$200K+ in Starting Capital. Several SFRs or go Multi-Family?

General Real Estate Investing
9yFollow

$200K+ in Starting Capital. Several SFRs or go Multi-Family?

Jeff Petsche
Real Estate Broker · Yorba Linda, CA · Member since 2017 · 154 posts · 114 votes

We have a starting capital of $200K+ to put into REI and we are looking for long term BUY/HOLD properties and CASH FLOW. Our question is do we focus on acquiring several SFR properties or go straight for the multi-family properties?

I'm leaning more towards 5+ units with an ADD VALUE play than SFRs. What are your thoughts on using the BRRRR strategy? Or, are there any other strategies you would consider with this amount of starting capital?

We ARE NOT interested in REITS or The Stock Market!  

There are three of us involved in the partnership and we ARE NOT looking to use any of the CASH FLOW towards our daily/monthly lifestyle. We will be REINVESTING the cash flow into more properties, along with each of us committing to saving $1,000/month ($36,000/year + the yearly cash flow) to reinvest.

Two partners have corporate jobs with good six figure incomes, bonuses, 401(K), etc. and I am a real estate Broker who focuses on my transactional business (six figure income), plus I am a retired police officer with a tax free monthly income (Approx. $54,000 passive income per year-tax free), so we are covered on our living expenses.

Two partners are not looking at retiring for 10-12 years because they love what they do for work, make good money and have pensions in place. I am already SEMI-RETIRED because my police retirement covers all my monthly expenses, and work in the real estate space because I have a passion for the business and make good money doing it.

Because of my business and flexibility, I will be the ASSET MANAGER of properties we acquire and can travel to other markets if/when necessary, go build relationships with boots on the grounds in markets and put a lot of focus into our investment business and goals.

Your feedback and suggestions will be greatly appreciated.

P.S. Two of us live in Southern CA (me and my girlfriend) and our other partner lives in Seattle, WA. Buy/Hold just doesn't seem to pencil in our backyards at this time, so we are leaning towards OOS investing where cash flow and COC seems to be more prominent. (Looking at Indianapolis, Kansas City, MO, Oklahoma City, OK, Columbus, OH and Memphis, TN) 

4Reply
25 views

Most Popular Reply

Lee RipmaPro Member
Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes
9y

@Jeff Petsche

If you like the BRRR strategy then you're going to really love forced appreciation in MF! I can't tell you what to do in your situation, however, I will tell you that whenever you talk to RE investors or hear them interviewed you don't often hear, I wish I had started off smaller and taken longer to get into MF. I did a small MF for my first deal and I'm just wrapping that up now. I'm looking for something bigger. Best of luck!

Podcast Guest on Show #373
2Reply
See this reply in the discussion

22 Replies

Jump to latestLatest
  • Lee RipmaPro Member
    Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes
    9y

    @Jeff Petsche

    If you like the BRRR strategy then you're going to really love forced appreciation in MF! I can't tell you what to do in your situation, however, I will tell you that whenever you talk to RE investors or hear them interviewed you don't often hear, I wish I had started off smaller and taken longer to get into MF. I did a small MF for my first deal and I'm just wrapping that up now. I'm looking for something bigger. Best of luck!

    Podcast Guest on Show #373
    2Reply
  • Robert EllisBusiness Member
    Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
    9y
    Originally posted by @Jeff Petsche:

    We have a starting capital of $200K+ to put into REI and we are looking for long term BUY/HOLD properties and CASH FLOW. Our question is do we focus on acquiring several SFR properties or go straight for the multi-family properties?

    I'm leaning more towards 5+ units with an ADD VALUE play than SFRs. What are your thoughts on using the BRRRR strategy? Or, are there any other strategies you would consider with this amount of starting capital?

    We ARE NOT interested in REITS or The Stock Market!  

    There are three of us involved in the partnership and we ARE NOT looking to use any of the CASH FLOW towards our daily/monthly lifestyle. We will be REINVESTING the cash flow into more properties, along with each of us committing to saving $1,000/month ($36,000/year + the yearly cash flow) to reinvest.

    Two partners have corporate jobs with good six figure incomes, bonuses, 401(K), etc. and I am a real estate Broker who focuses on my transactional business (six figure income), plus I am a retired police officer with a tax free monthly income (Approx. $54,000 passive income per year-tax free), so we are covered on our living expenses.

    Two partners are not looking at retiring for 10-12 years because they love what they do for work, make good money and have pensions in place. I am already SEMI-RETIRED because my police retirement covers all my monthly expenses, and work in the real estate space because I have a passion for the business and make good money doing it.

