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4 plex investment

Matt Crowley

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So do you think it is a good investment or not?
Not sure I follow you completely, dumb it down please

All depends on your investment thesis... (sorry for being a bit late to game here) Maybe 5% per year compounded growth is justified. But for smaller properties you are really bound by the fact that you are making a macro play. Even if you increase the NOI 20% it doesn't mean your property value will increase by 20%. For smaller properties, you may be able to do a substantial value enhancement if you buy a real dog and are able to bring up to average or a bit better than average and get out. With a trade background this is a possibility but limited by your capital or time availability which are big drags on return.

Macro play means that you buy an asset plop in tenants do very little improvement and hope the economy just lifts the value of your rents and property value. As smaller property, few options to forcibly increase value and cost of exit is about 4.5% of gross value whereas a larger building it is closer to 3%. So lots of disadvantages with smaller investments unfortunately.
 

Martin1968

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All depends on your investment thesis... (sorry for being a bit late to game here) Maybe 5% per year compounded growth is justified. But for smaller properties you are really bound by the fact that you are making a macro play. Even if you increase the NOI 20% it doesn't mean your property value will increase by 20%. For smaller properties, you may be able to do a substantial value enhancement if you buy a real dog and are able to bring up to average or a bit better than average and get out. With a trade background this is a possibility but limited by your capital or time availability which are big drags on return.

Macro play means that you buy an asset plop in tenants do very little improvement and hope the economy just lifts the value of your rents and property value. As smaller property, few options to forcibly increase value and cost of exit is about 4.5% of gross value whereas a larger building it is closer to 3%. So lots of disadvantages with smaller investments unfortunately.


There is truth to the above statement. That is; if you are indeed a more passive investor and buy and hold and not wanting to stand out and simply fill the place and collect rent and defer any (capital) improvements. It's a strategy you could follow. Many do. Don't necessarily like those investors as my neighbors, but understand there are different ways to get to where you want to be.
You probably won't even get the 5% compounded. But it could work as a safe savings vehicle with a return you are comfortable with over the long term.

But there are plenty of examples where it does work, with a lot of patience, research and definitely some luck you can find those real 'dogs'
For example I bought 2 4 plexes last year in a larger centre in Alberta. $330K each. They were actual lower then a 'dog'. Come to think of it; there probably is no name for such property.
6 units were empty, 2 others had $700 each come in.
Put in $80K in the one and 90K in the other. This brought actual purchase price to $410K and $420K.
Appraised close to 500K each and bringing in close to 100K in rents combined in 2017
Have had other such purchases in the past however this one I have to admit was outstanding.
But it is true that I'm doing this FT and although I don't do everything myself I save big time on labor and materials by project managing.

It does prove tho that it is possible to both improve NOI as well as your property value significantly at the same time.
 

TangoWhiskey

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"Macro play means that you buy an asset plop in tenants do very little improvement and hope the economy just lifts the value of your rents and property value. As smaller property, few options to forcibly increase value and cost of exit is about 4.5% of gross value whereas a larger building it is closer to 3%. So lots of disadvantages with smaller investments unfortunately."

Matt - I tried messaging you at the matt@sweetzone address, my email bounced back. Cheers TW
 

Dan Golby

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Well I should find out today what the owners decision is. I've teamed up with a local builder and we agree that the place does need a TON of money spent on renovations if it will compete with the newer properties in town......but I still have the option to keep it cheap and old and be a slumlord and it should cashflow about $1500 as is.

I should find out by 5:00pm today! Pretty excited :)
 

Dan Golby

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Got the deal!!! $90k below list price.
24 hours later they want to back out due to the fact that they have someone who wants to view it.....not make an offer, just view it......so now I have to make sure and get financing on time!
 

kfort

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I would say the above is indicative of both the type of seller and agent you're dealing with on that side. Here's hoping you get it, and there's no new findings when you get the keys!
 

Dan Golby

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I would say the above is indicative of both the type of seller and agent you're dealing with on that side. Here's hoping you get it, and there's no new findings when you get the keys!

Thanks!! I think I have a plan that should work
 

Marnie

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Got the deal!!! $90k below list price.
24 hours later they want to back out due to the fact that they have someone who wants to view it.....not make an offer, just view it......so now I have to make sure and get financing on time!
Congratulations on your accepted offer Dan!
 

Thomas Beyer

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Love to here from a local Cold Lake investor (such as Dan) where the UPSIDE is here given

a) a muted oil environment,
b) with CO2 caps in place in AB and
c) with general reluctance by industry to invest into new oilsands activities.

We have frozen our Cold Lake investment for now .. waiting for better days .. perhaps by 2020.

Related: Alberta's finances still ugly despite rosy update. Will face further downgrade by rating agencies soon. http://www.edmontonsun.com/2017/08/23/gunter-alberta-finances-still-ugly-despite-rosy-update

Better in 2020 with new government. Long long bottom until then, Dan ? Love to hear more insight from "boots on the ground" !!
 
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Dan Golby

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My quick answer is, my investment is much different than yours!
There is no doubt this is a low end rental and I will have to learn the landlord tenant act better than ever and manage it impeccably! However all my friends that have rentals are able to find tenants, and simple stuff like new car sales have come up from the brutal lows we had.
Is it the bottom yet? Hard to say, but considering I was renting a 4 bedroom house with a value of about $330k for $1500/month I'm more than happy to buy a 4-plex for the same price and get well paid to wait for things to come back or spend while labour is cheaper than ever and increase rents from $900 per corner to $1250 per corner.
Using the pics from REALTOR.ca I ran a ghost ad and had a couple people anxious to view it at $1250.
My builder friend who will help with any renos has about 12 suites with no vacancies....so that's a good sign.

Is it going to go crazy up here, not likely, but the local market at least has a more stable feeling to it, the sky isn't falling anymore lol.

At my own site (Cenovus Foster Creek) expansions will eventually go ahead despite the low returns because the equipment is paid for and preservation costs don't justify letting it sit in the corner. Osum is in the same boat.

I think I bought myself a job, but my support payments to my ex are $5100/month so I have to get ahead of that somehow
 
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