Multifamily Realestate?

[Piper2022]

Anyone on here own a multifamily buildings? I am a 26 year old who lives in Portland Maine. I have been thinking about buying a multifamily(3-4 unit) apartment for the last year or so and I think now is the time to pull the trigger. My goal is a take advantage of the FHA low interest rates and live in one unit for the next few years. I can see myself living there for 3-5 years. At that point I hope to use the equity and buy a property outside the city and keep the multifamily as a rental property. As much as it seems like the multifamily building is a good idea I want to make sure its economical and the numbers all work. I don’t want to end up with a property where the rents can’t pay the operating costs.

Below is an example based on a 3 unit building I looked at:

Rents: 1st floor-$1,300, 2nd floor - $1,300, 3rd floor - $1,100
Total - $3,700/month $44,400/year

Expenses:
Mortgage - $1,900/month, $22,800/year
Taxes - $5,500/year
Gas - $4,500/year
Electric - $3,500/year
Water - $2,300/year
Total income: $485/month or $5,800/year

Mentally this doesn’t seem like a ton of income as vacancy(very low in Portland right now) and maintenance costs are not factored in. However I plan to keep the building so the equity I am gaining is what I need to consider as well. My father is a contractor and I have extensive building experience from working with him. So I feel capable doing a majority of the work on the property. I f I don’t go the route of a multi family building I am considering trying to flip some foreclosure type properties or maybe try and buy one or two small single family foreclosures and hold them as rentals.

Anyone care to chime in.

 

[bumperm]

If there's a downside to multi-family units, it's that, when it's time to sell, their market appeal is not to as broad a segment of potential customers as would be single family homes. So there is some logic to purchasing several single family homes as rentals rather than duplexes or apartment buildings. Though this depends on the market you're in.

 

[Dutch445]

Played with rental income back in my 20s and was in an area and time when real estate
was blossoming so my equity/resale values were very high when i sold compared to
when i bought. it is a good business to get into, and i still own a single family rental home
and would consider more given the right opportunity.

my only caution would be if you are using fha or some other first time buyer program that involves
low down payment, you probably won't see a large build of equity the first few years, especially
if you finance 25-30 year term. the amortization schedules on those loans are scary!

it sounds like all utilities are included in the rents (except cable/internet), so make sure your rents
are in line with the market for the area, my rentals had all electric power, with a meter in every unit!
(6 units in 1 building). I only supplied electric for common lighting areas and the basement coin op
laundry! (always had plenty of quarters for the kids at the carnivals!)

knowing how to do most repairs is a huge savings, and it will help to be a real good people person
and be able to handle conflicts calmy, as they do arise. (never forget the time my wife at the time
confronted this huge "harley dude" about playing his drums in the apartment and evicting him!)

good luck in your endeavor, it can be profitable, and it surely will be interesting!

 

[bigtiller]

Shout term depreciation is a major factor with income property, so adding a few dollars for a tax accountant will help keep you sane. And you will probably get a lot of low income people applying so that means dealing with state or/and federal housing agency's. Don't forget child welfare agency's, parole officers, etc.

 

[Otto Syracuse]

I would factor in that you will have some vacancies at least some of the time. To be conservative I would deduct 10% off your rent income to be sure you can still cover your expenses. Also verify that your taxes of $5800 will be the same after you buy it for X amount and the appraised value changes.
the hardest part is actually finding good tenants that will not create issues for you or the other tenants.
Good luck, at your young age this this the time to do it!

 

[MossRoad]

Get a mortgage amortization table for that mortgage and run your numbers again and see how much you'd save and how fast you'd pay off that mortgage it you put that $485 per month onto the principle of the loan. It will shock you as to how fast you can pay it down, build equity, then use that equity towards the purchase of your next property with little to no money down using a blanket mortgage.

 

[300UGUY]

Anyone on here own a multifamily buildings? I am a 26 year old who lives in Portland Maine. I have been thinking about buying a multifamily(3-4 unit) apartment for the last year or so and I think now is the time to pull the trigger. My goal is a take advantage of the FHA low interest rates and live in one unit for the next few years. I can see myself living there for 3-5 years. At that point I hope to use the equity and buy a property outside the city and keep the multifamily as a rental property. As much as it seems like the multifamily building is a good idea I want to make sure its economical and the numbers all work. I don’t want to end up with a property where the rents can’t pay the operating costs.

Below is an example based on a 3 unit building I looked at:

Rents: 1st floor-$1,300, 2nd floor - $1,300, 3rd floor - $1,100
Total - $3,700/month $44,400/year

Expenses:
Mortgage - $1,900/month, $22,800/year
Taxes - $5,500/year
Gas - $4,500/year
Electric - $3,500/year
Water - $2,300/year
Total income: $485/month or $5,800/year

Mentally this doesn’t seem like a ton of income as vacancy(very low in Portland right now) and maintenance costs are not factored in. However I plan to keep the building so the equity I am gaining is what I need to consider as well. My father is a contractor and I have extensive building experience from working with him. So I feel capable doing a majority of the work on the property. I f I don’t go the route of a multi family building I am considering trying to flip some foreclosure type properties or maybe try and buy one or two small single family foreclosures and hold them as rentals.

Anyone care to chime in.

Being a landlord can be a pia.

 

[Danno1]

I would factor in that you will have some vacancies at least some of the time. To be conservative I would deduct 10% off your rent income to be sure you can still cover your expenses. Also verify that your taxes of $5800 will be the same after you buy it for X amount and the appraised value changes.
the hardest part is actually finding good tenants that will not create issues for you or the other tenants.
Good luck, at your young age this this the time to do it!

When I had rental prop the bank would only count 70-75% of the rental income towards the mort bec you will have occasional vacancies.

Also, you can be more picky about which tenants to rent to if you are in an owner occupied 2 family dwelling. Less so in a OO 3 family. Not at all at 4 or more units.

Do it while you're young .Good way to build equity. But it can be a PIA...



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