All Forum Posts by: Terry Lao

@James C Norman Jr

The area with 4plexs are a B/C area. Right behind MGM Casino, off Maryland Parkway. I bought in Apr'16, and thought that when tenants moved out, I would upgrade and raise rents. All original tenants never moved out. Maybe a few units become available, but they are rented quickly. In fact, whole Vegas market, rentals go quickly.

You have a unique financing situation where you can go VA or conventional 25% down. VA means you have to owner occupy for minimum duration. If you had to live in one unit, it would be break even or a few hundred negative. If conventional 25% down, then 1% higher interest rate, and would net about $600 using market rents. The unique mix of these 4plexs are (1) 3 bed/2 bath, (1) 2 bed/2 bath, and (1) 1bed/1bath. All come with single car garage.

Terry

@James C Norman Jr

I was a novice. Everyone is a novice in the beginning. Once you avoid or eliminate the 4plexs with HOA's, you pretty much eliminated over 75% of 4plexs available. You will have 25% remaining 4plexs in bad areas. Yes, the good 4plexs are in good areas with HOA's.

Here is the key. Obtain a home owner's warranty policy. This is especially easy to do in the first year. In fact, have it written into your offer. Any buyer will pay for one in the first year, and the first year pricing is really low, around $700. This is what I had in contract, and said if it is worth it in second year, do not renewal. I realized this is a life saver, as the first year, you will find out that AC and heater often break down in summer and winter. Without one, one visit in summer will cost you over $300-400 for something simple. Another is to find a local  handyman and appliance contact. All this items I mentioned will cover 90% of possible issues.

You might have glossed over my initial email, but in my email I mentioned a 4plex in gated community and a one car garage. In all the listings I've seen in Las Vegas, there is only one 4plex complex that I know had a garage for each unit. The garage is gold.

Terry

Terry

@James C Norman Jr

Welcome to Las Vegas..........soon to be resident. Las Vegas is my niche, as like most visitors, I decided to try something else than losing money at the casinos. Since, Mar'14, I bought 3, 4plexs, did a condo flip, and sold 1 4plex. Most on BP are correct in sense that most 4plexs are in bad areas, are older, and rarely are 4plexs newly built. However, there are certain areas better than others. Once, you moved to Las Vegas, and drive to the various areas of Las Vegas, you will know what I'm saying. The good niche areas are west of I95 (450k) Chinatown area known as Spring Valley (400k), and near strip off Maryland (350k-400k). 

Here's one fact that no one will tell you. If you search any MLS or Redfin site, at any given point, there are available listings for SFR (5688), condo/townhome (2080), and multi's 2-4plex (98). When you do the math, 98/5688 =1.72% or roughly 2%. Or another way to view is there are 2 multi's for every 100 SFR. This unique supply will always be low compared to homes, and keep prices up.

You mentioned that you do not like HOA's and will use property management company. No one likes HOA's, as most will run 600-700 a month. However, if you find HOA's that will include water, sewer, and trash, this is normally a $200 month expense. I suggest being open to HOA's if they include utilities. I know a 4plex complex that is about $660 a month, includes water, sewer, trash, gated community, security, pool, and 1 car garage near the strip. How do I know? Because I own 4plex in complex. Also, management company's charge 8-10%, equivalent to $300 a month. I would suggest against, as you will live in Las Vegas. I'm actually from southern California, and manage my own units.

Terry

@Josiah Sia

The terminology is pretty much correct. The most basic principle is OPM (Other People's Money). The rent you receive is helping you pay off the mortgage. Over time, the property will be free and clear, and you will own and continue to collect rent. You can do this principle with one property or 1,000, it is still the same concept.

Terry

@Cody L.

Nice portfolio, to get to 1,000. Are you planning to sell any? like below par performing units? Jay Hinrichs gave first hand experience of great recession during 2006-2008. 

Terry

@Josiah Sia

The $100-200 is net, after all expenses paid.Probably includes reserves for capital expenditure. The example that you have is just a basic analysis. Brandon of Bigger Pockets uses net $100 per door. The net varies to market, type of home (SFR, condo/townhouse, multi's), and financing used to acquire the property.

The bottom line is the return on investment. I get about 10-15% return on cashflow. 

Terry

@Josiah Sia

The 20K down is the equity in the house. The 1k rent is actually cashflow saved in example. However, most purchases are 20-25% down, thus the rent that you get goes toward the mortgage payment. The mortgage payment is divided into principal and interest. The principal portion brings down loan balance, and increases equity.

The remaining amounts after taxes and expenses will not be that much on a monthly basis. Maybe you will net only $100 to $200 each month. T

@Josiah Sia

The $572k equity is based upon the chart that you used as an example. The increase from year 6 (526k) to year 7 (572k) is possible depending on market. In the San Jose area, you can increase 200-300k in a year for a SFR.

It really depends on the specific real estate market. The most active markets like Houston and Las Vegas will have the most increases. A lot of it depends on timing. Currently, there is a slowdown in most markets, as inventory levels increase, econcomy slowing, and talk of recession in 2020. 

It is good that you are learning the basics. Your example you are learning from goes from 4 units to 75 units. A normal person following this example will take maybe 10 plus years to get to 75 units. So I would not worry so much about understanding the 75 units level. Once you understand the 4 units level, then you can apply to the next level.

Terry

@Josiah Sia

The $572k is from the current market value (24 units) 1,167,000-595,000=572,000. Yes, by selling 24 units at said market value minus the cost/loan balance should net you 572k less any selling expenses.

The hard part in example is finding 75 unit apartment that is appraised at 3.4M, that owner is willing to sell to you for 2.1M.

Terry

@Sadrud-Din Williams

There are key elements for success regardless of any specific investment, such as individual determination, knowledge, networking, hard work, access to capital, luck, and timing. For real estate, timing is crucial, if you purchase property during 2012-2014, this was the lowest price period for pretty much any property in any location. However, you would need the courage to say "YES" during a recession where loans were hard to obtain, bad economy, high unemployment, and lots of capital. 

Even Brandon of Bigger Pockets says that 90% of the people on BP never purchase a property. 

Terry