All Forum Posts by: Ryan Brown

Excited to share that I just closed on a newly remodeled Triplex as my first home purchase and 2 blocks from the beach! Passing the Self-sufficiency test on 3-4 unit properties with FHA financing is truly a nightmare.

Property: Triplex, new entire remodel from the studs just completed and vacant

- Unit 1: 3 bed 2 bath

- Unit 2: 1 bed 1 bath

- Unit 3: 1 bed 1 bath

Location: Long Beach, CA

Purchase Price: $1,250,000

Financing: FHA 1.75% fixed 30 year

- Down: 7%

For anyone that knows or has tried to finance a 3 – 4 unit property with FHA, the biggest roadblock is the Self-Sufficiency Test. I didn't even know this existed until the worst-case scenario occurred and the entire deal fell apart. Luckily, because this property is a new remodel and a beautiful location next to the beach, the appraised rental comp's were about 35% below market ($6200/month)! We went back to the appraiser for re-evaluation and they even exceeded the appraised rent rates we needed ($8500/month). Long story short, the PITI passed the self-sufficiency test by $20 (literally 20 dollars) and it took a 1.75% fixed interest rate to get us there!

I aged about 10 years through this process, but grateful we got it done. The amount I learned the hard-way through this volatile escrow process I feel as thought I could write a book!

If anyone is considering doing a FHA loan on a 3-4 unit property, especially in a high cost area, feel free to reach out to me for feedback/discussion as I just went through the real school of hard knocks, but came out with a great cash flowing property!

I live in Los Angeles county and just purchased my first Triplex in Long Beach! I am currently screening tenants on my own and using TurboTenant. Can anyone recommend a good real estate lawyer in the Los Angeles area to help me formulate a proper and thorough lease? I've seen a lot of default templates to use, but I want someone with experience and expertise (which I have none) in this area to help facilitate this. I would prefer to spend a few extra $ now and reduce the chances of potential legal headaches down the road. Thanks! 

@Steve K. that is some excellent feedback! I share many of those same concerns. Thank you for your time and input I definitely need it! 

@David Smith average rents are around $700 and I agree with you, I do not foresee great value appreciation for this area. As I'm analyzing the deal I'm finding the building to be in good conditions, a couple units needs repairs, but there is also room to increase rents to market value and initiate renter-paid utilities 

@Brandon Carlson thanks for the input. I did consider that and was very conservative with a 10% vacancy rate. Per the owner he said he is annually close to 5%. 

@Michael P. correct, commercial is what I meant. ideally 20% down 30 yr amort

@Michael P.

I would be financing. Considering traditional or exploring owner financing if possible. 

@Evan Polaski

Thanks for the input! I plan on the management company to handle all the leasing, evictions, etc. If this deal were to go through as currently budgeted my capex reserves would initially be low around $2,500. I appreciate the consideration of expenses being light. I want to accurately account for as many expenses as possible to ensure the deal will always end up cash flow positive. 

@Arn Cenedella

thanks for the reply! The owner does pay all utilities for all units. I asked for the expenses for the last 3 years. In 2019 WY annual taxes $1355, water/sewer/trash $5063, Natural gas $2837, electric $151, insurance $2600, maintenance $1300. These are factored and increased into my expenses total and I greatly increased the anticipated maintenance from $1300 to $9600 annually. The landscaping/snow shoveling according to the owner is factored into a reduced rent by one of the current tenants.

Hi All,

I am nearing an offer on my first multi-family deal in Riverton, Wyoming. I am doing my best to be thorough in my property evaluation and approach this as a business rather than a hobby, but recognize I offer no personal experience in this arena. I live out of state (California), have a buy and hold long term strategy, and plan to go the property management company route. The property is an 8-plex built in 1961 in moderate condition, all 8 units are currently rented. It is not on the market to my advantage so I am doing my due diligence to see if this is a good cash flow investment opportunity. I would like to do the deal through an LLC. Here are some specs:

List Price: $425,000

Estimated Annual Income with a 10% Vacancy: $54,996

Annual Expenses (include 10% property management, gas/electric/water/sewer/trash, taxes, insurance, maintenance [$100 unit/month = $800/monthly]): $22,550

NOI: $32,446

Cap Rate 7.6% with opportunity to increase current rent rates as multiple units appear 25% below market rates

Any advice/feedback is greatly appreciated as I am doing this entirely via ambition, reading books, and listening to podcasts (biggerpockets and wheelbarrow profits). Especially interested in major pitfalls to be aware of and lending opportunities for rural areas. For those questioning why I would invest in WY, I have family in the area that connected me with this property and the prices are not even comparable to the sky-high prices in California. Thanks!