All Forum Posts by: Robert Saunders

@Hannah Rubin I can see why my 30% would seem somewhat alarming when it's compared to the 50% rule. However, the way I understand that rule is that we should reduce revenues by 50% to get to your cash flow before debt service or NOI number. If you look at what I'm doing, it's roughly the same thing. As an example, take a 4-plex with market rents of $1200/unit/month ($4800/month). I'm taking a unit, which accounts for a 25% reduction in revenue, and then I'm adding a 10% vacancy factor which brings us to roughly a 35% reduction in revenue. Then, I'm using that potential gross revenue and taking 30% for expenses, which essentially means I'm reducing revenue by a total of about 55% before debt service. My total cost factors in a rehab budget so hopefully I take care of any serious deferred maintenance items. This is where it becomes important for me to create the deal going in with negotiating a good purchase price because I estimate that my Year 1 reserves are anything over my 10% cash-on cash number. I don't like that but after I settle on a purchase price, I can factor in a more traditional reserve amount per unit per month.

Regarding the location; I will say you are right. I am less sensitive to location than you might be but there are a couple of factors to that. One, I'm from Brooklyn, NY and I have yet to see a "hood" in FL that compares to anything that I grew up around. Two, I do take the neighborhood into consideration in my ranking of the properties; mostly because I have kids and I have to make sure they are safe. I'm not worried about their zone school because they're in a charter school that doesn't factor in their address. Three, though the neighborhood might not be the best, I do take a look at other factors like the houses directly around it, the city's economy, jobs, population growth, etc. With that being said, I have still walked away from properties that penciled out beautifully because it was in terrible neighborhoods or was next to something I couldn't fathom living next to (even if only for a year or two).

For you, I would say that you have to continue to consider all factors that would make your first investment a good one as well as those that will make you comfortable living there. If you feel that your contribution needs to be higher to have a nicer place, then do it as long as it doesn't take away from the return requirements you have set. Those great deals are out there for us, we just have to stay focused and keep working at it.

For duplexes, I remember seeing a couple properties pop up last week around there in the $180k asking range with market rents that may get you to the 1% rule. Depending on your return requirements, that may work for you. I haven't had the need to look at traditional SFR properties lately so I'm not sure what that market is looking like right now. I wouldn't mind checking it out for you though.

Hey @Hannah Rubin. My first analysis on all potential investments is at the asking price. Right now I have a list of 23 ranked properties that I am willing to purchase and all but 2 of the properties work at the current asking price. For the 2 that do not work at the asking price, I looked to see what similar properties closed at in relation to their asking price (i.e. 90% of asking price). I'll then run my numbers at an average % of asking price instead to see if it works. Either way, my goal is to make offers below what I have in my analysis and then negotiate to see what type of deal I can create. We are in a "Seller's Market" right now so you're going to see some seriously inflated asking prices; I know I've definitely seen some head-scratchers. I have to figure that some of my offers won't even get a response but that's why it's a numbers game at this point.

As far as low cash flow from the owner's unit, I'm referring to what I expect to pay for my unit in order to still hit the investment returns I'm looking for. I know it sounds somewhat counter intuitive to pay yourself to reach investment returns, but I figure that anything less than what I pay in rent today is a viable option. As an example, for the properties I am considering now, my unit will cost me anywhere from $0 to $1100 a month with the average of my top 5 being about $500/month and the lowest being $375/month. All of this is with me running a 10% vacancy (plus the additional economic vacancy created from me not paying market value for my unit), 30% for operating expenses, and at the asking price. I believe this is very conservative. If you ask me, even if I got stuck at the asking price, being able to walk away from renting someone else's property for $1200+/month to paying myself $500/month and then still making over 10% Cash-on-Cash annually is a pretty good trade-off and sets me up to be able to get to the next one fairly quickly.

What do you think? 

@Brock Laramee Just set some strict (yet realistic) investment criteria and stay focused on what your goals are. The more you continue to look and network with like-minded individuals, letting everyone you talk to know what you're trying to find, I am sure you will come across the right house-hack investment. At $100,000/unit, you are on the lower-end of the market but it is very doable. I am in the market for a house-hack investment as well but focusing more on the triplex and quadplex setup. What is the criteria you're using for your investment?

This is a great forum here. Great job @Autumn Alexander for starting the discussion. It is good to see my fellow SFL folks chatting and sharing their experiences. Everyone seems to be at different stages of their journey and that is always good to see because we get many different perspectives.

On my end, I am a seasoned Real Estate Investment Analyst but novice Investor. Yesterday I actually wrote my very first offer for my very first real estate investment. My first investment will be a "House-Hack" of a 3- or 4-unit SFH. I've got the funding lined up and a prioritized list of properties that I am going after. The next step is just to play the numbers game to see which property I'll end up with. Either way, I'm very excited about this next stage of my investing career.

@Hannah Rubin @Dean Iodice If you are measuring our market's "deals" against the ones you hear about on the podcasts, where they talk about getting the "2% Rule" to work, then you're correct. It's VERY difficult to find any rental out here that hits that 2% mark. I was listening to a podcast this morning where the guest said he got a triplex for like $67,000! Hearing that makes me cringe knowing that the worst triplexes I've seen here in SFL are running for like $200,000+ (ugh/lol). However, in my search for my first triplex/quadplex, I have been able to find deals that pencil out with no-or-low cash flow from the owner's unit. Now, I have my own set of investment criteria that may be different from yours so I'm not sure how far off our ROI, IRR, and/or Cash-on-Cash requirements are. Nonetheless, I'm sure you can find a decent deal that takes into account all your criteria if you stay aggressive/creative in your search. Same thing with flipping; you just have to stick to your criteria and not get pressured into bending your criteria to force a deal to work.

