All Forum Posts by: Scott Harlow

I'm about to close on a 4 unit. It's built on a large double lot in a prime location for 1 br/studio loft apartments. I plan to added another 5-6 units on the back 2/3 of the property (currently undeveloped). 

I'm looking for suggestions on where to look for financing. Commercial loan? Private money? I figure I can always refinance to package the entire property under a single mortgage and pay off the presumably higher interest construction/private money loan with the equity. 

I'm about to close on a 4-plex property. I'm very happy with the deal. I'm going with an FHA loan (3.5% down with 3.75% interest) and will be living in one of the units. The monthly rent from the other units will cover my mortgage plus a few hundred in cash flow. I'm planning to hold this property for many years to come.

The units are on a large lot - only built on about 1/3 of the .37 acres. The property is zoned R-3 so I could potentially add as many as 8 units to the property (based on the lot size). Has anyone had experience adding units to a property? How did you go about getting financing for it? I'd like to eventually build another 3-4 units on the property.

First some quick background about myself:

I'm a 25 year old mechanical engineer in Southern Arizona with little debt ($5K in school loans - making minimum payment, very low interest rate). I don't have a car payment and I'm able to sock away a decent amount each month. I have $25K cash with another $5K that I can scrape together if I close out stock positions. 

I'm looking to start investing in multi-family properties as long term buy and holds that will cash flow. My long term goal is to be generating $100K/year in passive income by the time I'm 32.

I've found a property in my area that is listed for $175k. It's a 4-plex renting for $575 per unit (all units currently leased). On paper this is looking like a great opportunity with a solid 11% cap rate. I'm having trouble pulling the trigger and figured I would outline my two major reservations to see what other members have to say:

1) Area. The property is in an area that I wouldn't necessarily want to live in. It's not terrible by any means but it's a lower income neighborhood. That being said, the units are some of the nicer ones in the area. I realize that the name of the game is cash flow, and since I'm not living in the units, the area should not matter.

2) I'm having trouble trusting my evaluation of the deal. I'm worried that I'm missing something. On paper it seems like a great deal...11% cap rate leaves me cash flowing 7% after factoring in my loan payment...less if I go with a management company. I'm thinking about using a property manager so I can have more time to spend on finding the next deal.

Any input would be greatly appreciated. I'm ready to bite the bullet and jump into my first deal but I still felt that I should post here first. I'm a big fan on the podcast and I'm excited to start learning from the other users here.