All Forum Posts by: Marc Alexander

I don't have any experience with wholesaling, but it seems to talked about pretty heavily.  

Are you trying to stay in the city or move away? Is the house you love a multi-family property? The SFH market in phila isn't going to generate much COC in the current market. You can still do ok if you BRR(R), especially in the long-term, but i would think displacing 11 people every year or so is gonna take a toll.

If you are new to real estate then you are in a very good position to build equity and create passive income.

If I were in your shoes again (I started out in real estate @ 19 with only a couple thousand in my name), I would absolutely look for a multi-family property I could owner-occupy. Ideally it would be a quadruplex. I would use a 3.5% FHA loan to put as little $ down as possible.

I would have to live there for a year, but that isn't a bad thing because while I'm living rent free I am cash flowing each month and saving that money for the next multi-family property I would be buying next year.  

I would do this every year for the next 10 years.

After lots of looking both on and off market I was able to land a deal for a duplex in a LCOL area (not ideal), with a very low crime rate. The property is only $45k, but with 25% down the CoC return will be +20% after everything is said and done. The property has plenty of room to force equity and rents are a couple hundred per month under market, so growth potential is there.

Percentage wise this is where I wanted to be (north of 20% COC), but from a pure revenue perspective I am only going to be cash flowing +/- $300 mo. instead of the $1k I was looking for in each property.

This deal made me realize there is a "cost of entry" with regard to financing.  My closing costs are going to be roughly ~12% of the purchase price, which makes financing this property seem... silly. 

This brings me to my next question; should I finance or pay in cash?  The cash flow difference between the two is less than a couple hundred dollars a month (~$300 vs ~$450), which IMO isn't worth tying up that capital ($17k finance vs $45k purchase).

What would BP do in this situation?

Thanks all for the input thus far.  

I've updated my numbers based on information received in and outside this thread.  

Initially I was thinking 20% down and ~3% interest rate would be a reasonable starting point.  After getting quotes back from my broker, I am being told its actually 25% down and the best rate on a non-owner occupied investment property at this time is 4.125% with a limit of 4 units total.  Anything over 4 units would be considered commercial loan territory and this specific broker wouldn't be able to help me.

I was a little taken aback by those numbers, and I have a few other quotes from other brokers in the work to make sure I am getting the best rate I can, but I would like to ask the community if what I am being told is accurate or if you feel I am being taken advantage of.

TIA

I can provide more specific info... what numbers/assumptions do you feel are missing from the picture? 

I'm using 20% of the mortgage value each month as a reserve for vacancy and repair (10% each per month). I understand things can and will go wrong. More experienced advice is always welcome!

I realize patience is going to be key in finding the right deals if I want to maintain my projected returns. I have plenty of that. I'm aggressive in my goals, but in no rush to get into a bad deal. I have no issue waiting on properties where the numbers align.  I was initially thinking 10yrs for this to work out, but after I started plugging local numbers/deals into my spreadsheet I saw there were multiple examples around.

Agreed about not dipping in the cookie jar. 

Good to know the numbers I'm getting aren't unheard of in other markets.

Yes, that is the question...

You are correct about not being a SFH, they are mostly duplex-triplex.

Hello BP, this is my very first post.  I'm getting back into the real estate game after being dormant for well over a decade.  My goals are to generate enough passive income to not have to worry about my 9-5 anymore.  Ultimately I'd like to retire in ~10yrs and live 100% off passive income, but I think I can actually get it done sooner than that based on the numbers I'm seeing.  This is where I need a reality check... I feel like I might be oversimplifying things a bit and would greatly appreciate another perspective on what my goals and expectations are.  

My high-level plan is to leverage all cashflow producing properties in my general area (NE US) using #1 the equity I currently have in my SFH ($100k-$150k) and #2 using the cash I've been saving/investing ($200k-$300k).

Currently I have $400k-$450k available to me as 20% down payments on high cashflowing properties.  I don't feel I'll need to use all that capital because I have the ability to raise funds thru investors, but I want to have a proven track record (couple years of solid returns) before I would feel comfortable bringing people on. 

The numbers I've ran show there are several units in my areas generating +$1k month in positive cash after paying all expenses (mortgage, ins, taxes, any utilities & 1mo vacancy/repairs, self managed) using anywhere between $45k-$55k down to achieve 20% on a 3% conventional loan.  On average, I am seeing $1k/mo in cash flow for a $250k-$285k property, thats a +20% return in the first year.  The really good stuff is showing 22-24%, but I am trying to be conservative with my forecasts.

Scaling up, using all my available capital (I don't feel I will need to, but worse case scenario), if I am efficient with my purchases and stay around a 20% return, which doesn't seem too unrealistic in my area, i should be able to get ~$90k year in passive cashflow in 8 deals or less.  That is enough for me to retire on... what am I missing?

I feel like the numbers are almost too good and there might be some fundamental cost or expense I am overlooking.  Will lenders keep giving me loans as long my debt to income ratio is favorable or will I be cut-off at some point because I am too leveraged?  

I am currently getting pre-approvals with 2 different brokers and have several properties I am eyeing (both on and off market), ready to inspect and make an offer... Any advice would be greatly appreciated!