by JY
for RE investing, general rule of thumb is, 1% for SFH, 2% for MFU or Apartment complex.
while every market is different, but the 1% rule shall give you close to 10% return on your investment after tax, insurance, interest payment, regular maintenance and expected 10% vacancy.
rental is not an easy business, is more like buying yourself a 2nd job, 90% of small landlords will fail within 5 years.
so if you plan to jump the gun, go read every book you can find in your local library that is related to RE, from buying, advertising, leasing, and tax planning, every step will cost you money if you not planning ahead.
there will be phases; in beginning, if you handy you should able handle everything yourself, for like under 10 units. but between 20-30 units, you will have hardest time, this is where you need to decide sacrifice your personal life or hire out for help.
for every 30-40 units, you should able to afford one full time help.
a 80 unit SFH ( or 150 unit MFU) portfolio shall give you net income of 350k a year, hands free and NEAR TAX FREE.
======
while what you said maybe all true but as we all know it, there only 1 califonia out of all 50 states, so markets outside of CA is very different than the over heated CA market.
you may argue if the portfolio is appreciating 15-20% a year now, why should I worry about short term lost? unlike other areas, CA dual income families may bring in 250k-300k a year, thus can sustain some short term negative cash flow, but I have to ask, yes you may able to sustain a 50k lost in one single house a year but can you sustain 10 or 20 or maybe 30 properties with negative income year after year?
Rental for sure is a tough business, and the devil is all in the details. operation is the main key, this is what makes or breaks the bank.
I am in mid west, and base on what I own, I can say a 50% leveraged 8-10 mil portfolio with a 1 mil yearly rent roll should net you replacement income of 300-400k, plus moderate 3-5% or 300-500k appreciations each year will put some additional icing on the cake.
yes it may not make you rich but for sure can offer you a hands free, semi retirement life by working only 3-4 hours a day and still live comfortably, like the most famous WXC TZLC phrase said, sit at the beach and watching the blondes everyday.
============
haha, not any 大牛, you may already know landlords are just losers...
first rental, 1991, 2nd year in college, 14k from an neighborhood auction... but I really didn't have any meaningful accumulation till 2007, at that time I have 38 SFHs.
2007 I bought my first real apartment complex, 40 units with A/A- location. By 2011 I own and manage myself 128 units together with SFH/MFUs, since then , I am pretty much out of SFH market. oh one other thing I may tell you is, retirement life at 40 is no fun at all, boring as hell.
my first apartment complex, I paid market price and assume the loan, out of pocket was 59K (after tax credit from seller for previous year), and its been generating 120k-150k net operating income (profits + principal payments) for me each and every year since day 1.
bro, if you still in search on what is best value in RE, I can tell you it is owning yourself an apartment complex.
Unlike SFHs, where every house is build differently, which also translated into higher maintenance and labor costs. With an apartment, everything is standardized and all within single location, you can stock up and no more paying for traveling between locations, can cut down maintenance cost by as much as 40%.
last two years I been concentrating with MFU between 100-300 units, TZLC investment LLC and TZLC management LLC (originated from WXC forum members) now own 9 group projects (10th one in pipeline) in 4 different states and near 1000 units in total.
the truth is, there ain't any secrets in RE investing, just time, consistency and scale.
===============
haha, in real estate investing, no need to out smart others (藏龙卧虎), but be consistent on what you do and do what you do best at (重剑无锋).
here is a project we closed in March 2014, 210 units, previous sold for 6.1 mil in 2009, B/B- location, we closed escrow at 2.52mil, renovation cost 176k, total out of pocket 2.7mil.
occupancy rate raised from 83% in March 2014 to 96% today, yearly schedule rent 1.1mil, now we in process of refi and it appraised for 4.4mil.
===============
every project bit different than another, so its case by case.
1. deep discounted projects, you going to expect to close with cash, what I mean by deep discount, is like 40-50 cents on a dollar, then you can create value thru renovation, when finish you still only 70 cents on a dollar.
2. stressed properties, current owner can't sell it on market due to condition or location of the property, most time they may consider do seller financing.
3. near marketable or marketable properties, about 80% of commercial apartment loans are non-recourse and underwritten by HUD, and best thing is, its assumable, cost of assuming the loan generally 1% fee of loan value.
1000-2000 units still a very small fish in apartment business world, I have seen few REIT holdings control 10000+ units.
our long term goal is 5000 units in 10 year.
============
the hardest part with any group project is everyone must compromise to achieve a same common goal..lol, not to be bashful but rumors will always be rumors, truth will eventually prevail over time...
============
for this particular complex, I paid retail pricing, 2mil dollars, private seller, assumed mortgage, 5% down, 5 year renewable term on 15 years amortization.
5% of 2 mil, less tax credit and prorated rent and tenant security deposits transferred, out of pocket is 59k, annual scheduled rent is 300k and we collected 305k for year 2014.
deals are everywhere, you just have to look harder, and it doesn't cost anything to ask.
right now we are closing on a 64 units complex (complex under court appointed receivership since April 2014), for 1 mil dollars, B/B- location, annual scheduled rent is 380-400k range, goal is to refi and cash out 1.1-1.2 mil after 12 months of stabilized operation.
No comments:
Post a Comment