Real Estate/Investor advice..

[1cleanm6]

Hey there folks i have a little money saved and ive really been thinking of partnering up with a family member and buying a multi unit complex.

I have found several nice complexs for affordable prices. Mortgages of 4000 a month and a return of about 6900 dollars. Nothing too big looking to start off real small.

I would like to renovate the apartments a little(changing windows, wooden floors, and cleaning out the kitchen and bathroom areas) to get a little more rent.

Anyways hopefully in 2-3 if its worth a little more i can pull out a equity loan and invest in another complex also.

Anyways i know i will probably have about 1000-1300 dollars a month of expenses a month. Leaving me with a little profit a month, however focusing on long term investment.

In about 5 years how much do you guys see a 750k 5 unit complex being worth? I know its really hard to tell. But is there a way this unit will be worth 1 million dollars?

I am really new to this, however everyone keeps telling me to put my money into real estate right now.

[J BONE]

Sounds like you have a nice plan in place. I do not own any multi-units but own mulitple townhomes and houses. I am not familiar with the CA area but real estate is really low in most areas of the country. If you are new to this, i highly recommend reading some books on multi-units. They are a different ball game, with a much bigger risk, however, a huge return if you play your cards right. Find a GOOD real estate agent how is willing to put in some time for you. He or she can be your biggest assest when it comes to real estate. When I first got started I went with a buddy of mine...bad choice IMO. He was new and cost me 1000's. I found a couple of good agents out here which has made all the difference in the world. As far as how much they will be worth? Who knows? Location, location, location. You will here this all the time, and you hear it for a reason.

So, do your homework. Read, read, then read some more. When you look at properties, don't jump right into them. Look at a lot of them and compare your notes. Keep your emotions out of the properties. If you investigate enough, you will find a deal. It may take you looking at 100 properties, but that 101st may be your golden ticket. Be patient, something I was not at first and it still bites me in the ass. The first book i picked up was "The weekend millionaire's secerets to investing in real estate" by Mike Summey and Roger Dawson. I like this book a lot because it gave you some insite to real estate and also how do perform some of the basic calculations. There are so many books out there it is amazing. Take some time to research this and see what you like.

Hope this helps a little. I think it is a great time to buy real estate if you have the money and if you can get a loan. Hard to get loans these days. Be careful when working with friends and family, it can get dangerous. Best of luck to ya.

[J BONE]

One more thing...find an good accountant that works with real estate investors. It is a different league and you want someone that has experience with this. You will be able to write off a lot more items with your taxes. The depreciation alone will require someone with an understanding. A good attorney is also highly recommended because you will most likely want to form an LLC.

[RonJon]

Originally Posted by J BONE

When you look at properties, don't jump right into them. Look at a lot of them and compare your notes. Keep your emotions out of the properties.

Yup it took me and my partner (life long buddy) about 6 weeks to buy our first triplex (3 unit house).

My advice is to pick a price range and look at no less then 5 listings for that range, and then look at the same amount of listings that are 10-25% more expensive and then 10-25% less expensive.

Seeing how the housing market in the states is going to $hits I would strongly advice you to wait a bit, at least untill the dust settles, I am thinking 3rd Q of this year at best.

If you're goal is to have only one property then you mite want to think about this approach:

Get a 30-35 year amm. and put all of the earnings that the property generates over the course year against the mortgage, and on top of that, put $10-$15k/year of your own cash towards the mortgage and hopefully have the place piad off in 7-10 years (I am just guessing the numbers but you get the idea). (there may or may not be tax benefits of this plan in your state, check with with accountants).

Basically if you end up paying the place off in 10 years or less you will save shit loads on interest, and by that time all of the revenue generated will go to you and not the bank. So if your monthly income is $6900 today, it will be roughly $8500 in ten years, which means you will generate $102,000/year mortage free!! Of course you still have maintance/utilities to take care of but you might be unload some of those on your tenants.

If your seriously thinking of doing this long term and want to buy more then a couple of places then I suggest you start interview/meeting real estate agents, lawyers, accountants and mortgage brokers. When you meet with them outline your goals and see what they have to say, your long term success is highly dependant on your team of pros.

Good luck and let us know what you end up doing.

But I caution you in starting soon, the market is only going to get worse in 09 so wait and save money as long as you can!!

By the way there is too much to talk/cover in post so if you have any specific questions then shoot them.

