All Forum Posts by: Phil Mcnally

@Phil Mcnally . Your examples for Anchorage are all C/D properties in high-crime areas. Anchorage is a very patchy town, but anything north of the highway is usually low-quality tenants. The market trajectory is flat to down since late 2015. There should be some opportunities for A/B/C properties with your 1% benchmark for the next two years at least until the state financial situation is sorted out (new taxes coming). Claimed rents are also inflated lately as rents have dropped since December 2016. Best of luck in your search!

Yeah the little I read makes it sound like local knowledge was more important than ever.

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Originally posted by @Jamie Rose:

Anchorage, Alaska you can find 4plexes for 400k and 1,000 or greater rent fairly regularly.

I started looking tonight out of curiosity and you really can...

https://www.realtor.com/realestateandhomes-detail/...

Now where to start with the unique situation of Alaska. Oil price dependent economy and high heating bills paid by the landlord it seems but hey I asked for a place that has $400k - $500k 1 - 4 units at 1% rents and there it is.

I am going to read more.

phil

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https://www.zillow.com/homedetails/586-Reaney-Ave-...

$380k - 4 unit - total rent $3650 = 0.96%

Both of these links from Jordan Moorhead. Let me know if there is anything 'not cool' about posting links like this.

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Those both sound promising but again show how good deals may not exist in the $400k - $500k range. I realise this request for a $500k, 1% property seems a bit annoying to some reading the thread and there are obviously easier deals to find at lower prices but I really am interested to find out if a $500k 1% property exists, that also fits the criteria of a conforming loan.

I will try and actually do some searching and link a few properties that might be close and see what you all think. Also anyone who see something that might fit feel free to post a link.

Unless there are some BP rules that prevent this type of posting. I consider it educational purposes.

https://www.redfin.com/MN/Minneapolis/1615-Lowry-A...

$400k - apparently rents for $895 a unit (x4) = 0.9% approx

phil

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Originally posted by @Jeff Filali:

Can multiple SFR properties be grouped into one loan? If you found someone who had four $100K homes for sale that were all better then 1%, could one loan be used instead of 4? Could someone put those properties into one LLC, and sell the LLC instead of the individual properties?

Not with the 30y, Fannie Mae loans. Each property would would be a separate loan. I agree once you get above $300k in the cheaper markets the rents are less attractive. But that is why I am searching.

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Originally posted by @Terry Lao:

@Phil Mcnally

The goal is be in a position to buy commercial properties, ranging from 10, 50, 100, depending on cap rate. The economies of scale works best with large commercial buildings.

I'm not sure why you didn't just say that at beginning, then you would be guided to commercial properties. There is no next step other than commercial when you reach ten. You can probably sell smaller non-performing, but at some point either you have to accept your ten, get another person to put properties in their name, or just go commercial.

Terry

Is the goal for everyone to buy commercial properties?

Yes I agree that big commercial deals that go well can provide huge returns in a short time, but I don't think I am going to get there. Maybe too much to learn and understand before I would be in a position to be confident of a deal of that scale. Maybe ten conforming loan properties do an ok enough job?

So my original question still stands and maybe valid for others in a similar situation. Do $500k 1 - 4 unit 1%ers exist? If so where?

I also think the ten conforming loans could be recycled over time to build a greater that a ten property portfolio without ever going commercial scale. eg

Buy 10 x $100k properties

Over time save rental income and cash out refi enough from the group to pay off one loan = One free and clear property with cash flow.

Buy a new $200k property to fill the slot and repeat each time upgrading the property and loan size as income allows.

Many years later you could have ten $500k properties (if they exist) still on loans and a bunch of other paid off properties accumulated along the way. Maybe you can't live long enough to do this but you get the idea. More of a slow and steady approach.

Or maybe someone has the cash and qualification to get 10 x $500k properties on 30y loans and be happy with a $5mill portfolio that is paying for itself and growing. Doesn't sound too bad. How many people achieve the maximum capacity of conforming loans?

