“”“Unfortunately, all of your answers spawned new questions and now I am seeing how lost I really am. please be patient.”“”
No problem, landlords are a tight group of people that enjoy helping others get involved.
“”“ok, first, where would I find a “large residential landlord”? Perhaps I should talk to the management guy that managed the property I used to rent. Maybe he has some names?”“”
Yes, if you look in the newspaper you will see some for rent ads that have multiple properties for rent. They are probably a large property management company. Call them up and ask them if they know some names of the largest landlords in town. Most landlords will know who the big guys are. The reason I say to speak with a landlord with a lot of property is for one thing, they likely know what they are talking about. They also have likely used many lawyers, title companies, etc over the years and know who is good and who to stay away from. A small landlord would be more than happy to give you references but remember that they are still learning too.
“”“second, I googled the multi family home thing but I still can’t grasp exactly what it is that you’re talking about, can you be really specific? and what does “rent x 30-50” mean?”“”
This is for any type of property, not just multifamily. Also, remember that the good deals aren’t just sitting around on MLS. You have to actively search for them by looking for hardship problems. You find people with problems and solve them. There is a deal here and there that you will find through an REO agent as well. You make your money on the purchase of a property and don’t realize it until it’s sale. What’s in between is very little. This is why it is so important to buy right. When you think you have a deal post the numbers here and people will analize it.
I buy low income houses in the Section 8 areas of town that you are looking at and this is what I do to consider if it is something worth while looking at or not.
Rent times 30 scenerio on a multifamily. Do the same thing for a single family. (typically the lowest you will find a deal) Rent amount MUST be verified.
Triplex example
1br - $425
1br - $425
3br - $595
Total rent = $1,445 X 30 = $43,350 total value of the house
Now lets say that you have about 5k in repairs.
$43,350 - $5,000 = $38,350 This is the total that you will offer in the rent X 30 scenario. Personally this is what I look for. I will do rent times 40 minus repairs though.
“”“mike, there’s no secret to any of this, the truth is, most people don’t do this because they fear failure and aren’t willing to accept the risk. if you want to move forward, you just HAVE to do it!”. “”"
He couldn’t be more right. If you learn as much as you can, don’t rush things at first, make sure you buy right, you will win.
“”" can you give me a rough, and I mean rough idea of the sort of cash flow that section 8 investors work with? I mean, let’s say for argument sake rough numbers, if a person bought a 50k property in a low income area with the intent of being a section 8 landlord, what would be a typical cash flow return on a monthly basis? $50 bucks, $200 bucks?“”"
It depends on the deal but most investors here won’t touch a property unless they are making at least $100 per door. Lets analyze my rent x 30 scenario and it’s cash flow after paying the banks interest of 7% on a commercial loan over a period of 20 years.
Gross Income: $1,445/mth = $17,340 annual
Expenses (50% rule of thumb) -8,670
NOI: $8,670
43,350k@7%/20yrs: $1,865
Yearly Cash Flow $6,805
$567 per month or $189 per door.
So you need to figure out how much money you need to live on so you can determine how many properties you will need to get by and quit the job. Once you have one house completely paid for you will be able to quickly grow, getting a loan on the paid for house to buy anther. Now the other you just bought is paid for because the loan is on the first so get a loan on that one and buy another, etc. etc. etc. (make double payments on a 15 year loan and it will be paid off in 5 years not 7.5 due to the savings in interest). Buy right and you will be able to make double payments.
“”“I’m just trying to know the rough size one’s portfolio needs to be to make a reasonable living through investment alone. I’m sure this is something that will take a good 5 or so years for me to build to the point that it’s paying my bills or whatever you want to call it.”“”
Reasonable living means what specifically? You can figure out by the $100 per door per month to determine how many you will need to make a living. The junkers pay more cash flow but you have to deal with more drama. Section 8 decreases the drama to some degree.
You should consider buying a book from Bryan Wittenmyer. This is my favorite real estate book and this guy is very experienced with the type of property you want. It’s also a nice read and too the point. The book I think is called Perpetual Income.