[mpimping]

Originally Posted by Boosted335

Hey there folks i have a little money saved and ive really been thinking of partnering up with a family member and buying a multi unit complex.

I have found several nice complexs for affordable prices. Mortgages of 4000 a month and a return of about 6900 dollars. Nothing too big looking to start off real small.

I would like to renovate the apartments a little(changing windows, wooden floors, and cleaning out the kitchen and bathroom areas) to get a little more rent.

Anyways hopefully in 2-3 if its worth a little more i can pull out a equity loan and invest in another complex also.

Anyways i know i will probably have about 1000-1300 dollars a month of expenses a month. Leaving me with a little profit a month, however focusing on long term investment.

In about 5 years how much do you guys see a 750k 5 unit complex being worth? I know its really hard to tell. But is there a way this unit will be worth 1 million dollars?

I am really new to this, however everyone keeps telling me to put my money into real estate right now.

probably a lot more since our money will be worth close to nothing...

[1cleanm6]

WOW!!!!

THANKS GUYS!

real solid advices!

Keep em coming...

Also in buying a multi unit complex what expenses am i looking at?

Also my uncle is a very successfully broker and i am actually taking his advice.

Also the corporate buiilding i work in has a real estate firm on the 3rd floor, and i have made friends with them all...

I am definately waiting, as i do and my uncle and my friends on the third floor the market is only getting worse..

This is why im trying to save as much as i can! Even holding off on a e92 M...which hurts but whatever my future is more important. Im trying to build a solid future.

[RonJon]

Originally Posted by Boosted335

I am definately waiting, as i do and my uncle and my friends on the third floor the market is only getting worse..

This is why im trying to save as much as i can! Even holding off on a e92 M...which hurts but whatever my future is more important. Im trying to build a solid future.

Most certainly!! If you can you truely afford an E92 M then you're better off investing that money in something thats going to appreciate rather then depreciate!!

I am in the same boat as you, I got into a car accident in the summer and my E46 was written off. I ended up getting a beater (Acura 1.6El, which is the Acura version of a civic) to save money and then focus on real life luxuries. If I stick to my plan I should be able to get a second hand E92 next year and write it off as a biz expense!!

[J BONE]

It is good to have friends in this business. Make contacts, as many as you can. Get your "feelers" out there to start looking. I think you have to be careful with some of the agents out there because it is a business for them also. They will make a great comission on your purchase. They may try and persuade you into buying something because they get more money. An agent has access to the MLS, which is the service that shows what properties are for sale and what has closed. It is KEY to look at similar properties and what they closed for. Your agent should be able to provide you with all the information you need. I also check with the local township records to check on the taxes, etc. There is so much to know IMO.

RonJon offered you some excellent advice. Props to him! SOunds like a guy I would like to work with.

As far as holding off for the M3....Play your cards right and you can pay cash for that car!! Plus, it will be a write off because you need a M3 to check up on the properties and check out new ones!!

Like I said, I don't know a lot about the multi-units but a big benefit is that your vacancy losses will be less. As opposed to a townhouse..once your renter leaves, it is vacant. If one of your tenants leaves the complex, you still have others. Also, the laundry services. Not much, but if you have a coin machine in the building, that is some extra revenue for you. I would think the maintence would cost you some money though. A lot of people have a property management group look over the property. This typically cost anywhere from 5-12% of your rental income. If you have the time, manage it yourself. That is jsut my opinion. I know a lot of people would disagree but when you frist get started, that is a lot of money. As your real estate portfolio grows, then think about getting someone to manage them. Def my .02

[RonJon]

Originally Posted by Boosted335

Also in buying a multi unit complex what expenses am i looking at?

I live in a different jurisdiction then you but this is how our triplex is setup:

Each tenant pays their own hydro and water, they all have seperate meters of course.

We pay for natrual gas, insurance, and property tax, which amounts to roughly, $1400, $2700, and $2100 respectively. Of course you live in a warm climate so I am not sure if they units will have cen. AC or not?!?!

[1cleanm6]

you guys are getting my pants wet..lol

[J BONE]

Once you get started and make that first purchase, it can be fun. It is also work though. The key for single units is to get a good tenant. I have had both. Last guy cost me $10K. Still trying to get that bastard into court. I think that is the advantage of the muli-units. But, it can be good. Long-term, I think it is worth the risk. The goal is residual income. Once those properties are paid off....