I appreciate the input everything helps fill out the picture.

phil

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Originally posted by @Terry Lao:

@Phil Mcnally

Your start was to have (10) 30 year fix conventional loan, 1-4 units, 500k properties. That is theory, which is a good goal. However, wouldn't a good starting point be ONE? This would give you the experience, management, and cash flow. It's like Monopoly.............do you start building hotels on Park Place and Boardwalk?

Also, the guy who seems to know it all. He didn't start off like that. I'm sure he started small and built up...

Hi Terry

I did not make it clear at the start but I have owned rental property since 2008 and will be at the 10 limit soon. This got me thinking of next steps. Do I look for commercial loans to keep going or could I have used the conventional loans better. I thought it could be a good idea to pay off one of my early small loans (or 1031 exchange etc) to free up a loan slot and find a fat expensive property to take its place. If I did this with all of them I could double or triple my current portfolio value. As I started to look I was surprised how difficult it was to find $500k 1%ers vrs $250k 1% ers and started this discussion to see what others found.

So I agree with you and I did start small and get some experience in an average joe investor kind of way. This idea is my build up to a bigger portfolio plan without yet having to take on commercial loan strategies. I have some properties in the $150k range. Exchanging these for $300k properties would be quite a step up. But why not max out each available loan if it can be done with a good chance of success.

I am not ready or educated enough to think about big apartment complexes. I also hope that my lack of knowledge can be mitigated to some degree if I have ten properties in a variety locations compared to a single large basket. I have already proved to myself that I can pick a bad deal :-) But I got lucky or did better on others and across the group things are beating my other choices like stocks and bonds so I am feeling confident enough to step it up a little. The 30y fixed loan gives a very long time for deals to come good.

phil

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I think this is a fair point that 1% is a broad brush that covers up important details. But the 1% rule is there to try and stop average Joe investors getting into a disaster and at least give some hope for success if they are patient.

The place I rent and live in right now has about 0.3% rent to value. Great for me but terrible if I had bought it as an investment. I also noted a nearby property was up for sale recently at $970k when I looked up the sales history on zillow it was last sold in 2007 for $940k so lots of possible traps for average joe investor around here. I think the OOS 1% type deals at least give hope for the middle of the pack folk. Is it false hope?

I would love a 0.8% San Jose property BTW :-)

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Originally posted by @Terry Lao:

@Phil Mcnally

yes, two loans. however, if you qualify for $500k, then 2 (250k) you should still qualify. it might cost you $3k more to do two. maybe cut fees down if you work out deal with lender.

however, what is your other option? ..........back to square one. why can't i find 400-500k with rents 1% of sales price.

terry

True but that was kind of the challenge. Do they exist?

The search started from the point of view that I have ten, 30y, fixed,conventional loans available for 1-4 unit properties. If I could find ten $500k properties that 'work' I could borrow a max of $5mill x 75ish %. This would maximise gains over time compared to ten $250k properties. But only if they exist. If they don't then better to find the next highest properties that do.

I am still hopeful they can be found. We seem to be getting closer as people chip in ideas. High $300's are doable. I have not yet seen a $400+ 1% property that an average Joe investor could buy without having some kind of off market find or rehab plan to boost value.

It is fun trying though right?

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All Forum Posts by: Phil Mcnally

Phil Mcnally has started 6 posts and replied 74 times.

Post: $400k, 1 to 4 unit property with 1% rule. Anywhere?

Post: $400k, 1 to 4 unit property with 1% rule. Anywhere?

Post: $400k, 1 to 4 unit property with 1% rule. Anywhere?

Post: $400k, 1 to 4 unit property with 1% rule. Anywhere?

Post: $400k, 1 to 4 unit property with 1% rule. Anywhere?

Post: $400k, 1 to 4 unit property with 1% rule. Anywhere?

Post: $400k, 1 to 4 unit property with 1% rule. Anywhere?

Post: $400k, 1 to 4 unit property with 1% rule. Anywhere?

Post: $400k, 1 to 4 unit property with 1% rule. Anywhere?

Post: $400k, 1 to 4 unit property with 1% rule. Anywhere?