    Because of my business and flexibility, I will be the ASSET MANAGER of properties we acquire and can travel to other markets if/when necessary, go build relationships with boots on the grounds in markets and put a lot of focus into our investment business and goals.

    Your feedback and suggestions will be greatly appreciated.

    P.S. Two of us live in Southern CA (me and my girlfriend) and our other partner lives in Seattle, WA. Buy/Hold just doesn't seem to pencil in our backyards at this time, so we are leaning towards OOS investing where cash flow and COC seems to be more prominent. (Looking at Indianapolis, Kansas City, MO, Oklahoma City, OK, Columbus, OH and Memphis, TN) 

     I'm a huge fan of buy and hold Multifamily properties. Make sure there is upside. All of those cities have great markets. I'd look at deals in all of them and finalize it and even lock a few up. Find one big, great complex to turn over and increase management on. We have a few here that could match what you are looking for. 

    [email protected]786-494-6766
    Section 8 Launch52 Reviews
    WebsiteView Page
    1Reply
  • Rhett TullisBusiness Member
    Property Manager · Oklahoma City, OK · Member since 2013 · 1k+ posts · 617 votes
    9y

    make sure you do lots of research and visit with some owners of multi family before you go that route.  if done well it can be fine but some folks are not cut out to own multi family.  i have seen the good and the bad, just make sure you know what you are getting into.

    [email protected]405-283-6522
    Integrity Oklahoma
    WebsiteView Page
    0Reply
  • Ross Denman
    Real Estate Consultant · Whitestown, IN · Member since 2014 · 547 posts · 933 votes
    9y

    I'm not a big fan of 2 or 3 unit multi's in Indianapolis as I don't see enough cash flow to deal with the headaches. I think it's preferable to target 4+ units. I like SFR's because of the retail exit strategy upside, but since you are looking for long term cash flow, I think you should keep your eyes out for 4+ units. Since you have a fair amount of money, I would certainly consider BRRRR. This will allow you to purchase homes with a little more distress and create a more equitable situation... this means a higher ROI, more value, or even the potential to cash out more money during the refi if that's a preferable position.

    2Reply
  • Vivek Khadilkar
    Fremont, CA · Member since 2015 · 18 posts · 4 votes
    9y

    BRRRR is a great strategy. will it work for part time and out of state investor with full time job ?

    1Reply
  • David Sweeney
    Real Estate Agent · Seattle, WA · Member since 2016 · 65 posts · 29 votes
    9y

    Everyone seems to have different opinions on this topic. I suggest that whichever way you go, get experience and education on how to do that type of transaction the best you can, in order to limit mistakes and to get good at how to put that type of deal together. Here is an article that touts the benefits of both SFR and MF properties

    Here are couple more articles on these topics: Article on cash flow vs. equity and  This author believes in SFR over MF

    My opinion? I am looking for an apartment building to buy. I like that when a tenant moves out of an apartment, you still have rental income coming in from the other apartments. I like that when you have repairs to make, you only have one roof to fix, not several. I think that millennials are going to demand more apartments than SFRs. Lastly, I think that the apartment building will increase in value over time, and you can buy for both cash flow and appreciation. I want to leverage my money for the biggest bang I can get.

    A friend of mine at work likes to buy SFRs and works to get $500 month cash flow from each one. Great plan, nothing wrong with that. My goal is to buy an apartment building and get $10,000+ coming in each month, which will more than cover the mortgage. The downside is that he can get residential loans, while I'm playing the commercial loan world. One advantage of a commercial loan is that you have a loan specialist putting another set of eyes on your transaction to make sure that it makes financial sense. I kind of like that.

    0Reply
  • Account Closed
    Contractor · Los Angeles, CA · Member since 2015 · 887 posts · 323 votes
    9y
    Vivek Khadilkar I believe just about anything works as long as you have a solid team and a solid system. All the best to you. Jorge
    0Reply
  • Cheng Chen
    Investor · Bangor, ME · Member since 2017 · 8 posts · 5 votes
    9y

    Multifamilies if you can find some good ones. Easier to manage for yourself or a PM, less driving for maintenance and repairs if you are going to do them yourself, and generally a higher ROI for each home you invest in. That's my $0.02 anyway.

