All Forum Posts by: Arun Iyengar

@Daniel Coblentz,

It seems like these are newer properties. As such, I agree that the maintenance costs could be much lower. The math seems to work out as a good investment.

Other related questions that I would now look through:

1. What is the rental trend in the location you are purchasing?
2. What is the vacancy trend?
3. Is it in a relatively safer location (safe can be as simple as you will not run into trouble when you visit your property)?

If you are comfortable with the above qualitative metrics, you should be ready to go. I do think these numbers seem very good and would dig quite deep to test the veracity of them before committing.

These numbers look great!! Some things to consider:

1. What is the age of the property?
2. For older properties, your repairs are going to be higher - I typically use up to $500 per unit per year if I don't have actuals
3. You are missing reserves for any other major repairs - typically around $200 per unit per year
4. Is payroll covered in management for your on site help?
5. How about expenses for water, sewer, landscaping etc
6. How about outside contract services, legal fees, permit fees etc?

If you've got all the above figured into your calculations and your numbers are as shown, this is a good deal and you will be able to sell to investors. 

Good luck

@Arturo Borges,

The question on payout is related to how much money you put in and the effort you put in. If you are the lowest equity GP but the one that spends the most time, you can ask for a share of the return that is higher than the equity you put in. I would structure that as an expense paid out as a salary or equivalent.

As has been said here, you first pay the investor before you can pay yourself. 

@Sri Ram,

How many units are in the property? Have rents increased due to rehab and if so how much? What is the NOI on the upgraded units vs the non rehabbed units? What is the general vacancy in the area where the property is in? These are some of the many questions that need to be answered before you can turn to valuation.

Hope that helps.

@Kusum Chanrai

Questions you should ask about your investment:

1. Duration - is this for 3-5 years or longer?
2. Engagement - are you going to manage or oversee?
3. Expansion - is this a one time investment or will you do more?

I started 4 years ago with a simple thought of "I want to invest in multi-family and it has to be close to where I live". It worked out well with my investments in San Jose, but I believe the returns on new investments here are so low that it is not worth "parking my money". 

My desire is to be in defensible markets that will allow me to weather the inevitable slowdown or downturn better. I am currently looking at a couple of properties in Sacramento which still provides a lot of value and still affords the appropriate downside protection.

Since you are local in the Bay Area, if you are interested in learning more about my investment, please PM me.

Good luck on your decision.

Thanks @Giora Sela and @Derek Lacy for your responses. I am more interested in the quality of care I can get first and then look at the costs. I did go to healthcare.gov but have heard that ACA insured people are not favored at doctors and hospitals.

Good tip on HSA eligible plans

@Giora Sela,

Thanks for the response Not having insurance is not an option. Will be a while before Medicare eligibility comes into play. For the $50-$60 for a policy, what type of policy were you referring to. With the ACA penalties being removed, where are these policies going to be offered in the future? Any knowledge here would be helpful to many people.

@Naina Tara,

The answer is yes and no:-) As my own circumstances have changed, my thought process has changed as well.

For the yes answer, when I first started working and decided to buy a home in the San Jose area, my goal was to buy as much house as my money would allow. Historically, this area has had a supply demand imbalance and with the continued tech concentration, I don't see that diminishing anytime soon. Over the past decade or so, as I have been able to move up to buy a larger house to support the growing family and then buy a house at the right school district, I continued to hold on to my older houses and renting them out. The name of the game here is capital appreciation.

That brings me to the No part of the answer. If I am looking for cash flow, buying a multi-family is far superior to the rents I get on my single family homes. The name of the game in this approach is cash flow. In the past 4 years, I have bought multi-family apartments and find that the cash flow there is great, and in this environment (not typical), the appreciation was good too.

And now to do both (Yes and No); If I was in your shoes trying to decide what to do, I would focus on finding myself a place to live in that I could call my own. I would pick as much house as possible in the best school district (even with no kids), to ensure that demand for my house would stay high if I sold.  If the market continues to grow in the next year or so, I would either refi or take a line of credit from that house and buy investment property.

Hope this helps. Good luck on your decision.

@Gary F.,

My approach has been that I want to have no more than 35% equity in my rental property, and I do a cash out refinance anytime my equity goes over 50%. This allows me to take the money and reinvest in another property.

The key to make this work, of course, is that the property can cash flow positively with the new loan. There is nothing worse than you having to pay every month for someone else to live in your rental.

I charge $1.75 for wash and $1.25 for dry. I am planning on raising them to $2 each.