not really looking for tips (raise rent…) of the landlording/management/repair sort, but rather on my actual acquisition.
i am going to be looking for a 4 unit property that i will live in, adn get with a conventional loan, putting down around 5%. i know to maximize cash flow, i need to get the building at a cheap price. cheaper price means cheaper mortgage payments, and a lower mortgage payment, with fixed rental rates, equals more cash flow.
my question is this. if i’m looking for a 4 unit, and want to maximize cash flow, what kind of four unit should i be looking for? i’m not sure about how things like war zone v. upper/middle class properties woudl affect relative cash flow. like maybe rent relative to property value, in real bad areas, is much higher than in nicer areas.
i am going to be living in 1 unit, and having my brother live in the other, so I would really like to do all i can to have the 2 paying units cover the operating expenses (not even sure if that’s possible with any kind of deal i could hope to get, but we’ll see i guess)
Sorry to say but I think you are looking for trouble. I find it hard to believe that you could buy a 4 plex and only have two units paying for all costs. Your brother needs to be paying rent as well unless there are cirumstances not mentioned. Business is business and this is a poor plan of attack. Depending on where you live 4 plexes carry a nice little price for them. You also need to start looking at the area you want to invest in to see what rents are going for on 1 bd, 2bd, 3 bd, etc. That way you know what to expect if and when you decide to buy and RENT OUT the other 3 units
You might have to put more money down and/or ask the seller to carry back a second to help with the cashflow.
will 3 units be enough rental income to cover the 4 unit property’s expenses in most cases where the building was bought at a good price?
he’s not leeching or anything, it’s too much to explain. anyways the plans aren’t hinging upon being able to have 2 free units. we can definitely swing 1 full units rent per month, but really didn’t want to. so we looked into 5-7 unit properties, but then realized those were commercial, and all of a sudden having ~15-20K to put down / great credit became less useful in our pursuit)
For any properties in the area, you should ask for as much historical information on the property as possible. And check the market rents.
This will ensure you can cover the mortgage and expenses on the property. 40-50% for apartments is normal. If your living in one unit it might be less, but just to be sure you have enough cash flow, use 40-50 % for expenses as a rule of thumb(newer properties might have lower maintenance though).