Everyone, it would be great if we all kept in touch and continued to share our experiences with one another. I am definitely down to check out some local meetups. The goal for me now is Buy-and-Hold with the endgame being the development of Trophy Assets down the line. Growing and developing my professional vision while helping others reach their goals is how I'd like my story to read in the end. Let's connect with each other! I'm here to help and learn from as many people as I can.

Thanks for your input @Rita Medeiros! Yes ma'am; the opportunity to live for free or for a nominal amount is very advantageous. One of the disadvantages that I'm considering though is the fact that I would be so close to the investment. It would be hard to remove the emotional tie from that investment with me and my family living there. With an SFR, I don't have to worry about that issue.

Thank you for your welcome Rita! I am definitely interested in going to a few local networking events every month. One of the first things I learned is that this industry is based on the relationships you build. I saw that you have a 20+ portfolio of SFRs. I would love to get your input on whether I should House-hack a fourplex or if I should just invest in an SFR. Thanks again for responding.

Thanks for the welcome @Jack Butala. It's good to be back on BP and I plan to utilize it the right way moving forward.

I appreciate your feedback too! I agree that it is usually prudent to start off with an SFR and then grow my portfolio from there. On my end though, I do feel like I can handle the additional responsibility of managing the fourplex. I honestly feel like I can handle the management responsibilities on a larger multifamily property as well. The dilemma comes because equity is limited at this stage so I am trying to find the best way to put my investment funds to work.

So it's a question of should I use my funds as 20% down on an SFR and rent it out as a traditional investment or should I use those same funds as 5% down (or lower) on a fourplex as a primary residence where I take advantage of the financing programs, live in one unit, and rent the others.

After understanding my position a little better, does your recommendation stay the same? Would you add anything else? Thanks again for your feedback. 

Hello everyone! My name is Robert L. Saunders and I am an old new member of BiggerPockets.  I say that because when I went to sign up for BiggerPockets a few months ago, I realized that I had already had been a member since November of 2015!! That seems crazy but it makes sense because I was fresh off of finishing my Master's Degree in Real Estate Development around that time. I was looking for my first job in the Real Estate industry but I was also contemplating if I wanted to jump right into the industry on my own dime and must've come across BiggerPockets in my searches. I obviously didn't recognize the hidden gem that is BiggerPockets at that time because I didn't come back until late last year when I committed to making my first real estate investment. Either way; I am glad to be back. I am very familiar with BP now and I have gained so much practical knowledge from through the BP Podcasts.

Nonetheless, let's get down to the business of introducing myself:

As mentioned, I live down in South Florida (Broward County to be a little more specific). I am originally from NYC but moved down here in January of 2010 to raise my son in a different environment with more opportunities. It was also in 2010 when I decided to get into the real estate industry. At the time, I had a successful retail management career but when I turned 23 I went through a process of what I call metacognition. To put it plainly, I decided to take control of my life journey and change its trajectory. That day (my birthday) I decided to get into Real Estate Development. To do so, I figured that I should get a Master's Degree in Real Estate development. Unfortunately, in this country you must have a Bachelor's Degree before you can get a Master's Degree (the nerve lol). Long-story short, I set a six-year goal to earn both degrees, start my real estate career with an active firm for about three years, and then to go out on my own. Fast-forward to 2015, I had both degrees in hand (a year early) and I was contemplating if I should skip out on working with a company for three years and just go out and start doing what I was academically trained to do. I did decide NOT to skip out on that work experience because I realized that it made more sense to learn on someone else's dime.

I started working for an asset management company as their Real Estate Investment Analyst and it was one of the best decisions I could've made. I was put in a position where I was analyzing potential investments day-in and day-out. It was great because it has seasoned me, in many ways, to make quick "Go/No-Go" decisions, to not get too attached to potential assets, and to understand what criteria investors typically look for. My job ultimately made me a better investor and a better asset manager without actually being either of the two yet.

I did end up walking away from that job, but I truly loved it. I walked away from that position because I was recruited for a similar Analyst position with a brokerage company. The offer and opportunity was just one that I couldn't pass up on.

Either way, I am at the stage where I am fully confident in my ability and willingness to step out and be successful on my own in this industry. I have decided not to just jump out and start developing real estate. I believe for the early stages, it is best for me to start out by acquiring existing assets. As my portfolio and equity base grows, I will then look to move towards the development of "Trophy Assets". That is where I see my career going and I am taking the necessary steps to get there.

About a year ago I became I licensed real estate agent and REALTOR; not really to sell real estate but more so to gain access to the properties on the MLS. I am a currently a candidate for CCIM designation as well. Finally, at the end of last year, I started my own real estate investment firm. Now, I am actively looking to acquire my very first real estate investment. I would like to do a "House-Hack" on a four-plex for my first investment, but I am torn between that and remaining separated from my investment by just buying a single-family residence and renting it out.

If you've made it this far, I appreciate your time in reading my intro. I am here to learn as much as I can from everyone here at BP while also providing some insight through my academic and professional experience. Whether you are in my area or not, let's network!

Help me decide: Four-Plex or Single-Family

@Jose Rueda Thanks a lot