Also I am in the process of buying a triplex. I have about $40k to start with. As of now I have 2 on the top of my list.
Property #1 Costs $375K, so I’ll need a partner to go in on it with 50-50. It is in a very high rental area, so it will rarely be vacant. The tenant on the 2nd floor has been there for 14 years. It will have a positive cash flow of $400 per month (so $200 to each owner). It is projected to have decent appriciation but not as much as property #2.
Property #2 costs 249k, which I will also need a partner with, but it will free up $15k so I can buy another unit as early as next year. The area is a decent rental community, but not as good as property #1. It will cash flow $150 per month off the bat ($75 per owner). Since it is in an “up and coming area” it is projected to appreciate more than property #1.
Should I go after more cash flow or go after the property that will appreciate more? Should I wait until I find a place I can own on my own?
My goal is to own 10 properties in the next 12 years, with the intent that my income from the rentals can cover all of my personal bills 12 yrs from now. (I won’t stop working, just a nice security blanket)
depending on how long this was ago, it may be over, but, id say go for the cheaper one if you are a beginning investor like me hhaa, and go after the one which has a better return and more security, if you can get a tennant in prop 1 quickly w/o many vacancies, id go for that one. so chester524, where do you live and/or invest in? im located in san jose, ca
Please post the numbers for both properties. How did you arrive at $400/month cash flow? Start from gross rent, deduct expenses, etc. Also tell us how many units are in each property and sizes.
Chester524,
I would be careful with that triplex with the $2408 in expenses.
It seems that is a thin deal. If you have 1 vacancy you are coming out of pocket 500-600 per month. That is if the expenses all remain the same. Are these numbers hard numbers that you have verified or are the “Proforma” numbers provided by the seller?
The reason I ask is, “Proforma” numbers are typically light on the expenses and heavy on the income. Sounds like you could likely get a better bargain, but I don’t know your area.
As far as the second triplex goes, DO NOT EVER invest anticipating appreciation. You should always stick to hard numbers in today’s values. The only time you can count on appreciation is if you see a true opportunity to increase rents or other income that is not currently being utilized. That is called forced appreciation and has nothing to do with what comparable properties are selling for.
I’m not experienced so take my advice for what its worth.
hmmm, the cash flow should be less minus trash and landlond’s cost of utilities.
These deals don’t pass the 2% rule by a long shot. Besides the vacancy expenses, as RapidPropertySo pointed out, the maintenance expense also seems low at $1200/year.
hi we’ve spoke before a while ago. I wanted to ask for your opinion on something i found in the rich dad book on real estate investing. heres the passage from the book.
“myth#3 you can flip your way to sucess or get rich with no money down”
“no money down is a way of saying the property is 100% financed. That means a much larger part or all your cash flow goes toward the monthly payment.”
"“it leads to higher interest rates, higher loan costs, and no money to improve the property should something break”
"with this model you are banking on property to appreciate to make money rather than improving the operations and making money through cash flow. appreciation is only in your control when you have improved cash flow in this case you have none.
So does this mean that those guys on the tv show “flip this house” are doing things the wrong or hard way?
Buying and selling property is one of the hardest deal that you should do as you enter real estate business so you need an expert partner to help you choose and pick a good property for your investment.