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Everybody of us has already heard of a person owning e.g. 5-10 apartments and renting them. Or it could be parking lots. And this person started with nothing and no money a couple of years ago.
My question here:
Does anybody have *any* reference (book, website, blog, etc.) where this path is described with figures (capital invested, ROI, time needed etc.) showing the buying of the 1st apartment, and later the second, and the third and so on?
WE have done it.. Sometimes it turns out to be a home run and sometimes it is a flop.
Best is to always use someone elses money. (Hard money loans)
You have to consider ever single aspect of the house.. not just the fixing up.. You need to think about the closing costs both when you buy it and when you sell it.
You have to consider the insurance which you will need no matter if you live in it or not. And the taxes..
Then fixing it.. are you planning on doing most of the work yourself or hiring?
Don't forget that if you buy apartments they usually come with HOAs..
I know someone who owns 40 units in a retirement community. The HOA is about $400 a month.. he gets about 800 to 1000 a month.. is it worth it? He still needs insurance, maintance etc. He thinks so ..
It's really all about RESEARCH!!! Make sure all your T are crossed and I's dotted.. and if you think you missed something, you probably did.
There are a ton of videos and books on the subject. Just Google it and you will get pages of the stuff.. I wouldn't pay to learn when there is so much free stuff. Do that first.. Free is good.. Don't waste your money on fly by night guys who say they flip all the time.. each house, each state, each city, each everything is different.
The two couples I know who have been successful at this have bought duplexes, triplexes, and fourplexes.
They prefer multi-units as there is often less exterior area to maintain. and if one tenant moves out, the income from that building may drop, but it doesn't disappear.
They look for "underperforming," as they say places that are getting to be just too much for the current owners.
Both pride themselves on their units being in great shape. They always painted and replaced floors, sometimes kitchen cupboards and bathroom vanities. Usually new heating systems, separated by unit. Often hot water heaters, refrigerators, stoves, roofs, parking, landscaping... When they buy a place, they plan on spending between $10K - $40K right off the bat.
One couple buys buildings in neighborhoods with mostly singly family homes. The other buys ones near two major hospitals and primarily rents to medical professionals.
It has worked out well. They both started out by living in one of the units and going from there. They've had an income stream while building equity. But it is a lot of fuss and bother. Apparently, screening is the key.
There's a good book by a landlord in Alaska about screening and what steps she takes to improve the chances new tenants are a good fit with the other tenants in a building.
Checked Amazon but didn't see it. However, there seems to be quite a selection of books on buying and renting out multi-unit buildings.
Thank you very much for your prompt and valuable testimony to you both. Should you have any reference to check (even if they are dozen), I would really enjoy to check it.
There is actually one point which I see as technically difficult so far in this whole activity: when you buy the first flat/house, you do that usually with a mortgage. If you rent the flat, you try to look before buying that the rent you get from the tenant will be higher than the mortgage. So you have some plus and the real estate item is financing itself automatically.
But the point is that you can't go to 10 banks and ask for 10 mortgages to do the same project with 10 other flats. The banks will not allow you that and with the first flat you have bought, you have a mortgage/debt rate which has to be lower or close to 30% of your income. Therefore you might be able to buy perhaps a second small flat and to reach then the 30% but that's all.
So how do these people with 10 and more flats? How do you make the step with the second or third flat when you have already reached the 30% debt ratio?
Thank you very much for your prompt and valuable testimony to you both. Should you have any reference to check (even if they are dozen), I would really enjoy to check it.
There is actually one point which I see as technically difficult so far in this whole activity: when you buy the first flat/house, you do that usually with a mortgage. If you rent the flat, you try to look before buying that the rent you get from the tenant will be higher than the mortgage. So you have some plus and the real estate item is financing itself automatically.
But the point is that you can't go to 10 banks and ask for 10 mortgages to do the same project with 10 other flats. The banks will not allow you that and with the first flat you have bought, you have a mortgage/debt rate which has to be lower or close to 30% of your income. Therefore you might be able to buy perhaps a second small flat and to reach then the 30% but that's all.
So how do these people with 10 and more flats? How do you make the step with the second or third flat when you have already reached the 30% debt ratio?
Most investors I know buy their first home to live in. They buy a home they intend to live in for a couple of years with the intention of turning it into a rental after that. That becomes investment property #1. Then you can use that asset to leverage to buy the next property. If you buy a fixer, then you can potentially do a cash out refi as a homeowner, or get a HELOC on the property which you use for investing only.
I agree with Nina702 that you would want to get to know a hard money lender and have one ready to go for properties.
Most investors start with single family and work their way up to multi-family. You can use loans for a personal residence for a property with 1-4 units so if you can find a duplex or triplex and live in one unit for a couple of years that works too.
There are many ways to get started in investing, but what you do depends on your skills, market and finances.
So in order to get access to buying several flats in a relative short time, you need to leverage yourself over those 30% and can do that best with a hard money lender.
Is that the most common way those "10-flats owners" do to get access to the 2nd, 3rd etc. real estate items?
Most investors I know buy their first home to live in. They buy a home they intend to live in for a couple of years with the intention of turning it into a rental after that. That becomes investment property #1. Then you can use that asset to leverage to buy the next property. If you buy a fixer, then you can potentially do a cash out refi as a homeowner, or get a HELOC on the property which you use for investing only.
I agree with Nina702 that you would want to get to know a hard money lender and have one ready to go for properties.
Most investors start with single family and work their way up to multi-family. You can use loans for a personal residence for a property with 1-4 units so if you can find a duplex or triplex and live in one unit for a couple of years that works too.
There are many ways to get started in investing, but what you do depends on your skills, market and finances.
^^^
This
That is how we started.
On one property that was a bank foreclosure we had to use cash so we took out cash from credit cards with zero interest offer, we fixed it, rented for a few years then sold for double price and invested in another.
It is very difficult to get a loan even with multiple multifamily properties, all paid for and fully rented.
We just went trough a loan application with the bank that knows us for years, we keep all our money with them, our credit rating is above 800 and still had to jump trough some silly and ridiculous hoops.
Start small, do your research about the neighborhood, run your numbers - all expenses, taxes, insurance, check out the local laws and good luck.
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