Im trying to get in the rei and i really would like to get into the multi-family type homes to start making cash flow. Do you think this can be done as a beginner? and what all should I need to get started?
Also im guessing to the only way to make a profit in this line of work is to buy low, how in the world do you find these type deals?
If you have to ask… stay away from multi-fam properties for a while.
You’ve got to learn the basics such as “How in the world do you find these type of deals?” and “What you should need to get started.” Stay small while you learn the fundamentals or your mistakes will be magnified in commercial properties.
To add to Danny’s answer…if you go multifamily earlier, stick to a duplex or a triplex…
My opinion…
Keith
Tunckey,
I also would strongly suggest starting with a few single family houses. They are MUCH more forgiving than multis. The tenants are much better; vacancies are lower; and SFHs are much easier to sell if you decide that being a landlord is not for you.
Good Luck,
Mike
Yes stay small at first to get into it. Single families are the easiest although they are also the hardest to cashflow but they can be found and do. Try to buy with as little money as possible as this will teach you to learn the nu,mbers and make them work for you. Anyone with a bunch of cash can go and buy a lot of properties but if not bought right the money will soon be gone. If you want to do rentals then concentrate and find everything you can learn about the subject, there are many, many articles about it. Some good, some not. There is an adage of 1% rent per month of the purchase price. To me that doesnt work. That would only give you 500 per month on a 50k property and thats awful. I like to see at least 2% month rent of the purchase price. This formula is also used by property manager who has much more experience than I. So just do your homeowrk and make sure you have all of your contacts, your inner circle created before you make the move but most of all make sure you do make the move…
Thanks to all of you
Yeah, that 2% rule is a good goal to have. It won’t be easy, necessarily, but if you can do it - great.
That is almost impossible to pull off! You would have to buy the property dirt cheap! I’m getting started in rentals and most people use the 1% rule. How would you find properties that you can rent for 1000 and buy at only 50k. The seller would have to be an idiot!
Almost impossible and impossible are 2 different things. Finding properties that fit the 1% is certainly easier…but how many of them will cash flow with little or no money down? The point is to find MOTIVATED sellers, sellers that will sell cheap to end the pain. You’re not going to find too many deals looking on the MLS or in the newspaper, you have to dig deeper than that. I’m sorry to tell you that saying something is almost impossible isn’t going to make you money, you have to go out and do it anyway regardless and MAKE IT HAPPEN!
I just bought one a couple months ago. Total investment 39k total rent 1190 per month. Fixer uppers or desparate sellers. Dont be talked into a deal by a broker they dont care what happens to you after the sale… Make sure your numbers work or dont do it.
I am looking at a deal right now for 32k its a duplex and will bring in min. 900 to 1100 per month gross rents. Only needs about 1k worth of work. Its a foreclosure.
It all depends on where you are. In the major metropolitan areas of the midwest, it’s pretty doable. In NY, CA or FL - it would be much harder.
I’m closing this Saturday on a SFH for $28,000 that is renting for $500 a month with the tenant paying all utilities. It has a brand new roof in 06, new furnance in 05, and steel siding. Plus on top of all that the seller is financing the entire deal over five years. So I have only $400 in closing cost, and it will be free and clear in five years.
You have to know how to negotiate and you have to look hard. But the 2% is real.
kjmoney,
What you don’t understand is that it doesn’t matter whether it is impossible or not. The only question that is relevant is whether you will make money with your rentals. I would like to see the numbers on a 1% deal that anyone thinks will cash flow (without putting money down). Your are absolutely right, most people use the 1% rule AND the vast majority of new landlords lose money and go out of business in a short period of time. If you follow the crowd, you’ll crash and burn also.
If you can’t find properties that will make money, do something else. It is crazy to make “investments” that lose money.
Good Luck,
Mike
OK. I’ll keep searching really really hard. I live on the east coast and are dealing with small towns. Thanks for all your advice and convincing me it can be done.
Start small grasshopper, or you'll be in over your head. As far as deals, I look for disstressed or 70 cents on the dollar. But if you must go multi-family look for cash-flow, and occupacy rate.