All Forum Posts by: Oliver Trojahn

I currently own three single family rentals with a partner and we plan to buy 1-2 a year conventionally for the next 10 years or so. The business model is working and will continue. My next plan shouldn't effect our SFR rental business plan.

Now, on my own, to help diversify I have decided to jump into the apartment building/multifamily game. I do not have experience in Apartment buildings but am very competent in rental real estate. I have about 55k cash to start. My plan is to buy either duplex's, fourplex's or even a 6-14plex to start. I am not sure exactly which one to start with. All of these will be in C to C- areas that will generate great cash-flow with little chance of property appreciation. I will use a PM company to manage all in these areas. The deals I am considering will meet a 2%-3% rule.

I have three plans of attack I would like feedback on:

Purchase 2 duplex's cash that will generate over 2,000 a month in gross rents, get property management in place and see how it goes. This will allow me to get my feet wet with this area and not take on to much debt.

Jump directly into an apartment building 6-14 units and try to find an owner financed deal that will allow roughly 10-20% down, refinance after a year or so.

Attempt to get pre-qualified for a commercial loan with 20% down and make offers as normal on apartment buildings in my price range (i feel like this may be difficult with no experience in apartment investing.)

I have W-2 income which may help with loan qualification.

If you guys were me what would you do? I would like to get a jump start in the commercial multi family world.

Thanks.

I purchased my 40k vehicle after driving a free POS for 10 years. No car payment was amazing. However, with a lot of peoples mindset on this post I guess I also shouldn't buy nice clothes, go out to eat, or go to the movies either, maybe I should cancel my cable and my gym membership as well. Each one of those items is a luxury item to some extent that has a monthly bill associated with it, similar to a car loan. However, the car out of all things actually retains some value. Everything else has no value once consumed. I would be the first to tell you I try not to spend to much money in those categories but the fact is I do a little and wouldn't change it for the world. I can afford it though along with my 40k car that I have a loan on. Let's do a simple math problem with my 40k car as an example (lets assume i didn't put anything down on it):

Total interest paid over 5 years @ 1.9% for a 40k loan = $1,962 (this is the cost of the loan over 5 years). wow what a deal.

The 40k cash you didn't pay for the vehicle invested on a municipal bond at 5% interest for 5 years = $11,051 earned interest.

$11,051 - $1962 = $9,089 net gain.

If you paid cash for the vehicle you would lose the potential to make $11,051 in interest and have all your cash tied up in a depreciating asset. I guess you can qualify for more loans though, however, you wasted all your down payment money on a car. So you can't buy anything.

Imagine investing in real estate with that money. Also, like Brian said, you could always sell the car. With that said, I recommend putting money down on all vehicles because you do not want to be upside down. I also recommend buying a used cheap vehicle but if you don't want to because you want to live your life and have fun I would finance it any day of the week. This also assumes you can actually afford the monthly payments and it will not effect your debt to income for real estate investing.

Getting a low interest loan would work better for any priced car.

I feel the exact same way. I purchased a 40k car with 10k down. To imagine someone paying cash for that would be a down right waste of liquid cash. I have heard many people talk about buying a car with cash and it does not make sense to me either. A car loan is one of the cheapest loans to can obtain. I guess I lent myself 30k at 1.9%. That is free money in my opinion. I will go buy some cash flowing properties with that.

This deal to me is an absolute loser. There is only a partial upside with the fact you would only be paying 323 for rent each month. However, this property will never have the required cash flow to operate as a successful investment after you move out. I would hang in there and wait for the right investment. I would pay 825 a month now to live (probably in a nicer place than the one your buying) in order to wait out for a good long term investment. An investment that after you move out you don't have to worry about the payments each month.

It is for both quads.

Just found this property for sale on craigslist and spoke with the seller.

Owner/Landlord moving out of state and needs to sell (2) Four-Plexe's. All units rented. Gross monthly rents are 3,200 a month (rents are low for the area and can be raised). Seller owes 127,500 on each Four-plex. Loan is blanketed on both properties and is assumable. Current assumable loan monthly payment is 2,100 that includes P&I and taxes only. Insurance, gas and water for only (1) unit adds an additional 310 to the monthly payment. So total monthly payment, including utilities for one unit is 2,410.

This deal sucks in my opinion but the assumable loan makes this slightly more attractive. Also, rents can definitely be raised in each unit from between $25-$50 when these leases expire. Also, once acquired, I can try to find some more favorable financing terms to lower the monthly payment. That (1) unit gas and water payment will also be removed immediately at lease end.

He also wants $9,000 to assume the loan. - Wouldn't pay him anywhere near that.

What are your thoughts on assumable loans and what they have to offer a deal?

That is why you have to find great deals. I mortgage all my properties and if I use the 50% rule I still come out with great cash flow (100-200 per door each month). Majority of people on this site do not just break even. They cash flow nicely while mortgaging the property. Do some research on it.

I have done this once to help show better reserves (0 interest balance transfer check to my account). However, you have to be careful as you will then have a higher card balance. If you using conventional they may see this when they check the credit report one last time before closing. Be careful.

Rob, I like the land contract deal described above. Sounds like it will pay off in three years.

I shoot for $450 a month excess cash flow after all expenses are paid. This number doesn't include repairs however. I also haven't really had to repair much anything in the past three years. I am sure it is coming though.

Rob and Steve. Very great question. I guess in reality my entire business LLC checking account is for repairs (like Wade said). I don't necessarily allocate anything specifically for repairs as I don't see the need. If something breaks, I fix it with money from the business checking account. In reality, i do leave about 1k in the account when putting the funds towards another property. For reserves etc.(which is needed for getting the loan) my personal checking account has enough to qualify. For someone doing this full time with no outside income they wouldn't qualify for the loan.