All Forum Posts by: Nathan Emmert

Chris Tracy nailed it. Personally, I like to see double digit CoC returns. Something in the 12 - 14% range is great. That said, I'm a fairly passive investor.

Also not one to knock... but you're essentially saying you're going to buy 1 apartment complex every month (50 - 150 units each).  To do that, you need to be looking at a viable, for sale, apartment complex, which meets your investment criteria, every day... a different complex, every day.

You're also investing in the most competitive area, the small complexes where high net worth individuals can play for tax shelters.

Goals are great but you also don't want to get laughed out of the room by your potential investors when they are unrealistic.  Your Business Plan not only needs to motivate you to success, but it needs to demonstrate to your partners and investors that you actually understand the market.  It should demonstrate your expertise as an investor or why will they trust you enough to give you any money?

You say you lose $400 a month on the property... have you looked at the equity pay down month to month?  You're 10 years into a 30 year mortgage so the tides on the amortization table are starting to shift.  You may simply be turning cash into equity on a monthly basis.  While this isn't ideal for investors (cash is king), it may still be fine very long term for your overall net worth.

You could also consider mortgaging your current home, going through the voluntary foreclosure process on the rental (continuing to suck in rent as long as you can) and simply becoming a cash buyer for the next 7 - 10 years.

Depends on your career goals.  Are you looking to be a passive investor, an active investor, or a real estate professional?

If you're investing as either an active or passive investor, you'll need outside income.  The decision on whether or not to get your MBA will be dependent on the additional earnings potential you have with that degree.  Earning an extra $20 - 40,000 a year means more potential investment cash, better DTIs, etc.

If you intend on being a real estate professional and making your money purely in real estate, an MBA would be a complete waste of time.  Any dollar you spend in real estate will teach you world's more than that same dollar spent on a book or class.

I'm a passive investor, I have an MBA, I enjoy the additional income that MBA helps justify.

Yes... buying a condo is buying a single... regardless of the total number of units in the building.  A 4plex is buying a building that consists of 4 units.

COOK County

CHICAGO-NAPERVILLE-ELGIN, IL-IN-WI

Duplex
$468,150

Tri-plex
$565,900

Four-plex
$703,250

http://www.fha.com/lending_limits_state?state=ILLINOIS

As an investor with 4 properties up in Ogden, thrilled to read all this :)  Might just be time to use these price increased to do a cash out refinance after all!

You didn't mention whether your 1st mortgage was a conforming Freddie/Fannie or an FHA type loan.

As Mark implied, you can only have 1 FHA loan at a time (and I believe there's a limit to how often you can get FHA loans as well). If you are FHA you'd need to refinance which would require cash or equity as the LTV would need to be 80% (refi it as an OO while you still live there). From there you can buy a Single Family House (anything 4 units and under is considered SFH) with FHA and 3.5% down. There are limits on loan values with FHA and they go up based on number of units but you'll want to see what they are in your area.

I'm a little confused on your 1st Property.  You called it a Conventional mortgage but those are hard to come by with 20% down and only financing $24k... not to mention the mortgage cost of $415 is absurdly high for that amount.  I'm guessing you got a short amortization (10 year?) portfolio loan with a credit union?  I'd just urge you to be careful on terminology.  Looks like the same questions could be asked about the 2nd property as well.

I'd just be careful on your leverage.  Buy, rehab, cash out refi, rinse and repeat is a great way to quickly increase your portfolio but your overall cash flow (assuming 50% expenses) is pretty low.  You're -$90 on the 1st property, +$100 on the 2nd, +$30 on the 3rd, and +$85 on the 4th.  That's 4 separate risk items generating about $125 cash flow a month.  That's pretty lean, have you heard about the $100 a door standard some people look for?

My only other thought is to really understand your exit strategy.  I'm a buy and hold forever sort of investor, are you?  Homes bought for $17,000 aren't generally going to appreciate well at all, there's a reason they were sold for $17,000.  Selling in a hurry will leave you at the mercy of other vulture investors, not many owner occupied types in those areas I'm guessing.  Your exit strategies will be limited in my opinion, just be aware of that.

OO - Owner Occupied vs NOO Non-Owner Occupied. To buy FHA with a low down payment, you have to OO. Generally you get about 1% lower interest rates and lower down payments (20% vs 25 - 35%) on conventional (Freddie/Fannie) Owner Occupied mortgages as well.