Better Real Estate Investment: 5Fam vs Condo

By stizz44 - 08-03-2012, 07:53 AM - Boxden > The Money Spot (finance/careers)

Whats a better investment?

Fully rented 5 family with a $2700 income in the hood of the hood of the city. Selling Price is $135,000. Tenants miniuium wage jobs.

OR

1 Bedroom condo located in the downtown area of the city with about $850-$900 income.
Selling price is $38,000. Might get a young professional/ grad student as an tenant.

My gut is telling me "Cash Flow is King" and the 5 fam is the better chioce, but I was wondering if yall had any other ideas.

09:03 AM

Both are great idea's

Are the tenates on section 8?

What are the taxes on both places?

How much are you putting down?

You have to always think of the resell value as well, not that many people want to live in the hood, but if you know and can get a lot of hood MF in there, then thats up to you. It can work to your advantage

Are you going to be the landlord to? or Are you going to hire a handy man.
Repairs are the worst

08-04-2012, 10:07 PM

I would say it depends on your experience with renting and the time you have. with the 5 fully rented in the hood you could be looking at a-lot of vacancy and bad tenants.

for the second one you might want to check out the terms with the HOA fees and what you can and can't do. I had one where you couldn't rent the property out.

My opinion would be if you haven't had rentals start with one first to get the hang of it. If you wanted to go with the 5 properties i would look into some property management co. that could take care of the rents and evictions and fixing up the properties if left vacant or need repairs.

08-04-2012, 11:24 PM

DON'T EVER AND I MEAN EVER BUY A 1 BEDROOM CONDO. First of all it's hard to rent out and even harder to resale because people need space and who ever you rent it out too will probably have the attitude of why should i rent a one bedroom condo when i can buy a condo that has at least 2 bedrooms.

The house would be your best bet. Be sure to have enough money on the side to fix things up when ever something happen. in a few years it might be worth more. The best part is you can change the house more. You may want to tear it down one day and build a brand new one on that land.

08-05-2012, 03:04 PM

Depends I personally would go with the condo, especially if you can get it rented out with no problem. I[..]ume you are taking a loan out for the residential property. So you will have a larger down payment (around 20%), higher taxes, also it will be more of a hassle. With the condo even though you arent generating as much income you can leverage more. I feel like the condo may be a safer investment and if this is your first rental property you may want to start with the condo as a learning experience.

04:25 PM

Multi family are always better for investment properties than single tenant. Ill give you a few quick reasons

1. If your renter moves out of the condo, you have to pay the mortgage until you get another renter. In the multifamily property one or two could move out and the cashflow from the remaining renters can pay the mortgage.

2. You mentioned that the 5plex is in the hood? that means it probably does not have a washer/dryer which is a good thing for you because that is one less thing you are responsible for fixing. In the nice condo its one more thing to worry about.

3. In the hood alot of people are on section 8. They never move and those government checks always come on time.

4. the condo probably has hoa which means less money in your pocket.

08-05-2012, 05:16 PM

Need a little more information to determine...

RE Taxes
Avg. Annual Expenses (for repairs, etc.)
How long the current tenants have been there
Avg. Vacancy

For the condo I'd[..]ume any HOA or other fees you would include in your asking rent so you can cover that cost.

After you have that info you can determine a st@bilized NOI and determine the cap rate of each. Then you'll know which investment is more valuable.

04:48 PM

5 family
$135,000 Selling Price
Taxes are $2475
20% down payment. ($27,000)
$2700 Monthly Rental Income.
5 One Bedroom Units. No Section 8.
All Tenants are Tenants-At-Will. Tenants pay utilities.
Updated with new electric, water heater, plumbing, new gas lines, etc....Washer and dryer hookup in units.

1 Bedroom Condo
$34,900 Selling Price
Taxes $599
Condo Fees $287 Per Month
20% Down Payment ($6980)
$850-$900 Possible Monthly Rental Income.
Fee Includes: Extra Storage, Refuse Removal, Heat, Hot Water, Water, Sewer, Master Insurance, Laundry Facilities, Elevator, Exercise Room.
Vacant.

I just brought my first a 4fam about 5 months and I'm shocked by how smoothly its running. But my 4fam is in a good area and within 5 blocks of 2 colleges. My main fear with this 5 family is that its in the hood of the hood and I mean the side of town with traintracks, rundown strip clubs, and vacant paved lots. Nonetheless, its STILL fully rented and if there is a vacany 1 bedrooms rent faster than anything else and with interest rates being at 3.6 it seems like its well worth the risk.

08-07-2012, 07:43 PM

5 family is a better investment. How do you find it?

08-08-2012, 09:14 PM

i am looking to get into real estate investment with no prior knowledge other than reading around the internet and I am along the same lines as you, almost...

I definitely prefer multi family over anything because chances are you will be renting out at different times...which means if one leaves, you have one paying your mortgage (while you only lose extra income for a few weeks/months).

another plus, for me, is right now, while I save, I'm still living with my mom but I have been wanting to get my own spot for a while and if I got a multi, I could live in one, rent the other(s)

i was kinda off put by the hood too, but like someone said, them section 8 checks dont be late...and most people pay they rent before anything else.

