All Forum Posts by: Max Reznik

Thanks for all your replies guys! 

The way I am trying to look at it is aiming for the stars and hitting the moon. In other words I want to aim to make a high $1,000/month using $50k capital to acquire the property, which is 24% COC. It looks to me and based on all of your replies that that's a very very optimistic calculation and it's an unlikely outcome. But if I aim for that, at worst I would get is probably $300/month during a bad month (of course it can be WAY worse than that depending on what occurs, but I'm not talking about very rare occasions where you have to upgrade the heating system to a new one). I feel like Andrew Bosworth and how detailed his calculations are, is probably pretty close in his numbers and I would still be pretty happy if it's going to be $500/month since that's still 12% COC, not bad. So I know reality is always different from theory where in reality things break down, there are vacancies, sometimes evictions, leaks, capex, etc, but I still want to aim for $1,000/month. To increase that chance I may spend another $20-30k on top of the $50k to put into the property to minimize maintenance in the long run, perhaps upgrade to a new gas heating system, new roofing, maybe some new plumbing to pex lines, refresh the apartments by painting and new flooring. I am in luck because I have a lot of residential construction experience particularly with remodeling, so a lot of the work I will do myself and save on labor. I'm very excited to learn this businesses, and as many of you would probably agree, the best way to learn is just to try it out for yourself and learn as you go.

Mark,

I met an investor today in the local area who says he charges the tenant water, sewer, trash, electrical, and gas for heating. Also he says his expenditures on maintenance usually are $1,000 per month and hardly go over that. He does the lmaintenance himself but hires a management company to deal with the tenants, so that brings down his expenses.

Michael L.,

It's nice to meet an investor from my area! So tell me about your investing experience, where do you own properties? And are any of them 4-unit? Do you own any properties in Lititz or Ephrata?

Max

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It's somewhat of a "it depends" answer to this question which is why I'm providing more details below, but I would like to know if it is realistic to expect at least $1,000 clean cash flow from a four-unit apartment building in a blue collar area in Lancaster County, PA, particularly Ephrata, Lititz, Denver, or similar area. If that's not realistic, then what is a realistic cash flow number I should be looking at?

4-unit buildings around here cost about $250k.

So here are the details I can provide to narrow down my question and make it more specific:

1. We would do a 20% downpayment which is $50k on a $250k 4-unit building. Mortgage bill will be about $1,100/month.

2. Rents per unit are about $700/month (times 4 = $2,800/month).

3. Taxes are $3,500/year

4. Other expenses (utilities, maintenance, other) I'm not sure about, but some of you who are in the business can fill in the blank to this point.

I can do the math all day long, and it looks good on paper, but I want somebody who is actually doing this in practice who can tell me from personal experience if it is realistic to make $1,000 clean cash flow per month with the above details, and if not, what's a realistic number? Let's assume the rental units are recently remodeled (utilities upgraded) and should therefore be relatively low maintenance. My main priority in this investment is NOT to have a high ROI (but of course I would like it to be as high as possible). I'm more concerned with having steady cash flow with as least amount of headaches as possible (even if that means it will be a smaller cash flow amount) so therefore I'm trying to stay away from city properties. This is why the price on 4-unit buildings is so high along with the taxes in this question of mine since I want to buy it in a nice area with working-class tenants who understand the value of working and acquiring money.

All of your answers and help is much appreciated! 

Thank you for your detailed responses!

Kelly N,

Out of curiousity, is your goal also to purchase 10 properties?

Mike H,

You mentioned that I can get a commercial loan to get 80 units for example, are you saying there are less restrictions on commercial loans versus conventional loans? And how much % down do commercial loans require minimally?

Max

I have very simple but extremely "it all depends" kind of questions, but if I provide these following details perhaps the answers can be black and white and not so grey.

Ok so I'm a starting investor and my essential goal is to own ten 4-unit buildings (40 units total), and cash flow $10,000 a month, clean income after all expenses. Each 4-unit building will be purchased for $200k max in working class neighborhoods. Conservatively, I am hoping each building will generate at least $1,000 a month. It will most likely be more than that (maybe $1,300) but I know in reality there are always more expenses than expected.

I own a flooring business and given that it continues to do as well as it has been, my plan is to buy one building per year for the first 3-4 years then buy two a year with the help of income from those new 3-4 properties, until we own 10 buildings. I want to use standard conventional loans and put down 20-25% deposit for each building. That would be about $40-50k deposit per building. Knowing and hearing all the horror stories I realize there are alway way more expenses than you ever expect, so therefore we plan to collect $80k for every property, so we would haven about $30-40k left over for safety margin in which we can use for initial remodeling if needed, and any unexpected expenses that may come up. We do not want to buy any properties in section 8, but rather in blue collar working class areas. 

Here is my question: given that we can pull off collecting $80k per year for one building a year for first 3-4 years, and 2 buildings a year after the first 4 properties, is it realistic to get to where we want to be in 6-8 years which is 10 buildings and $10k cash flow a month? I know the math works but is any of this realistic? Will banks allow me 10 investment loans in next 8 years? (I do have a really good credit score and history, at least 750) Will each 4-unit building generate $1,000 at least of cash flow given that we give it proper management/maintenance? Without any sugar coating, can somebody who owns a handfull of multi family units (preferably at least 20 units) tell me the reality of my plan and if I am being WAY too naive with my plan? Are my expectations way too high? If they are too high, what should I be expecting then with the amount of cash we are planing to invest?

All answers are appreciated and thank you so much for you time!!!

Max