One of my 2011 financial goal is to acquire a 4-plex. It’s been two months and here is my progress report.
I met with my lender and was preapproved for a mortgage loan for an investment property. The local bank wanted me to put 25% down and the loan will also cost an extra point since this will be a non owner occupied investment property. I am OK with that and have started to liquidate some stocks to prepare for the down payment. The larger down payment will make it easier to generate positive cash flow. My credit union doesn’t even consider lending for an investment property at this time so that’s out.
Once credit is taken care of, the next step is to work with a real estate agent to find a suitable 4-plex.
Here are my criteria
- Absolutely must have positive cash flow from day 1.
- Must be in an area that I would live in. I don’t want a building in a high crime area or terrible schools.
- Good school would be a positive, but not a must. As long as the school beat the state average, I’ll be happy.
In February, I have seen two 4-plexes that fit my criteria.
#1 cost 350k. Rent roll – $2,850/month. Schools are OK, not great. This 4 plex is in a good location near the highway, a large strip mall, and employment. There is a cluster of 4-plexes and apartments on this street, but everything turns into single family homes a few streets over.
#2 cost 269k. Rent roll – $2,600/month. Schools are good in this neighborhood. This location is close to a middle school, a mall, a park and a recreation center. This whole neighborhood consists of 4 plexes and apartments. This 4 plex looks like it need a fresh coat of paint. This one was a short sale.
Both of these 4-plexes were sold quickly while I was researching rent, operating cost, and school. I was really interested in the 2nd one and asked my agent to make an offer, but the seller already accepted an offer before I could make a bid. I think both of these were short sales.
So what I’ve learn so far is good investment properties are moving fast even in this environment. Next time something good come up, I will have to move quickly. My agent told me there will be many more properties coming on the market in Spring so I am sure there are a lot of opportunities left. The local market is still in a dive so I am not in a huge hurry.
#3 This 4 plex is brand new and is not even finish yet. The seller is asking 550k. I like this area a lot, but I think the most rent I can collect is 4k/month. I checked the rent in this area and they are all around $800 for a 2 bedroom unit. I think it’ll be tougher to find renters even if the place is brand new. If the price is around 450k, I might consider it.
What do you think about the stringent lending rule? Should I find a different lender? If you have any tips and hints on 4 plex, please share them.
Here is the latest on the 4 plex short sale!
Read how the first 3 months of owning the 4 plex went.