Real Property

Could a Quadraplex be your Starter Home?  Learn how to buy a fourplex with an FHA loan, it provides a low-down payment option for multifamily properties.  It may be easier to qualify for than an equaly priced single-family home.  Many people use an FHA loan to purchase a 2-4 unit property because it may require only 3.5% down and you may not need financial reserves.  

In the early 1970's I found myself renting an apartment that the landlord was moving out of.  He was moving into his new custom built house.  The quadraplex was his very first home.  Having renters helped him to pay off the mortgage faster than he otherwise could have.  That meant that he could refinance, pull his money out to buy his first single-family home, and still keep his rental property - the quadraplex. 

Find and Fill the Gap:  I purchased this lot in St. Charles to build a 'spec house' but have instead, kept choosing other projects to work on.  In the meanwhile this neighborhood gradually grew up around it.  Today, the neighbor's homes on this street are valued well above the median price in Minnesota.  I'm sharing this information with you to help convey some ideas that I've found useful and maybe will be of value to you too.

According to Bankrate, here in Minnesota, in late 2023, you'd need an annual salary of $91,866 to afford a monthly mortgage payment of $2,144 on a median home price of $323,900.

If you can't afford the single-family home mortgage then consider buying yourself a multi-family dwelling like a quadraplex. Your tenants will help you pay the mortgage via the rent they each pay.

What are Spec Houses?  'A spec home is basically what it sounds like: building a single family or multifamily property without having a buyer lined up (speculation).  Spec homes can be a risky venture, but with that risk comes an upside potential that can be very attractive.' - BiggerPockets.  

Where to build?  Look for the property gaps left by the large developers.  

An Option To Buy:  The Stock Market is not the ony place you can buy and sell options.  When you find a property that you think can be developed but need time to conduct a feasibility study, you can pay for an option to purchase the property at a negotiated price and reasonable time frame.  That way, you don't risk purchasing a property that doesn't fit your criteria.

Estimating Your Property's Cash Flow:  NOI (Net Operating Income) - (Minus) Debt Service - (Minus) Capital Improvements = Before-Tax Cash Flow.

Servicing Debt:  Get a firm financing commitment before making your offer.  For most conventionally financed properties, it's normal for debt service to approximate 80-90 % of the NOI in the early years.

Capital improvements:  You'll need money to replace major building components or systems like HVAC, windows, floor and window coverings, appliances, roof, driveway and parking lot, etc.  Neglected properties that haven't been properly maintained or upgraded present you with a good opportunity to buy small but potentially profitable income properties in your spare time.   

The Real Estate Recipe 

Published September 1, 2004

Extremely useful, this book has been my favorite guide...

"Friedman, who is a real estate broker and property manager, shares his experience with buying, renovating, and renting apartment buildings of ten or more units. He offers inexperienced investors advice on finding properties, conducting a property inspection, determining its value, making an offer, and obtaining a mortgage. Sample worksheets illustrate the calculation of income, operating expenses, and cash flow. Distributed by IPG. Annotation ©2004 Book News, Inc., Portland, OR (booknews.com)" - Amazon

Has the Nuts & Bolts of everything you need to know today.

Available at Amazon.  Get the Hardcover Book for your reference library.

The second best decision I made managing my properties was - hiring a property manager.

The first best decision was buying the first edition of this book.  It was my guide until I could afford to hire someone to manage for me and even then it supplied the advice that was needed in order for me to make an informed choice.  

"This book makes it simple to understand tax and insurance requirements, building maintenance concerns, and financial record keeping.  Plus, the updated edition (2021) reflects the current rental property boom, new technologies, changes to the law, and the inside scoop on the latest Fair Housing issues to keep you out of court. Emotional support animals? Rent control? Bed bugs? Eviction? It’s all in here." - Amazon

Available at Amazon.