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    9y
    I have talked to over 100 people about this. If you are saving over 30k after expenses every year you should consider Mfh. If not you don't have the liquidity to do it.
    0Reply
  • Rashard Alomari
    Investor · Memphis, TN · Member since 2016 · 215 posts · 128 votes
    9y
    I personally go for whatever is the best buy at the time. Why pass up on a GREAT deal when one presents itself.
    0Reply
  • Jeff Petsche
    OP
    Real Estate Broker · Yorba Linda, CA · Member since 2017 · 154 posts · 114 votes
    9y

    Thanks for the replies and comments. I'll be getting on a plane early next month to visit two markets, Columbus, OH and Indianapolis, IN. I'll spend 3-4 days in each market and see what my best options are.

    There are sooooo many markets and opportunities out there I can't possibly visit every city, so I have to go with my initial research and connections made to this point and see where it takes me, and right now that is Ohio and Indiana.

    Time to get to work!

    2Reply
  • Nathan Mairs
    Investor · Columbus, OH · Member since 2017 · 20 posts · 11 votes
    9y

    @Jeff Petsche

    Curious to know what LTV terms you've been offered for considering the single family route?

    I had lunch with a VP from US bank last week and they offered up to 80% loan to value on investment properties with an APR under 4% amortised over 20 years.

    Do you have any comparables to share?

    0Reply
  • Jeff Petsche
    OP
    Real Estate Broker · Yorba Linda, CA · Member since 2017 · 154 posts · 114 votes
    9y

    @Nathan Mairs I have not made a contact with the US Bank residential side yet, only the commercial side because I'm looking at 5+ units first. However, we are not opposed to 1-4 units either, if the deal makes sense.

    Why are you not able to get a 30 year amortized loan for a SFR property through US Bank?

    For the commercial side I was quoted I believe 75%-80% LTV of after repair value. No seasoning and low 4% rates with 25 year amortization.

    0Reply
  • Nathan Mairs
    Investor · Columbus, OH · Member since 2017 · 20 posts · 11 votes
    9y

    @Jeff Petsche

    Thanks for sharing, I'll circle back with the US bank to reclarify those terms. At the time my conversation was focused on their commercial lending terms but I haven't come across any sensibly priced commercial apartment units that aren't in war zones in my radius preference. 

    I plan to go back with a few deals for review this week so I'll be able to get a better feel for the terms they are willing to put in place. 

    0Reply
  • Jeff Petsche
    OP
    Real Estate Broker · Yorba Linda, CA · Member since 2017 · 154 posts · 114 votes
    9y

    @Nathan Mairs Sounds good. I'm heading out to Columbus first part of September and having lunch with my US Bank contact, so I'll be getting a lot more clarity after that meeting.

    I'd be happy to share the outcome of that meeting with you and even give you his contact info, if he's a different guy than who you are talking to now.

    Shoot me a CONNECT/EMAIL and we'll stay in touch.

    0Reply
  • John P.
    Investor · Vacaville, CA · Member since 2016 · 433 posts · 249 votes
    9y

    I have seen a ton of partnerships break up and non-married couples as partners are the worst. I would rethink your partnership Members if I were you. 

    0Reply
  • Hank Keller
    Rental Property Investor · Mansfield, OH · Member since 2017 · 151 posts · 117 votes
    9y

    @Jeff Petsche - I own 7 SFH turnkey rentals in Indianapolis and live 1 hour from Columbus. I'll be in Indy this weekend to help a fellow BP forum member with a potential purchase using the same TK company I use. PM me if you'd like to discuss either market. I'm available for a phone call too...

    1Reply
  • Diogo Marques
    Financial Advisor · Cascais, Lisboa · Member since 2015 · 199 posts · 83 votes
    9y
    Go Multifamily in the Midwest region. At least 20 units. You can skip the SFR all togethet as they mean nothing to a commercial broker
    0Reply
  • Jeff Petsche
    OP
    Real Estate Broker · Yorba Linda, CA · Member since 2017 · 154 posts · 114 votes
    9y

    @Hank Keller I'll be taking a trip out to Columbus and Indianapolis from Sept. 5th to the 12th and meet with some boots on the ground, and get a feel for the markets.

    I'd have no problem talking with you about your Indianapolis investments and their performance, but not sure TK really appeals to us at this time because it ties up our capital with the 20% to 25% down and no REFI out option to get our cash back. Our first strategy is BRRRR and TK is strategy #2

    I'll reach out to you by phone today or tomorrow.  

    1Reply
  • David Sweeney
    Real Estate Agent · Seattle, WA · Member since 2016 · 65 posts · 29 votes
    9y

    Good luck with your search. Let us know what you find.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free