All Forum Posts by: Orlando Goodon

Is this $800k house simply over priced? I'm new to CAP calculations, but from what I understand I should have enough data here to calculate true value of property. How do I find out what this is really worth? Key details:

Price: $800k
Total gross income: $81k
Total gross expense(Tax is $1600/mo or $19k/yr!!, plus water, sanitation, insurance, internet, gas/electric[owner] ): $30k
Mortgage with 3.5% down: $42,804

Last sold potentially 10+ years ago (So could be cash flowing nicely on MUCH smaller mortgage)


So with 3.5% down, I see this house losing $1100/mo or a loss of $13,200. Please let me know what this house should be worth and share how you calculated it. Also, tell me what you think of this deal. Additional details:

Apartments all updated
Washer drier
Building looks pretty good
All apartments have lake & mountains view
There are apartments listed for $2000-$2200 nearby without water views. Many are $1500-$1800
Nearby schools are B or C rated
1.5hr from NYC. Could approach 2 hrs on bad days, but I've done that going from Hackensack to NYC, although a bad day is typically 1.5hrs. Lots of full trains, train delays the tunnel traffic for Hackensack to NYC. However, on good days, it's an hour. The quadplex is 1.5hrs on good day...

Thanks for the info. I think I'm looking at places with old tenants. If you only can increase rent 4%-5% or similar, your rents will fall quickly behind market rates.

How easy is it to get a house empty? Have all tenants leave at end of leases. Fix it up, then raise rents to market rates?

Here is my full list:

 Newburgh, Brewster, Yonkers.
In NJ, Hackensack, Bloomfield

I'm confused. I'm a new investor about to make first purchase and after hearing about how rents are surging, I've notice that most places I look at or are shows are low rent. $1300-$1500. I just looked at an $805k house with $19k taxes and the biggest unit rented for $1500 in 2020. As a primary residence this would be a big loss and the apartment is already renovated. I don't understand with limited places why this is so low. I mean the house is beautiful with nice yard and lake views. I'd think it would be more than normal but it's below market.

Clearly I'm missing something. I must not understand at all how rental prices work. Some major gaps in my knowledge. Lake view within hour of city and 3Br costs you what I'm paying for a 1br with no lake view and my apartment is well under market due to tiny kitchen and tiny bedroom and I've been here 10 years.

Where are all the $1800/month quadplex in NJ/NY, under $1M?

You can do 3.5% down FHA but check the country rules. Bronx should get you over $800k limit.

I was just approved 3.62% interest on 3.5% down 4 family loan. Closing will be $34k. You can save a bit more with a credit union. I'm using Chase.

I'm already approved for over a million. Letter in hand. I'm starting to go look at properties to find something I want to make an offer on. So I'm past the money loan part and into the cap rate discussion. I need to target the right rental market relative to the mortgage and potential expenses. I'm not trying to account for expenses beyond the mortgage. I bought the BiggerPockets book so hopefully it has some good numbers to look at so I know what a good deal looks like vs a bad one.

Thanks again for feedback Jaron.

Hi Jaron, thanks for the information. I'm not sure about your question/statement though. Why did you highlight my pointing out that with multiple units your risk factors multiply? If I have a single family there is only one set of problems. For every unit that is another toilet blockage or tenant flooding or heater going out to deal with. This applies regardless of your finances. If my networth is $2M and I make net $50k/month, that is still true. I was simply trying to wrap my head around the risk difference between single and multiple which might explain why none of my credit unions will finance these. To me it seem less risk, but I'm starting to realize there is potentially more risk.

Imagine a person gets one and they are not good at it. Maybe they don't keep enough reserve on hand, don't plan ahead for a new roof, heater and who knows what. Before you know it, expenses are pilling up and tenants are unhappy. Then you start getting vacancies. Soon you have $3000/mo mortgage to pay with empty units and you can't afford it, then you default. With a single unit, it's one tenant, one plumbing heating and whatever. Anything that can happen in one unit would increase in probabilities equal to number of units. Extrapolate to a person with 1000 units. Now probabilities are so high you need a management company as you can have dozens or even hundreds of units that need repair at once.

I'll make up my own word. You have a unit risk which is equal to unit numbers. 4 family is 4 times as risky, based on that type of risk. Especially for a sell managed setup like mine.

I need to look around for common mistakes new investors make and see. No need for me to have to learn the hard way when I can benefit from others mistakes.

Goal:

Build portfolio of 6 units (4FAM+2FAM or 3FAMx2) 

Make enough money to live off

Budget: $600-$1M

So I'm really pushing hard to get a quadplex. I'd like some insulation (1 empty unit, still have multiple rents coming in) from vacancy. Going to do 3.5% down at 3.5% interest rate.

Please take a look at my numbers below and tell me if they make sense to you. $1k profit in year 1, then $3k when I move out and it's fully rented does not sound right to me. Maybe I'm just missing that much of that money will need to go to reserve fund and also to any repairs needed. Then with 3-4 tenants, that is 4 times the problems potentially. For example, what if unit 1 & 2 have plumbing issues?

Found this beautiful home and it got me thinking. What kind of vacancy would a house like this have out in rural north east areas like NJ/NH/PA? It would cost me just under 50% of my net income to pay the mortgage ($700k). I've heard the really nice houses (maybe $3M), can make $80k/month as a content house where you get a percentage of the income of the creators that live there. 

Can even purchase first as an AirBnb and ease into it. Start with one creator then add more. The more creators in the house the more investments made into the house to make it most presentable for production. Can even focus on particular shooting areas just like a traditional set. Areas that are best for backdrops are pristine, then the rest of the house can be more normal.

I have a lot of experience with content creation and production work, so I have an edge there. I've also negotiated deals with large manufacturers like Lamborghini, Rolls Royce and Kawasaki.

So that is one angle, but what about just traditional rental setup where I try to find long term tenants who can afford to pay $4600+/mo to live in a large 6 bedroom house? I have no idea who that market is. Who has that kind of money and wants to rent rather than buy? Technically, I could afford it and it might make sense if I had a HUGE family AND a 6 figure wife so the mortgage is easy. Thing is I can afford it because I live in a $2000 average rental market, not far from where you can find ugly $1M homes with normal people living in them somehow. I doubt many locals can afford $3500 rent, so that means top 3-4% of income earners, but again why would they not buy?

Seems it would be a tiny market of unique situations like some famous doctor coming from another country or something and want a place to live while they settle in, and look for a long term solution.

Hi Ben and everybody. Sorry I missed some of your comments.

So just completed first year and ended up getting a long term renter who was there about 10 months. The rent just barely covered mortgage and expenses, so don't even have much reserves. Really need to bring rent up, but can't get tenants. Property is vacant right now for last couple months, which sucks as I'm looking to buy my 2nd property in NJ in March. I've depleted all my business account cash, so I don't even have enough to do the advertising I want to do. Sure I have the money, but that means exceeding my business budget. I may have no choice as now of all times, I can't keep paying for house out of pocket while trying to raise $30k+ for downpayment.

Not really getting much interest in the property at all. Seems the island is in economic decline due to the closing of a major profit center for them. We were getting 20 views a day and now are down to 9 a day on AirBnB. Only a single inquiry in last 2 months.

I'm looking at other properties and it seems like maybe the market is just bad right now.