Getting started with Muli-Family investments

[TenaciousSD]

I cant wait to hear your responses! Here’s what I’m interested in:

– STORIES: What successful experiences have you had with starting your own successful multi-family investment property? How long did it take you to make the jump to 2-3 properties? Do you have a day job?

– CAPITAL: How much money did you need to get started? Were you debt free when you started? Did you partner with anyone?

– RESOURCES: Which books do you recommend? Did you take any classes?

– ADVICE: I’ve described my current situation, and where I’d like to be. Have any of you been in a similar situation? What worked well about it?

My current situation:
I have a great job (I’m happy working, and would love to continue working here for a long time), I’m paying off my car (I still owe about 30K), I have excellent credit, and I’m in my early 30’s. One of my resources is my brother who is one of the best plumbers/electricians that I know. He is equally as passionate about his job as I am with mine. What he can provide is manual labor. I’m very good at research, and am a quick learner. I’m being realistic here – I have no experience in real estate investing – but I’m fascinated by the process. I’m a regular Piggington reader, and feel like within the next year or two there will be some excellent real estate investment opportunities. I am very a very patient, hard worker – who eventually reaches his goals.

Where I’d like to be:
I’d like to create my own company based on the work that I currently do, and own a few apartment complexes. My brother would like to own property, and manage it himself. He worked as a property manager at one point, but started his own plumbing/electrician business. In the ideal case he would be managing a few properties – I mainly want property because I think it may be a wise investment.

[uneven]

I don’t have a lot of experience with rentals, but here’s what I’ve learned. I have a rental house (3/2) in San Jose and a condo (2/2) in Santa Ana. The 2/2 is in a complex with about 300units. HOA’s are a pain in the ass. It’s my first experience with them and it’s been non-stop aggravation. If you can afford a multi unit that you own the whole thing…. that’s the way to go. Otherwise, Id stick to SFH’s. That said, I’m making about $400/month (not including vacancy) on it. It took me 3 months to rent it at first. The tenant is good, but still has to be called every other month to remind them to pay the rent.

The 3/2 in SJ was my house for 5 years before I moved south. It’s been rented for 2 years with a new tenant after year one. I loose about $100 a month, including paying a property manager up there. Again, tenants have issues here and there, and checks “get lost in the mail” so it’s a little bit of work, but nothing serious.

The one thing you need to think about is most non-owner occupied loans will require 25% down. I’m not a broker, so I could be wrong, but I was told that you can get hit hard or not get loans if you can’t come up with that. Also, form an LLC. It can help in many ways. It protects your personal assets from a suit related to the property and it also allows you to be the “manager” instead of the “owner” to tenants. They write checks to Acme LLC and your just following Acme’s policies. I think I’m a very reasonable landlord, but it makes a difference in dealing with tenants.

I’m not sure how useful any of that was… but best of luck.

[uneven]

I don’t have a lot of experience with rentals, but here’s what I’ve learned. I have a rental house (3/2) in San Jose and a condo (2/2) in Santa Ana. The 2/2 is in a complex with about 300units. HOA’s are a pain in the ass. It’s my first experience with them and it’s been non-stop aggravation. If you can afford a multi unit that you own the whole thing…. that’s the way to go. Otherwise, Id stick to SFH’s. That said, I’m making about $400/month (not including vacancy) on it. It took me 3 months to rent it at first. The tenant is good, but still has to be called every other month to remind them to pay the rent.

The 3/2 in SJ was my house for 5 years before I moved south. It’s been rented for 2 years with a new tenant after year one. I loose about $100 a month, including paying a property manager up there. Again, tenants have issues here and there, and checks “get lost in the mail” so it’s a little bit of work, but nothing serious.

The one thing you need to think about is most non-owner occupied loans will require 25% down. I’m not a broker, so I could be wrong, but I was told that you can get hit hard or not get loans if you can’t come up with that. Also, form an LLC. It can help in many ways. It protects your personal assets from a suit related to the property and it also allows you to be the “manager” instead of the “owner” to tenants. They write checks to Acme LLC and your just following Acme’s policies. I think I’m a very reasonable landlord, but it makes a difference in dealing with tenants.

I’m not sure how useful any of that was… but best of luck.

[uneven]

I don’t have a lot of experience with rentals, but here’s what I’ve learned. I have a rental house (3/2) in San Jose and a condo (2/2) in Santa Ana. The 2/2 is in a complex with about 300units. HOA’s are a pain in the ass. It’s my first experience with them and it’s been non-stop aggravation. If you can afford a multi unit that you own the whole thing…. that’s the way to go. Otherwise, Id stick to SFH’s. That said, I’m making about $400/month (not including vacancy) on it. It took me 3 months to rent it at first. The tenant is good, but still has to be called every other month to remind them to pay the rent.

