All Forum Posts by: Josh Dillingham

@Richard Swift sorry to hear about your mom. I am far away from CA but I know enough to know that $20K doesn't go very far around there. What are your real estate goals? one great way to get started is to buy a owner occupied 2-4 unit property. Live in one unit, rent the other units out. This will allow you to get a FHA 3.5% down payment loan. of course, this would require you to live in the building, if that isn't something you are willing to do you will likely need a 25% down payment for a pure investment property, in which case you are likely going to have to look out of sate, as $20K isn't going to get you 25% down on anything near you.

@Account Closed in that case I would keep things set up the way they are and put something in the lease that if one tenant leaves the other tenant has the option of finding a new tenant as long as that tenant meets your criteria. I wouldn't bend over backwards for this tenant considering it sounds like you can find another one without much problem. And chances are the tenant isn't going to find another landlord that is going to do what he wants you to do.

@Rebecca Baggett it will be hard to get good (or any) cashflow when you are living in one of the units, but you can consider the money you are saving on your living expenses as cash flow.  I live in one unit of a tri-plex and rent out the other two units.  the property cashflows $250 per month with only two of the three unit rented.  That isn't great cash flow, but when I move out it will be $1200 per month, which is great cash flow for three units.

If I were you I would run the numbers as if all the units would be rented out, because someday they will be, and in the mean time you are saving that amount of money on what you would otherwise be using on living expenses.

@Account Closed do you have separate leases for each tenant or are both tenants on the same lease? is it a one year term? keep in mind that a 6 month. lease will allow him to move out in the middle of winter which will likely make it harder for you to find a new tenant.

@Glenn Hinojosa Maybe @Upen Patel can chime in on this he is an FHA guru.

@Randal Remon $250 per door can be achieved in single family or multifamily.  in my opinion it is easier to achieve in multifamily but some prefer single family.

@Neil P. you should definitely consult your lawyer about this, but since you asked I will be happy to give my non-professional speculative 2 cents. if his original lease stated that it turns into a month to month agreement after the two year term then I would think all of the terms of the lease are still valid which includes first right of refusal.

I don't understand why the seller didn't go to the tenant first and offer the property to the tenant at a certain price before listing it for sale. It seems strange that the seller (and sellers agent) would accept an offer before offering to the person that has first right of refusal. I wouldn't sign anything without talking to a lawyer.  They are probably trying to get you to sign the addendum because they know they never should have allowed you to get the property under contract in the first place without offering it to the tenant first.

There are an infinite amount of ways to set it up, but I have heard of a lot of people doing a 50/50 split when one person provides all the money and the other person does all the work.  Sounds like he is doing all the work and providing a good portion of the money.  if I were him and I was doing all the work I would want 50% even if you had twice as much money in the deal as me because he is providing all the expertise.

It is easier to find money than it is to recognize a good deal and have the skills to make it all work. Seems like he is providing you with a lot of value.

@Quincy Miranda the approach that @Caleb Heimsoth describe is how to find the value of a multifamily.  If you want to determine the price you are willing to pay you will first need to determine your goal in owning the property.  If it is cash flow you will need to determine how much cashflow you want to make each month from the property, then work backwards.

if you want to cashflow $1,500 per month from the 6 units you will need to add up the monthly revenue (rents) then subtract all your monthly expenses.  the variable in your expenses will be the mortgage payment. set the equation so that your revenue - expenses = $1,500. that will tell you how much of a mortgage you can afford to meet your cash flow goal, which will allow you to determine the purchase price.

That depends on your market.  I am under contract right now for 5 units with a purchase price of $170,000 which will cash flow $275 per door, self managed.