New to REIN. Have a principle, planning for my first Multifamily.. guidance appreciated.

[Creatingmyfuture]

Hello, my name is Evan and I am new to the network. I am 28 years old and I know I want to play the long game and build a healthy real estate portfolio.



Allow me to introduce my scenario:

In 2013 I moved from Toronto to Nanaimo on Vancouver Island. I must say this small city has a lot going for it. People from all over Canada especially Alberta seem to be retiring to the island. The climate cannot be matches this truly is the Hawaii of Canada.

After only a few months living here we jumped into our first home which is our principle residence. It is a fixer upper that should net us 60-70k after improvement. Its still a work in progress but we should realize its equity potential of its current market within 2 years once we finish the curb appeal and the rest of the basement.

At 230 000 with 11000 down and 220k mortaged we should own about 30000 into the home 2 years from now. We are hoping our improvements will increase the value to about 310000 evaluation increasing our equity.

I earn about 60k a year but I am on pace for 70k this year as I am a commissioned salesperson.
I am switching into real estate by the end of this yearand while I expect my income to increase, I realize as I establish myself this wont be a certainty for the first couple of years.

However being a realtor will give me an advantage to this effort. My fiancee is currently on mat leave but she earns 35k a year otherwise.

I would like to start by purchasing a triplex or fourplex as my first investment. In Nanaimo you can earn rents over 1000 per unit on properties in the 400k range currently. I would like the first property to be able to carry a unit in the event of a bad tenant.

So I need about 80k + costs to get this investment going. Can any seasoned investors please help me paint a clearer snapshot as to what getting this going would look like? Can I leverage tbe equity of my home as a down payment? Based on my figures to what amount? ( I just purchased the acre book I am diving in just now)

I will have the resources towards achieving this down payment within two years without the equity help. Should I be looking at a less expensive rental property first, or is my gut instinct to find a solid 4 unit 4 plex a smart endeavour?

Looking for insights, thanks kindly,

Evan S

 

[Thomas Beyer]

Continue the path. BE PATIENT. Build a small portfolio with your own money, say at least 3 better 5 houses with a profitable income and value upside. Then, tell others about it and invite them to invest with you. REIN teaches this and has a great JV binder by Mr. JV R Wescott. Get that one. Understand it. Plan it. Execute it. Once you have 10 or 20 JVs going look to bigger assets that require more money.

Multi-family(*) is just one investment option once you place $500,000-$1M+. There are many others worthy a consideration (* marks those I have done profitably) : mobile home parks(*), small office buildings, marinas, strip malls, rent-to-own(*), townhouses, storage facilities, condo conversions (*), light industrial/warehouses, land sub-division/development/re-zoning (*), house construction .. all good investment spaces if you know what you are doing, all with their pro's and con's.

 

[GaryW]

Hi Evan:
Looks like you have a great plan that you've put some time and effort into it. Yes, you most definitely can leverage your homes equity and the banks will lend up to 80% Loan To Value(Mortgage & Line Of Credit). Of course, I'm assuming your numbers were calculated to have the asset pay the LOC interest(on a 4-plex shouldn't be a problem). Give Jen Reiffer(604.319.3779) a call out at Peter Kinch's office in Vancouver.

I'd be interested to know your research on the Economic Fundamentals that you'll come across in Don's book for Nanaimo. There are also REIN members in Nanaimo who could definitely help your research for Nanaimo. It's been 5 years since I've been in contact with 3 of them, so I don't have their contact info anymore. Many people do buy and retire there, which helps your GDP research and more interesting would be the "Jobs" created. I'd assume people would come from the smaller areas to increase their chances of getting jobs(Your Tenants). The main thing is that there are members living there and making it work, who could be of tremendous value to you and who knows, maybe they'll be the ones you buy from 2 years from now...lol.
Gary

 

[Creatingmyfuture]

Hi Gary,

Thanks for that input.

There is certainly a hype about Nanaimo:
-Airport expansion announced
- 2 new luxury hotels downtown coming closer to fruition. One has a 6 month deadline to break ground.
- Helijet expanding service to vancouver
- New major city hall shakeup in recent election.
-Lumber mill 30 million dollar investment announced
-Tillray ( major marijuana producer north of town ) wants to triple production: hundreds of jobs
-Many transitional neighbourhoods and new developments
-City vying for a major sports complex for a western hockey league team
- Fastest growing city on vancouver island.
- Economic hub of center and north island
- Major watetfront expansion project being discussed
- Endless supply of baby boomers figuring out what Vanc Island has to offer and settling into retirement communities in and north of Nanaimo. (Parksville, Qualicum Beach)
- Apparent baby boom in the last two years and a healthy surge of young families... young professionals and skilled individuals migrating from all over Canada.. (including a banker my age whom I met the other day and shared my optimism... )
- Paradise.. best climate in Canada. I cannot even tell you how many Albertans have come here in the last two years. My commission sales job aligns me with their needs and it is a commonplace.

