All Forum Posts by: Ben Feder

Here is the thing - if you are seeking loans for investment properties - duplexes and 3-4 unit multi fam (dont know about sfh) the loan will be approved based, in part, on the income generated by the property. 

When you go 5+ units it is ALL about the financials of the investment and a bit on the person seeking the loan. One thing that does factor in, heavily once you get to larger numbers of units , is the experience of the borrower. Have you had investments before, if so what size? Etc etc. 

My suggestion is to buy a 3 or 4 family and use the owner occ loans as you will need a small downpayment. Leverage this experience to go larger once you have a better feel. Honestly the commercial world is a very different place than the sfh, under 5 units scene. 

The main reason you would want to do that is to protect your assets from each other. The other big reason is that when you sell 1 you can just sell the company and not the property. This has some tax benefits.  

@Ben Feder hello Ben it depends on your ultimate strategy. If you plan to hold them I would recommend separate LLCs, if these are flips it may not be required and more work/cost than its worth...

@Ben Feder

Hmmm, what makes you want to start with a large complex ? Do you have a background in managing them or something along those lines?

And yes, I left my W2 job early this year so unfortunately the bank will not consider the income I’m generating from my business when I apply for a loan. To solve the problem I found a relative with a solid debt-income ratio to co-sign for me. This will allow me to purchase another house-hack even though I will not qualify alone.

@Ben Feder

The mortgage includes interest, taxes, & insurance. I’ve not had any vacancy, in fact, I’ve had negative vacancy. The last two tenants that left paid for a month, left before the end of the month, and I filled the room before the month was over so I actually had double rent for the last week or two.

I’m talking about a house-hack, not a traditional rental, so the most substantial value is in the thousands I’m saving in rent if I wasn’t in the house. To rent a comparable home in the neighborhood I’m in is around the $2000 mark.

Everything was newly updated in the house so I’ve had no cap ex (and shouldn’t for years to come) and I’ve spent less than $100 in maintenance in the last year.

I pay the utilities which were about $120 in the summer and $220 in the winter bringing the average to $170.

@Ben Feder do some research on CAP rates. Maybe pick up this book to help you understand the financial aspects https://www.amazon.com/Estate-...

If you buy with cash then all the net income is yours.  If you leverage then you get what is left over after paying the mortgage. This means you are earning the split between the cap rate and the interest rate. 

I dont have time to type it all out but will send you some links later today 

@Ben Feder

Hey Ben, the property I’m currently house hacking needed no work (which was significant factor in buying it).

I have $2,300/month coming in for rent on a $1,761 mortgage while I’m living in the home. That’s a pretty good arrangement in my book. The point is, it depends on the situation and your goals.

I buy new builds. In the commercial multifamily world price is all about cash flow (and location).  For example, where I live the cap rates range from 4-6%.  This means if you bought with cash you would get 4-6% return each year 

It really depends on what your goals are, how much time you have, how much cash, etc etc. New Builds are more like bonds in that you are buying an income stream. This type of investment works best IMO for those with the ability to come in with a large amount of cash and if you leverage you are basically earning the split between CAP rate and interest rate and your cash flow will be slimmer until you can increase rents over time

So really it just depends. Just keep doing what you are doing - fact find and keep learning and you will find what will work best for your situation.