will negotiate the buying cost accordingly). The issue is I do not know what market I am in because I am searching outside of my state (Cali is too expensive). I am looking towards the Midwest. Is there a city/market I should check out for cash flowing multiplexes and what is the best way to find out the cash flows for the area? I suppose I just analyze deals and see what my average projected cash flow is for that market but I figure there is a far more efficient way such as asking a real estate agent or other investors in that area but I am unsure how to get into contact with those people since I am a beginner.I am not looking to cash flow $800 a month; I just thought that was what I should be prepared to expect out of state. I would rather make the highest cash flows possible and I thought 4-plexes would be the investment vehicle to get me there: Would I still be better off starting with single or duplex considering what I have just told you?

Cody Evans · Answer

Howdy right back at you @John Leavelle !!Thanks for the great tip. I will go try it out right now. As far as my goals they can mostly be summed up by getting a 4-plex cash flowing at 800 a month for year one and then storing up capital by recycling those cash flows and adding in another 20k from my personal income which I will then use to buy another 4-plex the next year. I will continue buying as many 4-plexes as I can each year as my cash flow increases. I will then sell those to get my down payment for an apartment. I live in Cali and want to invest somewhere where properties are cheap but can cashflow. I am currently looking at properties in the Midwest to try and find my market. The issue being I don't know how to go about discovering what a good market looks like based on my goals. I know it is subjective and I need my own view of what makes a good market but are there rules of thumbs to give me a foundation to stand on? For example: Population and jobs must be increasing. The city should not rely on one industry for fear of a collapse if that industry becomes automated or goes away like in Detroit with the auto industry. It should be a location with x amount of property managers to choose from in case I have to change companies. Other people have told me and I know I should take what anyone says with a grain of salt since every investor has a different opinion/background but what are some items I should add to this list while I am still coming up with my opinion on this matter?Thank you very much for the help with searching 4-plexes.

John Leavelle · Answer

Howdy @Cody EvansYou need to filter your search using Multi family only, min 4 Bed/min 4 Bath. That should eliminate a lot of properties for you (Duplex & Triplexes). If you are getting too many large properties then start putting in a max price.As far as only putting $20K down it will depend on a number of things. The Market you are searching, the condition of the property, on market or off market, possibility of using creative financing, and the investment strategy you are trying to use.You need to provide more information on your goals and the strategy you want to use.