by JY101 2015-03-23 11:13
so lately I had few friends came ask me why RE
and why residential RE and why residential MFU RE, so I decide to write a
mini series base on my very limited knowledge, and of course, I am not
sure there ever be a part 2...
so first of all, and by purely looking at only residential properties, here is how I see residential properties should classified.
1. single unit SFH/condo.
2. 2-4 units duplex/fourplex.
3. 5-60 units apartment complex.
4. 60-100 units apartment complex.
5. 100-200 units apartment complex.
6. 200+
category 1 and 2, basically the same, and this is where we all started, easy access to finance, hands on DIY. but the truth is, if in term of management, SFHs are not efficient; no two SFH build alike and distance to travel varies, you can not stock standard parts and always have to rely on local warehouses, so it can be expensive both in time and money.
category 3, banks usually consider anything 5 units or more commercial and lending terms are much more strict, aka they don't want your business unless you sign over your first born child and have money in their depository account. but by the same token, sellers have harder time to sell, because not many banks willing to finance the deal so sellers more willing to carry out their own terms, aka seller finance. now if we looking at it from operation stand point, 30-40 units complex is the perfect size for small owner-operator, it is efficient, all within centralized location, all build similarly with standard common parts, and best of all, its rent roll can support a full time maintenance and a part time housekeeping, and you be semi hands free, only need to work 3-4 hours a day for scheduling and paper work.
category 4, believe or not, you can get financing for these, and its not that hard, all you need is a 90+% rent roll and P&L, Fanne Mae is happy to hand over you money, cost of fiance is about 6-8% so yes there is light at the end of the tunnel. but the issue is, with this size, you will need an office assistant but you still have to work as hard and same hours as smaller projects and make same amount of money, you will need 1 office assistant, 2 handyman and a full time housekeeping, the payroll ate all your gains.
category 5, actually I say 120 units or more, is the breaking point for true hands free, you are the boss and can sit on the beach and do everything from you cell phone as long as you have a trust worthy manager in place.
category 6, lol, I am still working on it.
for us self-manage small landlords, a well greased operation with a 40 units complex should able give you a NOI about 100k-150k each year while only require minimum office hours.
so first of all, and by purely looking at only residential properties, here is how I see residential properties should classified.
1. single unit SFH/condo.
2. 2-4 units duplex/fourplex.
3. 5-60 units apartment complex.
4. 60-100 units apartment complex.
5. 100-200 units apartment complex.
6. 200+
category 1 and 2, basically the same, and this is where we all started, easy access to finance, hands on DIY. but the truth is, if in term of management, SFHs are not efficient; no two SFH build alike and distance to travel varies, you can not stock standard parts and always have to rely on local warehouses, so it can be expensive both in time and money.
category 3, banks usually consider anything 5 units or more commercial and lending terms are much more strict, aka they don't want your business unless you sign over your first born child and have money in their depository account. but by the same token, sellers have harder time to sell, because not many banks willing to finance the deal so sellers more willing to carry out their own terms, aka seller finance. now if we looking at it from operation stand point, 30-40 units complex is the perfect size for small owner-operator, it is efficient, all within centralized location, all build similarly with standard common parts, and best of all, its rent roll can support a full time maintenance and a part time housekeeping, and you be semi hands free, only need to work 3-4 hours a day for scheduling and paper work.
category 4, believe or not, you can get financing for these, and its not that hard, all you need is a 90+% rent roll and P&L, Fanne Mae is happy to hand over you money, cost of fiance is about 6-8% so yes there is light at the end of the tunnel. but the issue is, with this size, you will need an office assistant but you still have to work as hard and same hours as smaller projects and make same amount of money, you will need 1 office assistant, 2 handyman and a full time housekeeping, the payroll ate all your gains.
category 5, actually I say 120 units or more, is the breaking point for true hands free, you are the boss and can sit on the beach and do everything from you cell phone as long as you have a trust worthy manager in place.
category 6, lol, I am still working on it.
for us self-manage small landlords, a well greased operation with a 40 units complex should able give you a NOI about 100k-150k each year while only require minimum office hours.
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