…I woke up thinking about real estate again.
All I can say is that I feel kind of bad for my (very patient) wife, Lucy, who found herself discussing an apartment deal when, by all rights, she should have been sleeping.
As a percentage of the general population, the people who are intensely interested in this stuff has to be shockingly small. But one of the cool things about the internet is that, because it’s so big, no matter how weird your peculiar little interest is, there’s a community of people just like you.
I’m hoping this site becomes a meeting place for the kind of weirdos who bore their spouses who, frankly, can’t understand why someone would consider a triplex to be relevant pillow talk.
If you’re one of those people, I’d like to meet you. I don’t care if you’re a broker, a lender, an experienced investor, a novice who reads Curbed, a Redfin addict, whatever. If you can’t stop thinking about this stuff, we should talk. Sign up for the mailing list below or else get in touch.
If you’re interested in making money from re-positioning apartment buildings like we do, you should read Multi-Family Millions, by Dave Lindahl (that’s not an affiliate link; I don’t get paid if you buy it).
A few warnings:
- The book is cheaply made. It feels like someone self-published it out of vanity. I recommend getting the Kindle version.
- The author is kind of cheesy. He’s constantly trying to get you to join his mailing list so he can promote seminars or something.
- It was written before the financial melt-down, when it was much easier to get loans, so you need to take his advice about financing with a major pinch of salt.
So, why do I like it so much? MFM was the book that taught me the basics of how apartment buildings are valued and how you can add value to them.
Armed with that information, buildings talk to you. You see a run-down building in a good neighborhood and you hear it saying “Rescue me from this stupid, lazy owner. I’ll pay you handsomely for your time!”
If you’re reading this incredibly dense blog, about a pretty dry topic, with no pictures, you’re the kind of person who understands that knowledge is powerful. And this book, cheesy and awful as it sometimes is, contains within it the knowledge needed to begin or accelerate your quest to make money from apartment buildings.
…on the fourplex deal I sent out to the mailing list today?
It was a tasty one: A non-rent control fourplex where you put down $106k and get back $30k / year cash(!). In short, it’s homerun value-add deal.
If you want to avoid missing these (infrequent) emails, get on the mailing list.
If you want to find out more about this particular deal, get in touch.
Got some cash and looking for a strategy? Here’s one I like but don’t do myself:
- Buy a REO single family home on a 6,000 sq. ft. lot zoned R3 or RD1.5 all cash for maybe $300k
- Rip it down
- Build 4,000 sq ft fourplex made up of 4 2 bed / 2 bath units, for $600k
- Lease out three units for $2,300 / month (leaving last unit for owner-occupier)
- Sell for 11x annual fully-leased gross rents ($9,200 month x 12 months x 11 grm) = $1.2MM
- Buyer buys using 5% down FHA loan, putting down $60k and borrowing the rest
- You net $300k pre-tax on a $900k investment
Or do the above, but lease out all four units, then re-finance at a $1.2MM valuation with 70% LTV loan, allowing you to hold onto the asset while getting out $840k of your $900k investment. Then rinse and repeat.
You could probably go from being somewhat rich to very rich by doing one of these a year for 10 years. No need to thank me.
P.S.: I need to thank new reader Jeff P., who asked me if I had any interesting ideas yesterday while we were having coffeee. This was the one I came up with.
We’ve just turned over a few units in properties in Silver Lake and Echo Park and, boy, is the rental market heating up.
We posted a studio at one property in south Silver Lake right by the border with Echo Park for $1,300 (up from $1,200, I think). The unit and the building are both great. But there’s no parking. And the location, while pretty good, is not A+.
Would you believe we had 20 requests for showings in the first three days after posting the ad, even though it was March (not exactly prime rental time)?
Now, obviously, this is anecdotal. Our properties are not like everyone else’s (they’re much nicer, first of all). But my hunch is that other landlords in the area are feeling demand increase, too.
I’ve said it before but I’ll say it again: The easiest way to make money as a landlord is to buy at a sensible price with a fixed-rate mortgage and have your rents increase. Your costs (property tax and mortgage payments) are mostly fixed. So every $1 of rent increase ends up being pretty much pure profit. And each $1 of rent increase adds $10-12 of value to your building.
Not too shabby.