The 3/2 in SJ was my house for 5 years before I moved south. It’s been rented for 2 years with a new tenant after year one. I loose about $100 a month, including paying a property manager up there. Again, tenants have issues here and there, and checks “get lost in the mail” so it’s a little bit of work, but nothing serious.

The one thing you need to think about is most non-owner occupied loans will require 25% down. I’m not a broker, so I could be wrong, but I was told that you can get hit hard or not get loans if you can’t come up with that. Also, form an LLC. It can help in many ways. It protects your personal assets from a suit related to the property and it also allows you to be the “manager” instead of the “owner” to tenants. They write checks to Acme LLC and your just following Acme’s policies. I think I’m a very reasonable landlord, but it makes a difference in dealing with tenants.

I’m not sure how useful any of that was… but best of luck.

[uneven]

I don’t have a lot of experience with rentals, but here’s what I’ve learned. I have a rental house (3/2) in San Jose and a condo (2/2) in Santa Ana. The 2/2 is in a complex with about 300units. HOA’s are a pain in the ass. It’s my first experience with them and it’s been non-stop aggravation. If you can afford a multi unit that you own the whole thing…. that’s the way to go. Otherwise, Id stick to SFH’s. That said, I’m making about $400/month (not including vacancy) on it. It took me 3 months to rent it at first. The tenant is good, but still has to be called every other month to remind them to pay the rent.

The 3/2 in SJ was my house for 5 years before I moved south. It’s been rented for 2 years with a new tenant after year one. I loose about $100 a month, including paying a property manager up there. Again, tenants have issues here and there, and checks “get lost in the mail” so it’s a little bit of work, but nothing serious.

The one thing you need to think about is most non-owner occupied loans will require 25% down. I’m not a broker, so I could be wrong, but I was told that you can get hit hard or not get loans if you can’t come up with that. Also, form an LLC. It can help in many ways. It protects your personal assets from a suit related to the property and it also allows you to be the “manager” instead of the “owner” to tenants. They write checks to Acme LLC and your just following Acme’s policies. I think I’m a very reasonable landlord, but it makes a difference in dealing with tenants.

I’m not sure how useful any of that was… but best of luck.

[uneven]

I don’t have a lot of experience with rentals, but here’s what I’ve learned. I have a rental house (3/2) in San Jose and a condo (2/2) in Santa Ana. The 2/2 is in a complex with about 300units. HOA’s are a pain in the ass. It’s my first experience with them and it’s been non-stop aggravation. If you can afford a multi unit that you own the whole thing…. that’s the way to go. Otherwise, Id stick to SFH’s. That said, I’m making about $400/month (not including vacancy) on it. It took me 3 months to rent it at first. The tenant is good, but still has to be called every other month to remind them to pay the rent.

The 3/2 in SJ was my house for 5 years before I moved south. It’s been rented for 2 years with a new tenant after year one. I loose about $100 a month, including paying a property manager up there. Again, tenants have issues here and there, and checks “get lost in the mail” so it’s a little bit of work, but nothing serious.

The one thing you need to think about is most non-owner occupied loans will require 25% down. I’m not a broker, so I could be wrong, but I was told that you can get hit hard or not get loans if you can’t come up with that. Also, form an LLC. It can help in many ways. It protects your personal assets from a suit related to the property and it also allows you to be the “manager” instead of the “owner” to tenants. They write checks to Acme LLC and your just following Acme’s policies. I think I’m a very reasonable landlord, but it makes a difference in dealing with tenants.

I’m not sure how useful any of that was… but best of luck.

[evolusd]

I can speak to financing of apartment properties, as we do quite a bit here at the Bank where I work. Most banks underwrite to the cash flow of the property – they’ll want to see the appraiser’s estimate of NOI be sufficient to cover the required P&I payment with a 30Y amortization by a margin of at least 1.25x. This typically limits your LTV to 60-70% depending on the cap rate of the property. A personal guaranty is almost always required, and holding the property in a single-asset LLC is preferred.

Back in the loosey goosey days banks were going much more aggressive, but they’ve all imploded now and credit is much tighter, at least from my POV.