[RonJon]

Originally Posted by J BONE

Once you get started and make that first purchase, it can be fun. It is also work though. The key for single units is to get a good tenant. I have had both. Last guy cost me $10K. Still trying to get that bastard into court. I think that is the advantage of the muli-units. But, it can be good. Long-term, I think it is worth the risk. The goal is residual income. Once those properties are paid off....

How did the bastard cost you soo much??

btw, I am saving for a vacation condo in FL, unfortunately I have to come up with 35% DP because I am a foreigner. We should start snatching them up later on this year when things start looking up. The area I am looking at have gone from $1.4 mil to about $750K right now, in good times they generate roughly $1500/week but they'd require a property manager which charge anywhere from 10-35% depending on the type of service and expertise the possess.

To the OP, the laws in Canada favour the tenant HEAVILY, check your local laws and regulations when it comes to tenant-landlord issues.

[RonJon]

Originally Posted by J BONE

The goal is residual income. Once those properties are paid off....

Bingo!! Dont get caught up with making money right away, keep your day job and just plan to pay off the property(ies) ASAP. The quicker you pay them the less interest you pay. Click on this link and start tinckering with numbers and you'll see how big of a difference it makes if you dump $10,000/year on yor mortage!!

http://www.ingdirect.ca/en/tools/cal...e_Payment.html

click on "see how much more you can save" and play with those numbers.

[J BONE]

Originally Posted by RonJon

How did the bastard cost you soo much??

To the OP, the laws in Canada favour the tenant HEAVILY, check your local laws and regulations when it comes to tenant-landlord issues.

I couldn't get him to leave the property. After three months of no rent, he finally left. Plus, he had a dog and cat, which I did not allow. The carpet needed to be replaced and all the walls painted. He stole the draps that were in the house. Pretty much anything you could imagine. Never replaced the air filters in the furance, damaged the AC unti. Brutal!

The laws in the states also favor the tenants heavily. Doesn't amke sense but the law protects scumbags.

FL would be a great place to invest. Prices in a lot of those areas have dropped so much. Was also looking at some places down there but don't have the capital to put down. That is just it. When I got started, you didn't need any money down. Now, you need a lot. I started off by renting the twonhouse I lived in, so I was able to put no money down and get owner financing. Then moved to another one and did the same thing. I kept doing this so I could get a reasonable interest rate.

[J BONE]

Originally Posted by RonJon

Bingo!! Dont get caught up with making money right away, keep your day job and just plan to pay off the property(ies) ASAP. The quicker you pay them the less interest you pay. Click on this link and start tinckering with numbers and you'll see how big of a difference it makes if you dump $10,000/year on yor mortage!!

http://www.ingdirect.ca/en/tools/cal...e_Payment.html

click on "see how much more you can save" and play with those numbers.

Couldn't have said it better myself!! I use this website to mess with the numbers. It is amazing how much interest you save and how much faster you can pay off the loans by putting extra money toward the mortgage.

http://mortgages.interest.com/conten...calculator.asp

That is a good site you have. Going to bookmark that, thanks!!

[BMW_TT]

I am actually looking to invest in some townhomes. Nothing major but just small size family townhomes. I have two other guys that wanted to join in with me but everybody say never to do business with friends or family. By having them, it can help me with the mortgage while I can keep investing in other fields.

I was actually thinking about stopping my IRA and EIUL contributions and put all that money into investing in real estate.

[J BONE]

Originally Posted by BMW_TT

I am actually looking to invest in some townhomes. Nothing major but just small size family townhomes. I have two other guys that wanted to join in with me but everybody say never to do business with friends or family. By having them, it can help me with the mortgage while I can keep investing in other fields.

I was actually thinking about stopping my IRA and EIUL contributions and put all that money into investing in real estate.

Not that investing with friends and/or family is always bad it is just more challengening IMO. YOu have to make sure they are on the same page as you. When things go bad, you have to be with them. Nothing worse then sitting at the dinner table being pissed off at your family for an investment choice. I would just say procede with caution. Sit down with them and write out your business plan. Put your ideas together, write them down, and have everyone sign it. SOunds crazy, but it works.