I could go on but those are just some of the gold mine indicators I have noticed in the region. The vibe is here I feel a pending boom although I am no expert.

I am going to change my career and become a real estate agent this year, that way I can marry two passions and create my vision.. the strategies and systems in the book are just so concrete and I look forwards to further investing myself into this community as I start to take more action!
I am just happy to have found where all the people that think like me but better yet have taken action are hanging out. I have much to learn.

P.S.) I do intend to become an agent who encourages and works with investors!

 

[Matt Crowley]

Hello, my name is Evan and I am new to the network. I am 28 years old and I know I want to play the long game and build a healthy real estate portfolio.

I would like to start by purchasing a triplex or fourplex as my first investment. In Nanaimo you can earn rents over 1000 per unit on properties in the 400k range currently. I would like the first property to be able to carry a unit in the event of a bad tenant.

This forum is a place to be looking for some information...but you are going to have to put a lot more work into investigating rents.

Let's say you can get rents of over $1,000 on a unit worth $400,000...say rents of $1,100. Assume 30% expenses (conservative, before mortgage debt). Now take the annual NOI ( = gross rents - expenses). We will even ignore vacancy for simplicity.

Monthly rent $1,100
Annual rent $13,200
Annual expenses ($3,960) at 30% expenses: property tax, insurance, property management, maintenance...
NOI $9,240 (before vacancy, for simplicity)

Calculate yield:
= (NOI / property value)
= 9240/400,000
= 2.3%

This is a terrible place to invest. You will make no money. That is just not enough of a spread. Once you introduce any vacancy and factor in putting in a an extra $4k / year for the first couple years for deferred maintenance from the previous owner you will be probably floating this property yourself. Way, way too skinny.

Bare bones minimum you need is 3.5%. (If you don't make more on the yield of the property than you pay for your interest rate, you are in a negative leverage situation). Mathematically, this means you are a speculator who will lose cash every month because you think the value of the property is going to increase.

Property values do not always go up.

I look for about 6% as a starting point.

 

[Seller909]

This forum is a place to be looking for some information...but you are going to have to put a lot more work into investigating rents.

Let's say you can get rents of over $1,000 on a unit worth $400,000...say rents of $1,100. Assume 30% expenses (conservative, before mortgage debt). Now take the annual NOI ( = gross rents - expenses). We will even ignore vacancy for simplicity.

Monthly rent $1,100
Annual rent $13,200
Annual expenses ($3,960) at 30% expenses: property tax, insurance, property management, maintenance...
NOI $9,240 (before vacancy, for simplicity)

Calculate yield:
= (NOI / property value)
= 9240/400,000
= 2.3%

This is a terrible place to invest. You will make no money. That is just not enough of a spread. Once you introduce any vacancy and factor in putting in a an extra $4k / year for the first couple years for deferred maintenance from the previous owner you will be probably floating this property yourself. Way, way too skinny.

Bare bones minimum you need is 3.5%. (If you don't make more on the yield of the property than you pay for your interest rate, you are in a negative leverage situation). Mathematically, this means you are a speculator who will lose cash every month because you think the value of the property is going to increase.
3
Property values do not always go up.

I look for about 6% as a starting point.

I Think you missed the part about it being a triplex. That would mean monthly rent of $3,300, or annual at $39,600, which puts it close to your 3.5%. A four plex should make it above that.

 

[Creatingmyfuture]

Indeed I would like to start as a triplex or fourplex.. but I appreciate the break down anyways!

Triplexes at first glance starting in the high twos.

Fourplexes mid three hundreds to mid four hundreds in varying conditions. I might do some practice due diligence on some properties in the coming weeks..

I'll bounce the numbers here. A rental in central Nanaimo with 3 bedrooms often pulls in 1300-1500. One bedrooms pull in 600-800 depending on location and amenities on average.

 

[Creatingmyfuture]

Building on this, there appears to be a good opportunity in duplexes in the 250 range or single family homes that could be converted for ~20k. Many of these in the transitional neighbourhoods sit on lots big enough to be sub divided and sold/ built and sold which is happening at this very time.

 

[Thomas Beyer]

Many of these in the transitional neighbourhoods sit on lots big enough to be sub divided and sold/ built and sold which is happening at this very time.

Multi-plexes have better cash-flow but LAND is what appreciates. So, if you can buy houses that cash-flow with sub-division potential I'd buy those .. as many as you can .. as land is rare and getting rarer even in smaller centers like Nanaimo. That is why I like mobile home parks as you only lease the land and don't have to worry about the tenant's heating bill, leaky toilets, carpet or paint.

Generally speaking, SF houses have poorer cash-flow but better equity/value upside, especially if you can sub-divide and make 2 out of 1 !