Buying a small condo in UTC as an investment?

[jamsvet]

I used to have only SFRs until I had to carry them a few months with nothing coming in and only money going out in repairs and rejuvenation. I bought apartment buildings and courtyard units and took advantage of economies of scale. A two hundred dollar water bill split among 8 tenants isn’t too bad. Losing one tenant and only getting 7/8 GSI didn’t really hurt either. Unless you are getting something with a GRM in the 6s or 7s, I wouldn’t think about it. 10 is just crazy.

[4plexowner]

2 to 4 units is (or was) the sweet spot for the small real estate investor

you get the economy of scale (leverage) of multiple units but stay out of the commercial financing world that comes along with the 5th unit (residential mortgages are cheaper and require lower down payment than commercial)

[4plexowner]

2 to 4 units is (or was) the sweet spot for the small real estate investor

you get the economy of scale (leverage) of multiple units but stay out of the commercial financing world that comes along with the 5th unit (residential mortgages are cheaper and require lower down payment than commercial)

[4plexowner]

2 to 4 units is (or was) the sweet spot for the small real estate investor

you get the economy of scale (leverage) of multiple units but stay out of the commercial financing world that comes along with the 5th unit (residential mortgages are cheaper and require lower down payment than commercial)

[4plexowner]

2 to 4 units is (or was) the sweet spot for the small real estate investor

you get the economy of scale (leverage) of multiple units but stay out of the commercial financing world that comes along with the 5th unit (residential mortgages are cheaper and require lower down payment than commercial)

[4plexowner]

2 to 4 units is (or was) the sweet spot for the small real estate investor

you get the economy of scale (leverage) of multiple units but stay out of the commercial financing world that comes along with the 5th unit (residential mortgages are cheaper and require lower down payment than commercial)

[jamsvet]

That’s still what I would do if I didn’t own a home or other investments today. Living in one unit and having tenants help pay the mortgage is the only way to go. Plus if you live on site it keeps everyone under control. As to affordability, nothing makes sense now unless you go to some pretty undesirable areas.

[jamsvet]

That’s still what I would do if I didn’t own a home or other investments today. Living in one unit and having tenants help pay the mortgage is the only way to go. Plus if you live on site it keeps everyone under control. As to affordability, nothing makes sense now unless you go to some pretty undesirable areas.

[jamsvet]

That’s still what I would do if I didn’t own a home or other investments today. Living in one unit and having tenants help pay the mortgage is the only way to go. Plus if you live on site it keeps everyone under control. As to affordability, nothing makes sense now unless you go to some pretty undesirable areas.

[jamsvet]

That’s still what I would do if I didn’t own a home or other investments today. Living in one unit and having tenants help pay the mortgage is the only way to go. Plus if you live on site it keeps everyone under control. As to affordability, nothing makes sense now unless you go to some pretty undesirable areas.

[jamsvet]

That’s still what I would do if I didn’t own a home or other investments today. Living in one unit and having tenants help pay the mortgage is the only way to go. Plus if you live on site it keeps everyone under control. As to affordability, nothing makes sense now unless you go to some pretty undesirable areas.

[davelj]

[quote=Scarlett]Davelj, when does it make sense, though, even with those assumptions, to pencil out as an investment?

[quote=davelj]
when calculating the interest-only payment I’d use (…) the RATE assuming 20% down (but applied against the entire cost of the house – as if you’re putting zero down). Hope that makes sense. And, this is looking at buy vs. rent, not looking at it as an investment. Just to be clear.
[/quote]

Thanks, Dave,that is actually a good and simple way to calculate – using the best rate (at 20%down) but with the loan value = sales/purchase price (like a 100% LTV).

If you figure out what mortgage payment WOULD be with the assumptions above (the good rate,but the whole purchase price loan), for an investment I guess you want to be at least a couple hundred bucks better off paying that THEORETICAL P&I and HOAs and MRs than rent income – or HOW MUCH MORE? (assume no PMI, because you WILL put 20% down at least). In REALITY, one would put 20% down, on which he would lose any return, even a safe 3%, but get a lower total P&I. Or there isn’t a rough number?[/quote]

4plexowner – I assume he owns a 4plex or two? – is a better one to answer this question, but… the basics are that you’d take your total rental income and subtract out operating costs including vacancies, which generally amount to about 35% of rental income. Then you apply a cap rate to that net operating income (NOI) – these days 7%-10%, depending on the property, and that yields a value. Now, one of the checks is that this value also has to ensure that your debt service coverage (DSC) on your loan is 1.2x or greater or you won’t get that loan. In this day and age, I’d probably look for a property where you can apply a 10% cap rate and have at least 1.35x DSC and a 65% LTV. That’s gonna be pretty cheap with a pretty big margin of safety. But, again, I’m assuming that 4plex does this for a living, so he can offer you better insights into buying these things as investments.

[davelj]

[quote=Scarlett]Davelj, when does it make sense, though, even with those assumptions, to pencil out as an investment?

