All Forum Posts by: Fred Fleury

@Steve Buchanan this is great information. Let me see if I understand, the question I need to answer is: exactly how much leverage can I get and still afford this every month, so that I have more cash for stuff and for a next investment. I think this is it, right? Compromise a little cashflow but really amp the returns? These concepts are becoming clearer, but again I'm very new to this. Thanks. 

@Jeffrey Almonte thanks for pointing that out, I will include this in the Rehab costs like Steve suggested. I'm so glad I started this topic now I know all these things to focus on. 

@Wei Cho that's really helpful, especially because we're in the same city. I'm sending you a PM. Thanks

@Will Barnard thanks for the input, I will add those to the expenses list to make it more realistic and study more of it. I can see if this would be a definite no-go deal with these included. 

@Bill Goodland thanks for the insight. Do you have any pointers on how you decide how much debt to use? The calculation at 75% financed seems to make the property break even. If I used more debt like you mentioned, it'd cashflow less, but the money would be more leveraged and I'd have more free/non-spent money for repairs or other investments. Would that be it, how do you see this? Thanks a lot! 

@Robert Nelson thanks for the input. There's no cash on cash return in this deal apparently, which seems to make sense considering it's a central area in Los Angeles. You are correct in the big down payment and nearly or no income. The debate is if this would be a first good investment for me for all the non-cash benefits I mentioned, as stepping stone to more rei deals, instead for example of jumping in and investing oos (or far) with zero experience. But most definitely the long term goal is to learn and have cash generating properties. 

Thanks everyone for the answers.

@Robert Chuang Yes that makes sense, thanks for pointing that out. I'll also be more conservative with the utilities, I did use less than 5% to be able to come up with a non-negative cash flow so I'll adjust that up. 

@Seth Borman good point, I didn't see that initially. Maybe more realistic numbers would be to lower the vacancy estimate and amp the utilities estimate as pointed by Robert then. Also noted on your eval of market rents, that's good additional info, ty. 

@Lee Ripma thanks for pointing that out. I think what you mean is (bare with me, I'm learning!) for MF the ideal would be either not be under RSO, or be RSO but being delivered vacant. Avoid the combo RSO + long time tenants already in. Whereas SFH there's just no RSO to worry about. Is this is it? Or did you also mean landlord-tenant rules in general are not favorable? Thanks.

Hello BiggerPockets members, 

 I live in LA and am looking locally at a growing neighborhood I'm familiar with called West Adams. I'm looking at multi-unit rental properties and trying to run numbers on them to get educated and see what's up. 

I thought I'd ask for input on this one if anyone could help out. It looks decent and with potential for appreciation with cosmetic repairs. 

Triplex (2/1, 1/1, 1/1)

Sold for: 720,000

Sqft: 1,964

Bangalow style units attached side by side 

(+) Actual income: 4,523.50    (property was sold with all 3 units occupied)

(-) Expenses

Property taxes........................800.00

Insurance.............................200.00

Repairs/maintenance...............200.00

Capex.................................100.00

Utilities..............................100.00

Vacancies............................200.00

Management.........................200.00

Total expense........................1,800

Income (NOI?) .....................2,723.00

Then

(+) Income (NOI?) .....................2,723.00
(-) Mortgage at 4.4% 25% DP.........2,704.00

Monthly cashflow.....................19.00 


So looking at this I'm thinking:

- Property seems to break even, but good potential for appreciation with TLC and considering the developing neighborhood

- For reference it doesn't meet the 1% rule, but gets 0.6%, which looks better than many properties in LA

- Large out of pocket for down payment, closing costs and rehab 

My context:

-I'm considering househacking for personal reasons such as: proximity to work, for getting started in rei, because I want to be hands-on in the process and be around the property (at least the first) to learn everything, not necessarily looking for cashflow

-If I moved in then of course the cashflow would become negative, but let's consider good odds of minimizing expenses and growing rents, and this negative cashflow does not exceed what I currently pay in rent

- In a market comparison of 30-40 properties this triplex seems to be a little slightly below market value

Conclusion: When it comes to cashflow and money down this doesn't seem like a good deal, but it looks like an interesting option to me personally. Again, this property is sold and not in the market, I'm just running scenarios to learn.  

So the way this could work is I'd have to commit that large amount out-of-pocket to be able to do this househack, hoping to be able to learn a lot, get appreciation and once that happens refinance the property and move on to a second one with lessons learned.

What do you think? What angles am I missing, is this realistic as far as the numbers go? Thanks in advance for any advice. 

Cheers