All Forum Posts by: Dion McNeeley

Hi @Russ Marlborough,

I only have 7 units and am still learning but here is what I have done. I think every market can be very different though.

Here in Washington state I haven't found any duplex that meets the 1% Rule. (Based on total rents are equal to 1% of purchase price, before any expenses) So I have a set amount I like to make per unit. The lowest I would go for any property is $200 profit for SFH, and $100 per unit for small multifamily. So duplex $200 triplex $300 and fourplex $400. This would be profit after P.I.T.I. and saving 10% for repairs and 5% for vacancy.

From what I see on the forums there are many markets that do a lot better than what I am able to do here. I would maybe try a local REI meet up in your area and see what people there are shooting for.

Hope this helped. Thanks.

Hi @Jiffin Eapen varghese,

Welcome to BP. You will find lots of information here to help you. I think the thing that may help you get started is trying to figure out what your end goals may be. 

Are you looking for another job? (Flipping, being an agent etc) 

Are you looking to replace your W2 income? (Buy and hold rentals)

Questions like this could help you understand what first steps to take. Goals may change down the road, however I like to start with something to work towards.

I have 7 units and am building enough passive cash flow to retire comfortably. Mostly I am focusing on small multifamily and house hacking. I'm still pretty new but have spent a lot of time learning. I can try to answer questions you have.

Good luck. Thanks.

Hi @Smita Rahatadkar  I have some small multi in Tacoma, Lakewood, Lacey and Yelm.  

Most of Tacoma is pretty good. There are a few neighborhoods I would avoid. I live in Tacoma too. Shoot a message if you want an opinion. 

I’m not an agent or anything but I’ll try to help. 

Thanks. 

Heloo @Austin Bright,

Welcome to BP. There is a ton of good information here and some awesome people to network with. 

Here are some thoughts for you.

A lot of lenders will want two years of work history in one field of employment. They may not care that you change jobs but it looks best if you work in the same industry for two years. 

FHA loan is a good way to start out with property ownership. I would suggest looking into a small multi family, 2, 3 or 4 plex. Live in one side rent out the other units. This could eliminate your housing costs and possibly create some cash flow. The best part of this is then being able to increase your save rate since your not paying for your housing.

If you haven't read it yet I would also suggest reading "The richest man in Babylon" this has some great formula for saving for investing even when you do not make a lot. 

I hope this helps. Thanks.

If this is a SFH I have seen a ton of cash offers go on places like this. So qualifying for a loan may not matter. I would have it listed and see what the level of interest is. You may not get as much as if you had the issue fixed. There are buyers out there who do not mind foundation work. Also I would not have any work done until you have at least three professional estimates done. Including these estimates in the listing could help narrow down the buyers to people less likely to walk away mid deal.

Good luck. 

Hi @Brendan Connolly,

Here are my thoughts. 

If you are willing to move your family and live in the next place you purchase then you have more lending options and there are some properties that are only available for a time to owner occupancy buyers. House hacking into the second place can give you a lower down payment if you find a deal that has the cash flow to make up the difference. Some of the decision making process will depend on if you live in the 4 plex you have now. It can be hard to go LLC when purchasing. There are several opinions about when to go LLC. It can be hard to just make an LLC and then purchase a property with it since it doesn't have the two years income track record lenders will be looking for.

I struggle often with the question of "pay off mortgage or get more properties" question. There are more than likely better ways to go about it but here was what I did. I purchase new places when I have enough saved for the down payments until I hit 4 loans. This is the current maximum number of loans a big bank will allow. Smaller banks may go up to ten loans but I was comfortable with 4. Then I focused on paying off the first mortgage. Luckily it was the smallest and the highest interest rate so it made sense. The plan is to rinse repeat at 4 loans. As soon as one is paid off, find the next deal then pay off another mortgage. I like having some paid off and some on loans. This way I am taking advantage of the benefits of leverage, (appreciation of a larger amount than what I have in the deal, tax benefits, more units etc.) and I have a cushion of houses that do not have a mortgage so I have good enough cash flow to handle market fluctuations. 

Even after having a clear plan that makes logical sense to me I still find myself running numbers and seeing if it makes sense to cash out refinance and get more doors. For now I have decided to stay with this four loan system. 

I hope this helped. Good luck.

Hi @Kaleb Henry, 

Yes, this is one strategy. It doesn't matter which you use first. As long as you stay in the place for the one year period that is required. The FHA can require mortgage insurance but can be refinanced after you hit the 20% equity point. The VA loan doesn't require the mortgage insurance. I have been doing conventional with 25% down to make cash flow better. I am saving my VA loan for the right deal when I do not have the funds for the down.

FHA and VA loans can be used on SFH and 2,3 or 4 plexes. Once a place has 5 or more units then the loans become commercial.

Hope this helps. Good luck. 

Hi @Alexander Gee,

This doesn't look bad. The first few years may have small cash flow. Refinancing after you are past needing PMI can be worth it if the mortgage rates don't go up. You should consider the refi cost and where the interest rates are at a the time.

When I first started I also set aside a large amount for repairs and maintenance. However once that savings gets large enough you may not need to set aside as much. If you are saving $340 a month and do not have large things pop up in a couple years you have a bit over 8k sitting there. So if in a couple years you haven't had a lot of repairs come up you could reduce that saving each month from $340 to $170. I tend to keep 10% of rents for repairs until there is 20k in savings and I have 7 units. With one unit having 8k set aside should be plenty. This way you could have better cash flow later.

Have you checked the rents in the area for similar places? This is often the best way to know if the rents are accurate. I like to run the numbers as if I had to rent the place out for 10% less than the area average. Sometimes selling agents can list rents that aren't accurate. I have even seen a lease that was inflated to make the numbers look better. The tenant had not paid a deposit so they had added $200 a month over the first year to build a deposit. If I hadn't talked with the tenant during the inspection I wouldn't have known. 

I hope this helps. Good luck.

Hi @Johnathon Freeman,

I am a big fan of house hacking. Start a business or not it is a good thing to make a housing move that reduces or eliminates your housing costs. There is a ton of information here on BP and some helpful people. 

Good luck

Hi @Kyle Wilson,

This sounds a lot like what @Mindy Jensen does. She has hosted a lot here on BP. She calls in "Live in flip". You may want to watch some of the episodes she is in. She has a ton of knowledge on this strategy. 

Good luck,