[evolusd]

I can speak to financing of apartment properties, as we do quite a bit here at the Bank where I work. Most banks underwrite to the cash flow of the property – they’ll want to see the appraiser’s estimate of NOI be sufficient to cover the required P&I payment with a 30Y amortization by a margin of at least 1.25x. This typically limits your LTV to 60-70% depending on the cap rate of the property. A personal guaranty is almost always required, and holding the property in a single-asset LLC is preferred.

Back in the loosey goosey days banks were going much more aggressive, but they’ve all imploded now and credit is much tighter, at least from my POV.

[evolusd]

I can speak to financing of apartment properties, as we do quite a bit here at the Bank where I work. Most banks underwrite to the cash flow of the property – they’ll want to see the appraiser’s estimate of NOI be sufficient to cover the required P&I payment with a 30Y amortization by a margin of at least 1.25x. This typically limits your LTV to 60-70% depending on the cap rate of the property. A personal guaranty is almost always required, and holding the property in a single-asset LLC is preferred.

Back in the loosey goosey days banks were going much more aggressive, but they’ve all imploded now and credit is much tighter, at least from my POV.

[evolusd]

I can speak to financing of apartment properties, as we do quite a bit here at the Bank where I work. Most banks underwrite to the cash flow of the property – they’ll want to see the appraiser’s estimate of NOI be sufficient to cover the required P&I payment with a 30Y amortization by a margin of at least 1.25x. This typically limits your LTV to 60-70% depending on the cap rate of the property. A personal guaranty is almost always required, and holding the property in a single-asset LLC is preferred.

Back in the loosey goosey days banks were going much more aggressive, but they’ve all imploded now and credit is much tighter, at least from my POV.

[evolusd]

I can speak to financing of apartment properties, as we do quite a bit here at the Bank where I work. Most banks underwrite to the cash flow of the property – they’ll want to see the appraiser’s estimate of NOI be sufficient to cover the required P&I payment with a 30Y amortization by a margin of at least 1.25x. This typically limits your LTV to 60-70% depending on the cap rate of the property. A personal guaranty is almost always required, and holding the property in a single-asset LLC is preferred.

Back in the loosey goosey days banks were going much more aggressive, but they’ve all imploded now and credit is much tighter, at least from my POV.

[jamsvet]

I was into investment property until about 4 years ago, now all I’ve got are some small commercial props and a little strip mall. I just don’t think that anything now makes economic sense. All my props I’ve had for a long time. There is no way that you can buy something today especially multifamily and make money.

Yeah, you’ll hear from “experts” that say look at he numbers, if you buy for a GRM of 10 with a 5% vacancy factor, etc, etc, etc. Real world, something always comes along to screw up those numbers. Especially if you need a decent cash flow. It only takes a unit to be vacant for one month to really screw things up.

Hate to be a downer, but until investment properties get back to something approaching realworld values, my money is in CDs.

[jamsvet]

I was into investment property until about 4 years ago, now all I’ve got are some small commercial props and a little strip mall. I just don’t think that anything now makes economic sense. All my props I’ve had for a long time. There is no way that you can buy something today especially multifamily and make money.

Yeah, you’ll hear from “experts” that say look at he numbers, if you buy for a GRM of 10 with a 5% vacancy factor, etc, etc, etc. Real world, something always comes along to screw up those numbers. Especially if you need a decent cash flow. It only takes a unit to be vacant for one month to really screw things up.

Hate to be a downer, but until investment properties get back to something approaching realworld values, my money is in CDs.

[jamsvet]

I was into investment property until about 4 years ago, now all I’ve got are some small commercial props and a little strip mall. I just don’t think that anything now makes economic sense. All my props I’ve had for a long time. There is no way that you can buy something today especially multifamily and make money.

Yeah, you’ll hear from “experts” that say look at he numbers, if you buy for a GRM of 10 with a 5% vacancy factor, etc, etc, etc. Real world, something always comes along to screw up those numbers. Especially if you need a decent cash flow. It only takes a unit to be vacant for one month to really screw things up.

Hate to be a downer, but until investment properties get back to something approaching realworld values, my money is in CDs.

[jamsvet]

I was into investment property until about 4 years ago, now all I’ve got are some small commercial props and a little strip mall. I just don’t think that anything now makes economic sense. All my props I’ve had for a long time. There is no way that you can buy something today especially multifamily and make money.

Yeah, you’ll hear from “experts” that say look at he numbers, if you buy for a GRM of 10 with a 5% vacancy factor, etc, etc, etc. Real world, something always comes along to screw up those numbers. Especially if you need a decent cash flow. It only takes a unit to be vacant for one month to really screw things up.

Hate to be a downer, but until investment properties get back to something approaching realworld values, my money is in CDs.

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