[quote=davelj]
when calculating the interest-only payment I’d use (…) the RATE assuming 20% down (but applied against the entire cost of the house – as if you’re putting zero down). Hope that makes sense. And, this is looking at buy vs. rent, not looking at it as an investment. Just to be clear.
[/quote]

Thanks, Dave,that is actually a good and simple way to calculate – using the best rate (at 20%down) but with the loan value = sales/purchase price (like a 100% LTV).

If you figure out what mortgage payment WOULD be with the assumptions above (the good rate,but the whole purchase price loan), for an investment I guess you want to be at least a couple hundred bucks better off paying that THEORETICAL P&I and HOAs and MRs than rent income – or HOW MUCH MORE? (assume no PMI, because you WILL put 20% down at least). In REALITY, one would put 20% down, on which he would lose any return, even a safe 3%, but get a lower total P&I. Or there isn’t a rough number?[/quote]

4plexowner – I assume he owns a 4plex or two? – is a better one to answer this question, but… the basics are that you’d take your total rental income and subtract out operating costs including vacancies, which generally amount to about 35% of rental income. Then you apply a cap rate to that net operating income (NOI) – these days 7%-10%, depending on the property, and that yields a value. Now, one of the checks is that this value also has to ensure that your debt service coverage (DSC) on your loan is 1.2x or greater or you won’t get that loan. In this day and age, I’d probably look for a property where you can apply a 10% cap rate and have at least 1.35x DSC and a 65% LTV. That’s gonna be pretty cheap with a pretty big margin of safety. But, again, I’m assuming that 4plex does this for a living, so he can offer you better insights into buying these things as investments.

[davelj]

[quote=Scarlett]Davelj, when does it make sense, though, even with those assumptions, to pencil out as an investment?

[quote=davelj]
when calculating the interest-only payment I’d use (…) the RATE assuming 20% down (but applied against the entire cost of the house – as if you’re putting zero down). Hope that makes sense. And, this is looking at buy vs. rent, not looking at it as an investment. Just to be clear.
[/quote]

Thanks, Dave,that is actually a good and simple way to calculate – using the best rate (at 20%down) but with the loan value = sales/purchase price (like a 100% LTV).

If you figure out what mortgage payment WOULD be with the assumptions above (the good rate,but the whole purchase price loan), for an investment I guess you want to be at least a couple hundred bucks better off paying that THEORETICAL P&I and HOAs and MRs than rent income – or HOW MUCH MORE? (assume no PMI, because you WILL put 20% down at least). In REALITY, one would put 20% down, on which he would lose any return, even a safe 3%, but get a lower total P&I. Or there isn’t a rough number?[/quote]

4plexowner – I assume he owns a 4plex or two? – is a better one to answer this question, but… the basics are that you’d take your total rental income and subtract out operating costs including vacancies, which generally amount to about 35% of rental income. Then you apply a cap rate to that net operating income (NOI) – these days 7%-10%, depending on the property, and that yields a value. Now, one of the checks is that this value also has to ensure that your debt service coverage (DSC) on your loan is 1.2x or greater or you won’t get that loan. In this day and age, I’d probably look for a property where you can apply a 10% cap rate and have at least 1.35x DSC and a 65% LTV. That’s gonna be pretty cheap with a pretty big margin of safety. But, again, I’m assuming that 4plex does this for a living, so he can offer you better insights into buying these things as investments.

[davelj]

[quote=Scarlett]Davelj, when does it make sense, though, even with those assumptions, to pencil out as an investment?

[quote=davelj]
when calculating the interest-only payment I’d use (…) the RATE assuming 20% down (but applied against the entire cost of the house – as if you’re putting zero down). Hope that makes sense. And, this is looking at buy vs. rent, not looking at it as an investment. Just to be clear.
[/quote]

Thanks, Dave,that is actually a good and simple way to calculate – using the best rate (at 20%down) but with the loan value = sales/purchase price (like a 100% LTV).

If you figure out what mortgage payment WOULD be with the assumptions above (the good rate,but the whole purchase price loan), for an investment I guess you want to be at least a couple hundred bucks better off paying that THEORETICAL P&I and HOAs and MRs than rent income – or HOW MUCH MORE? (assume no PMI, because you WILL put 20% down at least). In REALITY, one would put 20% down, on which he would lose any return, even a safe 3%, but get a lower total P&I. Or there isn’t a rough number?[/quote]

4plexowner – I assume he owns a 4plex or two? – is a better one to answer this question, but… the basics are that you’d take your total rental income and subtract out operating costs including vacancies, which generally amount to about 35% of rental income. Then you apply a cap rate to that net operating income (NOI) – these days 7%-10%, depending on the property, and that yields a value. Now, one of the checks is that this value also has to ensure that your debt service coverage (DSC) on your loan is 1.2x or greater or you won’t get that loan. In this day and age, I’d probably look for a property where you can apply a 10% cap rate and have at least 1.35x DSC and a 65% LTV. That’s gonna be pretty cheap with a pretty big margin of safety. But, again, I’m assuming that 4plex does this for a living, so he can offer you better insights into buying these things as investments.

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