As far as not investing into an IRA, that is a touchy subject. I think, depending on your age, now is the time to invest in the markets. Yeah we may have a down year, but stocks are cheap right now. THat investment you make today could give you big returns in the future. If you are investing with two other guys, hopefully you can do both. Maybe you cannot contribute the entire amount to the IRA, but you should at least contibute some. I beleive this is especially true if you are putting you money into a Roth IRA. Once you pay taxes on this, your investment will grow tax free for life. Who knows what taxes will be in 30 years! Of course, this is just my opinion. Good luck. Like I said the post above: read, read, and read some more. Find a good agent, and do your homework. It is ultimately your choice to invest in real estate and you have to be sure you are ready for the ups and downs.

[BMW_TT]

Originally Posted by J BONE

Not that investing with friends and/or family is always bad it is just more challengening IMO. YOu have to make sure they are on the same page as you. When things go bad, you have to be with them. Nothing worse then sitting at the dinner table being pissed off at your family for an investment choice. I would just say procede with caution. Sit down with them and write out your business plan. Put your ideas together, write them down, and have everyone sign it. SOunds crazy, but it works.

As far as not investing into an IRA, that is a touchy subject. I think, depending on your age, now is the time to invest in the markets. Yeah we may have a down year, but stocks are cheap right now. THat investment you make today could give you big returns in the future. If you are investing with two other guys, hopefully you can do both. Maybe you cannot contribute the entire amount to the IRA, but you should at least contibute some. I beleive this is especially true if you are putting you money into a Roth IRA. Once you pay taxes on this, your investment will grow tax free for life. Who knows what taxes will be in 30 years! Of course, this is just my opinion. Good luck. Like I said the post above: read, read, and read some more. Find a good agent, and do your homework. It is ultimately your choice to invest in real estate and you have to be sure you are ready for the ups and downs.

Thanks for the advice. I just turned 26, and started my Roth IRA when I was 24.


I have an agent my parents used to purchase our current house. I have a question when it comes to agents. Should I find an agent that sells to the demographic I am leaning toward or just find a really good agent regardless if he sells 30k homes or 500k homes?

[RonJon]

Originally Posted by BMW_TT

Thanks for the advice. I just turned 26, and started my Roth IRA when I was 24.


I have an agent my parents used to purchase our current house. I have a question when it comes to agents. Should I find an agent that sells to the demographic I am leaning toward or just find a really good agent regardless if he sells 30k homes or 500k homes?

Generally speaking get the one that targets the demographics. The guy thats selling the $500 might be too busy with his high end clients and may not commit much of his time on your $200 property. This is just my opnion..

BTW dont stop your IRA, diversification is your best friend unless you have a sound biz that you can invest heavily in. So yeh keep putting some money into your IRA.

[BMW_TT]

Originally Posted by RonJon

Generally speaking get the one that targets the demographics. The guy thats selling the $500 might be too busy with his high end clients and may not commit much of his time on your $200 property. This is just my opnion..

BTW dont stop your IRA, diversification is your best friend unless you have a sound biz that you can invest heavily in. So yeh keep putting some money into your IRA.

I might just keep my current contribution since I'm not putting too much into the IRA after I purchased the car. I used to max out the annual contribution limit.

[Z22Z]

Originally Posted by BMW_TT

I am actually looking to invest in some townhomes. Nothing major but just small size family townhomes. I have two other guys that wanted to join in with me but everybody say never to do business with friends or family. By having them, it can help me with the mortgage while I can keep investing in other fields.

I was actually thinking about stopping my IRA and EIUL contributions and put all that money into investing in real estate.

I wouldn't touch your EIUL bro. It's one of the few investments that guarantees your money AND allows you to withdraw money from it tax free. Keep it as a backup for anything you may need in the future. BTW it's great that you started thinking about retirement at this age. I work in this field and you have no idea how many people I meed twice your age who plan on depending on nothing but SS for their future.

[BMW_TT]

Originally Posted by Z22Z

I wouldn't touch your EIUL bro. It's one of the few investments that guarantees your money AND allows you to withdraw money from it tax free. Keep it as a backup for anything you may need in the future. BTW it's great that you started thinking about retirement at this age. I work in this field and you have no idea how many people I meed twice your age who plan on depending on nothing but SS for their future.

I laugh at SS.

SS will not support my spending habits even when I am old. Since I am paying for this car and putting money into retirement funds, I don't really have a savings account right now. Is that a bad idea to have? I know with the EIUL, I can always take a loan out to myself and pay myself the interest for the loan. From what I understand, that is how it works. I plan to save a couple of hundred to invest in small real estate with my buddies. With them around, it will take the load and stress off just me.