100 - 200k down payment in the South, where to invest?

Question

I have 100k now and would have another 100k if I sell a property I currently own. I'm interested in using it as a down payment on a multi-family.

Looking for cash flow, in an appreciating area that will attract decent tenants, and a building that is in decent shape and won't need huge repairs..

What areas would you look at to invest that money? What could I expect to get for that size down payment?

I live in Asheville, North Carolina and would like to be within a 3 hour car ride ideally. Some nearby areas are Johnson City, Greenville/Spartanburg, Charlotte.. don't know anything about any of them.

Also have never gotten commercial financing before so not sure how that works!

Thanks in advance for any replies, I know it's a bit open ended and asking for a lot of info.

David Zheng · Answer

you should always factor in property management costs when buying even if you're going to self manage. Just in case in the future you decide to go that route. Also I would personally stray away from self management if you're looking at buying a couple hours away from your house (unless you have a trust handyman or family/friends in that area) I couldn't imagine driving that far in an emergency situation.

Scott Skinger · Answer

Congrats!

I don't know that area so I will leave that part of the question for others to answer. Regarding your other questions:

-$200K down at 25%-30% will get you into a property that is $650K to $800K, considering repairs, reserves and closing costs, the number is probably closer to $600K to $700K

-the number of units really depends on the area and class building. I'm currently considering a 10 unit 1.25 hours from Chicago, class c+ for around $515K. Another building in the same general area is a 10 unit with studios for around $300K...just as examples

-keep in mind, up to 4 units is still residential. Over 5 units is commercial, valued using NOI and cap rate, NOI/Cap Rate = Value...big difference

-loans under $1MM don't qualify for terms that are as good as loans that are over $1MM, start talking to lots of banks in your area and listen to @Gino Barbaro podcast(s) (8/10/2017 podcast in particular) that talks about financing, very helpful

-keep in mind that it can be difficult and/or not cost effective to hire a property manager for a smaller building, so going 3 hours away might be really tough to do a property showing, fix things, etc.

Good Luck!

Scott Skinger · Answer

Be very careful with the decision "I would rather not hire a property manager because it's expensive and the whole point is to make money, right?". Yes, you want to make money but at the same time you also have to value your time. If you are cash flowing $500/month but at the same time you are investing 50 hours/month on tenant ads, phone calls, applications, showings, lease signings, check ins/outs, maintenance calls, back office, etc. you are working for $10/hr.

I'm not saying it is the "wrong" decision, I'm saying be careful and thoughtful about the decision. It may be worth it to you because you want the experience, the overall returns are good, you are passionate about landlording, etc. But what about time off, vacations, kid obligations, etc.? I can imagine that many people get tired of this after a certain period of time. Personally, I don't want this, it is called "owning your own job".

I may do the exact same thing that you are doing, buy 10-20 units, scale up to 100 units and self manage because I want to learn about the business. However, I will ALWAYS price in management because A. You or somebody that you hire has to get paid for performing these duties and B. You may outsource your building to a property management company when you get sick of doing it yourself and you want to make sure that these expenses are priced in.

BTW, here is a really simple way of looking at property management and pricing it out. It is not all inclusive or necessarily accurate but just a quick way to think about how to price out the property management piece if you don't want to use a fixed %:

Scott Skinger · Answer

Account Closed nope, this Jake & Gino podcast, https://jakeandgino.com/multifamily-financing-evolution-jake-gino/

David Lee · Answer

Account Closed its always good to see another investor from NC. I am from Lenoir, NC and I invest here. Its no where as populated as Charlotte or the bigger city's but I have enjoyed doing it here and it has been profitable. There are several companies that are looking to come to this area. We have Google here and are now adding to there location here. Its also home to Eric Church the country music singer and Madison Bumgarner the MLB pitcher for the San Francisco Giants. I am always looking to help out so if you want to know anything about this area I will help you in anyway that I can.

Steve Kontos · Answer

@Khalil Bachir

Big fan of Johnson City, definitely feel free to send my way.

Account Closed

There are some opportunities in the areas you mention but there hard to come by nowadays due to the market demand.  We own buildings in Charlotte and Johnson City; both solid markets for multi-family investing.  If you need additional help feel free to let me know.

Percy N. · Answer

Account Closed, are you looking for an active or passive investment?

Would you hire a property manager?

Have you considered a syndication for a much larger deal which would allow you to take advantage of scale?

Account Closed · Answer

@Scott Skinger Were you talking about the august 9th podcast #239 w Austin Fruechting?

Account Closed · Answer

@Scott Skinger Thanks that is really helpful!

Account Closed · Answer

I don't know why I can't figure out how to directly respond to people.. Thanks Scott that's a lot to chew on to get me started. I would rather not hire a property manager because it's expensive and the whole point is to make money, right? I would think on a smaller building I could handle it.

I don't know anything about syndications but the word scares me.

100 - 200k down payment in the South, where to invest?

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