All Forum Posts by: Sam LLoyd

I agree with Ryan.  Speaking as someone who closed a 4plex a couple months ago, you have no idea who you're getting as tenants.  However, it is also helpful to have an idea when the tenants are likely to leave if their units are going to have costly repairs... that way you won't be hit with multiple repair bills should they leave at the same time (yes, speaking from experience).

I second what has been brought up.  I'm hoping to close on a 7-plex soon that is 1.1%... and that's about the same as my other investments in my area.  That being said, one of the only reason's I'm buying it is because the seller is carrying back a portion, getting me into it for almost nothing, and still having enough cash-flow to pay for me to manage it.  Those numbers you gave would have me very excited, though I'd like to see more of the details?  Are you financing it?  If this is 120k of your own money, then this is only a 6% return.  If you're financing it, the $600/month cash-flow seems unrealistic to me.

Like most people on here, I could probably talk for hours on the topic, but I wanted to point out two quick things.  In all your calculations, make sure you put money away for maintenance and vacancy.  I have a couple units that have 0 vacancy if everything is perfect... but even they are going to be empty for a week if I need to put new carpet in.

So, using your first example, I would put away at least 10% for these two things... $150.. so 1 house would be 250 cashflow, and 2 houses would be 300... in my opinion, it's hard to justify another house just for $50/month

Also, My opinion as far as the refinance, which I've done for several properties now: For me, the cash I pull out has to go into an investment... if I pay off cc or vacations, that's just me spending money. If I put the money into another rental... then that's reinvesting. I've seen someone get a HELOC with the intention of buying a rental, then end up with paid off cars, big toys, and their house under water... which is being rented out at a heavy loss since they had to move TRAP. Also, remember to include the cost of the refinanced money in the investment. If your house payment goes up because of the cash-out, you have to add that extra cost to the rental expense... if your mortgage goes up $250/month to buy that one SFR... then there is no cash-flow at all.

Hope this gets decreases instead of increases the confusion... we've all been there.

Here's a project I'm working on.   I'm finishing up my due diligence and getting to the point where I need to make a go/no go decision.

Project:  Detached 7-plex on two lots... I'm financing them as a triplex and fourplex.  Very tiny buildings in a B- or C+ neighborhood... buildings are newer... a solid B.

Term:  Working with the seller such that I'm going to be into the project with only closing costs.  Cash-flow (self-managed) should be around 500/month, with a 60k balloon due in 5 years, after which cash-flow should jump to 1700... if rents stay the same.

Problems:  Still trying to get tax returns to show rent history.  Also, due to the uniqueness, the only exit strategy I can see other than holding them would be to sell them at a loss.  Rents are right at or slightly above what I would have projected from looking at the market.

Thoughts?  Thank you in advance for any input.