Real Estate/Investor advice..

[sandyeggo325i]

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.

Dude...I own a 4plex that I bought back in 2000, when I was the ripe old age of 22. Craziness!

Anyway, let me know if you have some questions as I'm "in the biz" if you will and could provide some insight. The first thing I would strongly suggest is to look for 4 units and under as financing is 150x easier than 5+.

They aren't making units any more...and in California rentals will always be solid. PM me...

[J BONE]

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.

Well stated! Diversification is key. You should have your money in multiple areas. Since you are young, you can afford to be a little more risky with your investments, if you can stomach the risk. In 2007 my overall investments in the market were up 52%, 2008 on the other hand... But it is a risk I choose.

This is turning into a really good thread. I would like to hear more from people that are investing in real estate. Big props to you younger guys that have started investing in Roth IRA's and real estate.

[J BONE]

Originally Posted by sandyeggo325i

Dude...I own a 4plex that I bought back in 2000, when I was the ripe old age of 22. Craziness!

That is awesome! That investment is going to give you big returns in the future.

[RonJon]

Has anyone tinckered with the idea of raising money privately?

After I own 3-4 properties and have at least one fully paid for I'd like to start raising funds privately, I think I can prduce a 8-10% ROR for the investors.

If I can raise $100K, that's enough for a duplex which would generate roughly $18-20Ks/year. So if I can lock the investors for lets say 5 or 7 years I can have a property thats worth $115K's and about $120k's sitting in the bank (or reninvested in another property!!).

I think it will be an easy sell for family, friends and acquaintances if I can grow my holdings in the next couple of years.

A)The total cost of a $100,000 duplex with a 25 year 5.0% mortage would be $169,800.

B)The total cost of a $100,000 duplex acquired through private funds with a projected ROR of 8%, 9% and 10% is $146,930, $153,862, and $161,051 respectively.

In scenario A) the total cost for the purchase is on average $15,937 more then B). In scenario A) it takes 25 years pay the mortgage off, which greatly reduces my monthly rental income for 25 years.

In scnario B) the cost of borowing is greatly reduced, and the house will be paid for from day 1, and my monthly rent income is much higher starting from day 1.

After the investment matures (5-7 years), I would pay the investors back with the money the house generated. So in this scenario I would own 100% of the property in 5-7 years, and generated a decent return for investors. This of course wouldn't make my mortgage broker happy, but screw him!! lol

How many of you folks would be open to this idea if a trusted friend, family member, or an acquaintance pitched to you. btw, to instill some confidance I would put the most money down, I am thinking in the range of 20-40%.

I am not sure how investing and retirement saving work in the states, but here in Canada 9% return in RRSP (similar to 401K and IRA) is very common. (with the exception of last year of course).

fwiw I would only do this inside a corporation and have specfic law binding agreements with the investors, I know it would cost a little more but it will protect everyone's interests!!

Please give me your feedback if you would invest in such venture, if not then what dont you like? What would it take for you to invest??

[155MPH]

Go to the book store (or Amazon) and look for a book called "Buying Small Apartment Properties" by Brian K. Friedman. It has lots of good advice and explains how the business model works.

[Z22Z]

Originally Posted by BMW_TT

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.

you can take out up to 90% of what you have saved up in the EIUL at a time. what they do is call it a loan, charge you a small percentage, and then refund almost all of that percentage at the end of the year. since it's a loan, it can't be taxed. also, unless you have three to six month's worth of income already saved up in your EIUL, i'd suggest you have some money in your savings if you loose your job.

[sandyeggo325i]

Originally Posted by tuvw387

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eh?

[J BONE]

Spam

[BMW_TT]

Originally Posted by Z22Z

you can take out up to 90% of what you have saved up in the EIUL at a time. what they do is call it a loan, charge you a small percentage, and then refund almost all of that percentage at the end of the year. since it's a loan, it can't be taxed. also, unless you have three to six month's worth of income already saved up in your EIUL, i'd suggest you have some money in your savings if you loose your job.

I need to check on my EIUL account. I started it almost 2 years ago. I only contribute 200 bucks a month to it.

[ideliver]

make sure that you have 51% ownership and voting rights...a 50/50 split is makes things very difficult if you don't agree...also make sure that you have CLEAR buy-out provisions when one of you gets pissed and wants out...

[Z22Z]

Originally Posted by BMW_TT

I need to check on my EIUL account. I started it almost 2 years ago. I only contribute 200 bucks a month to it.

i highly doubt you have three to six month's worth of income seeing how the market has been so low. on the bright side you didn't loose anything and made way more than what you would have if that cash sat in a regular savings account.

[Z22Z]

Originally Posted by ideliver

make sure that you have 51% ownership and voting rights...a 50/50 split is makes things very difficult if you don't agree...also make sure that you have CLEAR buy-out provisions when one of you gets pissed and wants out...

+1 i've known a few situations that have gotten uglier than they would have had this been set forth clearly.