I would take the multi no questions

if u dont mind me asking, how much did you pay for your 4 multi? and it cant be too bad of a hood if they paying $540 a month PLUS utilities to stay there...unless you in a big metropolitan area

im looking into a smaller investment for my first one just to see how things go (10-40k), though there is this one apartment complex (10 unit) in the hood just like yours that has a $4500 income but its $120k, more than I was hoping to spend but we'll see

08-09-2012, 12:18 AM

i would like to kno more about real estate is there anyone who can give some tips for someone just starting out.

07:16 AM

I’m in saving mode right now, so I only glance at listings and dream about the possibilities.

Loopnet.com Good Site for commercial properties 6 Units +
trulia.com Good site for your typical 3-6 families, condos, and single families.

I found my first property buy looking up expired sale listings, finding the owners in public records, and using yellow pages to call them to see if they were still interested in selling.
I ended up getting a fully rented 4 unit building next to 2 colleges for $176,000. Tenants pay utilities, no laundry on-site (reduced water bill), 6 car parking, and an income of $2625. He was very motivated to sell cuz he needed money for another deal he was trying to move onto.

Most of the good deals never make it to your local listing service website and if they do, they are gone within a few days, even in this recession. I’m going to try and get the seller to carry-back 10%-20% of the down payment and mortgage the rest for my next deal. I’ve never done this but I hope it’s possible.

I’m not a real estate guru by any means. But if you’re a beginner I’d suggest:

--Buying a fully rented or partially rented building. That way, you can make money day 1 in the business.
--Get a 3.5% down payment FHA Loan. You can purchase up to 4-unit properties with this type of loan. Generally speaking investment properties require a 20% down payment, 5 units +. So getting away with only 3.5% down payment for a 4-unit is a GREAT deal.
-- Suggest the Seller pay ALL closing costs. And if they don’t, half closing costs is kool too.
--Look at cities/towns where you see construction/developments. This means that other bigger companies are also investing their own money in the area as well. Which ties to economic growth, job creation, and a positive changing culture.

08-09-2012, 03:42 PM

Originally Posted by stizz44

I’m in saving mode right now, so I only glance at listings and dream about the possibilities.

Loopnet.com Good Site for commercial properties 6 Units +
trulia.com Good site for your typical 3-6 families, condos, and single families.

I found my first property buy looking up expired sale listings, finding the owners in public records, and using yellow pages to call them to see if they were still interested in selling.
I ended up getting a fully rented 4 unit building next to 2 colleges for $176,000. Tenants pay utilities, no laundry on-site (reduced water bill), 6 car parking, and an income of $2625. He was very motivated to sell cuz he needed money for another deal he was trying to move onto.

Most of the good deals never make it to your local listing service website and if they do, they are gone within a few days, even in this recession. I’m going to try and get the seller to carry-back 10%-20% of the down payment and mortgage the rest for my next deal. I’ve never done this but I hope it’s possible.

I’m not a real estate guru by any means. But if you’re a beginner I’d suggest:

--Buying a fully rented or partially rented building. That way, you can make money day 1 in the business.
--Get a 3.5% down payment FHA Loan. You can purchase up to 4-unit properties with this type of loan. Generally speaking investment properties require a 20% down payment, 5 units +. So getting away with only 3.5% down payment for a 4-unit is a GREAT deal.
-- Suggest the Seller pay ALL closing costs. And if they don’t, half closing costs is kool too.
--Look at cities/towns where you see construction/developments. This means that other bigger companies are also investing their own money in the area as well. Which ties to economic growth, job creation, and a positive changing culture.

you got this, [pic] [pic]

08-10-2012, 03:04 PM

check this calculator out for return on investment of a rental property:

08-10-2012, 09:25 PM

Originally Posted by stizz44

I’m in saving mode right now, so I only glance at listings and dream about the possibilities.

Loopnet.com Good Site for commercial properties 6 Units +
trulia.com Good site for your typical 3-6 families, condos, and single families.

I found my first property buy looking up expired sale listings, finding the owners in public records, and using yellow pages to call them to see if they were still interested in selling.
I ended up getting a fully rented 4 unit building next to 2 colleges for $176,000. Tenants pay utilities, no laundry on-site (reduced water bill), 6 car parking, and an income of $2625. He was very motivated to sell cuz he needed money for another deal he was trying to move onto.

Most of the good deals never make it to your local listing service website and if they do, they are gone within a few days, even in this recession. I’m going to try and get the seller to carry-back 10%-20% of the down payment and mortgage the rest for my next deal. I’ve never done this but I hope it’s possible.

I’m not a real estate guru by any means. But if you’re a beginner I’d suggest:

--Buying a fully rented or partially rented building. That way, you can make money day 1 in the business.
--Get a 3.5% down payment FHA Loan. You can purchase up to 4-unit properties with this type of loan. Generally speaking investment properties require a 20% down payment, 5 units +. So getting away with only 3.5% down payment for a 4-unit is a GREAT deal.
-- Suggest the Seller pay ALL closing costs. And if they don’t, half closing costs is kool too.
--Look at cities/towns where you see construction/developments. This means that other bigger companies are also investing their own money in the area as well. Which ties to economic growth, job creation, and a positive changing culture.

for the 3.5% down FHA loan isn't that only for owner occupied loans (you would have to live there for 12 months)? I thought if you you got a non-occupied loan you couldn't get the 3.5% down loan

08-11-2012, 12:13 AM

Originally Posted by philly337

for the 3.5% down FHA loan isn't that only for owner occupied loans (you would have to live there for 12 months)? I thought if you you got a non-occupied loan you couldn't get the 3.5% down loan

your correct

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