All Forum Posts by: Gary Thao

I am waiting to close on a fourplex and need some advice on how to introduce myself as the new landlord. This is an FHA where I will owner occupy one unit and already have three tenants currently residing there. Some of my ideas are below. Can anyone else provide some caveats or suggestions?

-Knock on doors to introduce myself and provide contact information.
-Leave notice on door that I am the new landlord with my contact information.

Thank you for the quick response Matt. I'll check with my agent.

I will be closing soon on a fourplex with 3 tennants and I will be occupying one of the units. The previous owner currently has a property manager managing the three tenants. I was planning to start managing the units myself. Will I be able to cancel their contract? What about obtaining the deposits the PM has received? Can anyone provide answers to this scenario?

I'm making a long story short. Let me know if more details are needed and I'll provide.

This situation occurred in Portland, Oregon. I signed a 6-month lease agreement for an apartment. When I moved into this apartment it had a very bad pet smell. I informed the leasing office and was given a different apt over a week later to which I was given a blank lease agreement to sign. I was unable to move my items due to work and my friends not being available during the week. The leasing office provided maintenance to move them due to their mistake. All my items were stored in plastic 25 gallon storage containers with locking lid.
All items were moved in while I was at work. I later started organizing my things and noticed a $650 item missing. I double checked all locations that it could be and was unsuccessful. The only way it would have gone missing was if someone had opened the lid to see what was inside.
I went to the office and informed them of the missing item, how unhappy I was with the whole situation and that I will be leaving within a months time and returned the unsigned lease agreement. I was told by the assistant manager that they will be speaking with the maintenance supervisor.
Later during the week, I received an email confirming the $650 item was seen by the maintenance manager and that he was unaware of where it had went. It also mentioned that they will be replacing the missing item. The email also stated that they were unable to provide a month to month lease. I requested a tracking number and provided a detailed description of the missing item and where to purchase it online (how were they going to replace it when they don't even know/ask for the details?). This was a few days ago.

I am curently tired of this whole experience and just need some expert advice. I'm planning to move out by the end of March.
-I did not sign the lease agreement for the new apartment. Will the old lease apply?
-What will happen if there is no lease agreement between both parties?
-They stated that the maintenance supervisor saw my missing item. Should I file a police report?

Shaun,
I am not experienced enough to be a flipper. There does seem to be a lot of opportunity for flippers here from what I've heard in older/eclectic neighborhoods. Housing does go down if you travel to the suburbs, but then, it may be harder to find tenants.

I have the opportunity to purchase a fourplex using an FHA loan. A decent fourplex is ~$345k here in Portland, Oregon. Yes, it's high and that's just the way the market is. Typical rents are in the $725.00+ for a 2bed/1bath or $2,900.00 total for a fourplex in the area that I'm interested in. The problem is that it will not meet the 1% of total monthly rents rule nor cashflow due to myself only putting down 3.5% per FHA. The scenarios below do not involve myself owner occupying just for the sake of if I were to move out. Of course I could learn the ropes of property management (in which I plan to) and save some costs also, but I just want to list all related costs that may occur.

Purchase Price: $345,000.00
3.5% FHA Down Payment: -$12,075.00
Total Loan Amount: $332,925.00
1% rule: $3,329.25?monthly rents required (I’m only making $2,900.00 which is a -$429.25 per the 1% rule)
Monthly Rents: $2,900.00
Expenses: $880.00 (PM, Waste, Water, 10% vacancy, landscaping, insurance)
NOI: $2,020.00
Monthly Mortgage (3.125%): ~$2,267.00
Monthly Cashflow: -$247.00

Yes, if I had the 25% down payment, then it would cashflow.

Purchase Price: $345,000.00
25% Down Payment: -$86,250.00
Total Loan Amount: $258,750.00
1% rule: $2,587.50?monthly rents required (I’m only making $2,900.00 which is a +$312.50 per the 1% rule)
Monthly Rents: $2,900.00
Expenses: $900.00 (PM, Waste, Water, 10% vacancy, landscaping, insurance)
NOI: $2,020.00
Monthly Mortgage: ~$1,950.00
Monthly Cash flow: +$70.00

There are discussions regarding leverage and how it’s great to put as little down as possible, but I’m questioning this decision. It is good, but at the same time, I’m relying on appreciation, equity, and taxes. Getting something that can cash flow from the start is nice, but requires the 25% downpayment ($87,500.00). Can anyone give an opinion on pros and cons or am I just destined to purchase a single family home for myself and not reap the benefits of this multiplex opportunity?

Thank you for the great insight on things guys/gals.

Steven Hamilton II: Thank you for the advice and formula. It really helps me to understand these things more.
Brian Hoyt: Thank you for the rule of thumb.
John Mireles: Your response was kind of scary because this property is in Portland. I've found that prices in Portland are higher than most of the country and that's just the way the market is up here. I don't think I can fix them up any more as they've had recent "updates". I was thinking about going in with a lower offer to either break even or at least cash flow. My concern is that I will have to do repairs on this building as it was built in 1974. Flooring/roofing since it rains a lot in Portland.
John Holdman: Thank you for being straightforward and presenting numbers. I like your quote below.

Thanks for the reply Mark. Yes, I understand it will be owner occupy with FHA. I was accounting for if I were to move out, will the property pay for itself and didn't include myself. The numbers didn't look good to me, but I needed some feedback from experienced members. Any more feedback would be great. Good or bad, I'll take it.

I am looking at purchasing a fourplex with an FHA loan as my first investment. Fourplexes in my area run for $350k+. I am doing my anlysis right now on several and don't see how purchasing a fourplex can cashflow (other than raising the rents or putting a 25% down payment). I feel that this is an opportunity to get into a fourplex and later down the road be able to use tax deductions, appreciation or equity to buy down the loan (of course it also beats paying someones rent). I know this is not the way I should be doing things from reading on the forums (1% rule comes to mind), but I need some feedback as I may not of thoroughly thought of all the variables involved.

Sale Price $350,000.00
Down Payment % 0.0361
Loan to Value/Interest rate 96.5%
Down Payment (3.5%) $12,565.00
Closing Cost $2,945.20
Loan Amount $343,660.63
APR (Annual Interest Rate) 3.125%
Life of Loan (in years) 30
Payments Per Year 12
Total number of payments 360
Property Tax/Year $5,297.00
Payment per Month $1,472.16
Property Tax/Month $441.42
Hazard Insurance 41.67
Mortgage Insurance 351.82
Total Monthly Payment $2,307.06

Rent Monthly
Unit 1 (13341) - 2 Bed/1.1 Bath $700.00
Unit 2 (13349) - 2 Bed/1.1 Bath $700.00
Unit 3 (13365) - 3 Bed/1.1 Bath $850.00
Unit 4 (13357) - 1Bed/1 Bath $625.00
Total Rents: $2,875.00
Expenses to Owner Monthly
Property Management (8%) $230.00
Sewer/Water $200.00
Garbage $95.00
Landscaping
Insurance $63.00
Property Tax $-
Repair and Maintenance
Vacancy Rate (10%) $287.50
Total Expenses to Owner $875.50

Capitalization Rate (CAP) 6.86%
Market Capitalization Rate (MCAP) $350,000.00
Estimated Property Value $350,000.00
Debt Service $191,952
Return on Investment (ROI) -29.37%
Gross Rate Margin (GRM) 10.14
Market GRM 10.76
Cash on Cash -24%
Net Operating Income - Monthly $1,999.50
Net Operating Income - Annually $23,994.00
Net Profit - Monthly $-307.56
Net Profit - Yearly $-3,690.77