All Forum Posts by: Frank Wong

@Michael Cornell

Buy and live in a multi-family is a great way to get into the game.  Like Sam said pre-approval is the first step, you need to know exactly what interest rate you qualify for and what your exact payment is.   The pre-approval will quickly determine which areas you can focus your attention on.  I think if Oakland is too expensive.  You can expand your search to San Leandro if you prefer to be South or expand it North to El Cerrito, Richmond (Annex, East Richmond Heights), and San Pablo.  

Start looking online at current listings and closed sales.  This is a quick way to educate yourself.  You can get a good idea of the general market price for each area of focus.  Also look at sales in the area that have been rehab.  Now you have an idea what on what the potential can be.  

Hi Dillon,

Those are all great ways to improve the value.  I think the key here is to look for value-add condo in a prime area of Chicago.  Something that fits your budget of course.  An older building in which all the units or most of them are in original condition, this is where your upgrades will have the largest impact.  I find most people don't have the time or don't want to do the upgrades themselves.  They want a finished product.  You fill this void and make the money.  Don't go cheap on the floors.  Pick a high-quality laminate or vinyl plank floors.  You can get something nice for $2.39-3.00 sqft.   Since this is a small place.  Have the same material run through the bedroom, living area, and kitchen.  This will make the place bigger.

Shawn,

Start by looking at deals every day.  Underwrite them and go through the numbers.  This will give you confidence when the time comes.  It is also good practice.  Watch the properties see what they sell for and compare your numbers.  Get your pre-approval on your loan.  Taking action on these things sets your mind to the next steps.  Always moving it forward.  Don't wait to join a group in your area.  Just go and make it happen.  No one will care more about your success than yourself. 

Good Luck

Hi Maria,

I think if you sell your owner occupy property you can just sit and wait for the right deal to come next.  Forecast of 7.7% is just a forecast, market conditions change and nothing is set in stone.  I like the idea of selling and buying a multi-unit to spread out your risk to other units and increase your cash flow.   

Cody,

Be patient and when the deal comes you will know it.  I think right now there is just this major thirst for doors doors and more doors.   People buying just to buy and talking themselves into deals.  If the deal doesn't feel good don't buy it.

Hi Cody,

From 2-4 units there is not much difference. Go for the 4 if you have the finance to do so. Great way to spread out your risk. Once you start looking into an SFR that is when you will notice a difference. SFR tenants tend to be families and to stay longer. My first investment was a 4 plex 17yrs ago. It was a great way to get started in the game. I always kept my units better than my competition and I always rented it for slightly lower than the market. I would list it for rent and get bombarded with calls. For me getting the best-qualified tenant and the shortest turnaround was most important.

Not many cons to a 4 unit.  You basically have a mini apartment.  Perfect first property.

Good luck

Samuel,

From my view, it's pretty clear.  Keeping it makes zero sense to me.  Based on your calculations you are losing -$1,241 a month.  That is not a performing asset.  This is a liability.  I don't care what the future may or may not hold as in value.  If this was 2010 and the market is recovering from the crash I would say keep it.  We are on the tail end of one of the most bullish real estate cycles. 

Right now the market is in a transition period and slowing down.  The crazy overbidding on homes in the South Bay is slowing down.  Only the lower price homes are seeing it.  Could the market pick up again?  Yes, it could or it can stay flat or turn over.  No one knows.  Banking on appreciation is like gambling.   Would a bank lend on an apartment building with negative cash flow? Exactly.

If you decide to sell don't worry about it. Whats done is done, can't worry about the future and have FOMO.  You were lucky to buy the home 7-8yrs ago and rode this wave.  Be happy and congratulations! 

Hope this helps.

Hi JR,

It really depends on what you are looking for.  SFRs will give you a higher appreciation over time but less cash flow.  Multi Units will allow you to spread the risk over a few units.  In your case maybe finding a duplex or a 4 unit will be a good idea.  You can still get a conventional residential loan up to 4 units.   

When you sell the SFR you will be selling to buyers and investors down the road. Multi units you will be selling to investors. I like SFRs for this reason. I feel like its a great niche to be in. My investment strategy also allows me to have the house vacant while I find a renter. You gotta look at what fits best for you.

Hello Samuel,

You said, "I will not be cash flow positive till the property is sold."   That says it all right there.  I would sell.  Campbell has had a tremendous run-up in price along with every home in the South Bay.   You can sell cash out and reevaluate what your next plans will be.  I don't believe in holding a rental property than loses money each month.  I especially don't like holding a property this high in value.  It is such a large risk having this much equity and risk in 1 rental property. 

Some investors will argue and say CA appreciates over time and values always go up.  Yes, those are all valid arguments.  Prices in CA have also gone down and stayed flat.  No one really knows what values will be in the short term.   What we do know is that keeping this property will not be cash flow positive.   I think when you look at this deal from the outside it becomes more clear.  What I mean by that is would you buy this house at $1.4m today as an investment?  Pretty clear answer.  

Hope this helps.

Hi Sam,

I think it depends on the individuals business plan.  Some people just like to buy and hold and others are flippers.  I like both.  I try to keep the best property that fits my parameters as a rental.  I like a 3/2 around 1300 sqft starter home in a B to C area.  If the property is a 2BR or a large 4/2 2000sqft house,  I would flip it and move onto the next project.