80K to invest. What would you do?

[davidmollison]

I live in LA, have a 740 credit score and don't mind hard work.

Since moving to LA from London 2 years ago I've had to start from scratch. I bought a small fixer I live in which I can now pull 80k out and rent out if needed.

I'm ready for my next maneuver but only know live-in fixers as I've never had any money before. My current goal is to own as many units that pay for themselves as I can but even this may not make sense in America.

Now I got a few bucks to play with it would be great to hear where some of the more sesoned members are looking.

[multiman]

personally, i love the multifamily market. there is just something about getting a check in the mail every month from someone you hardly even know.(if you do it right)
there are many ways to buy commercial properties(5or more units) with 10% down or if your really good, nothing at all.

its really all about what makes you the happyest. if you love rehabing, then you'll be rich at it. i love to invest in multis so i'm slowly building a good portfolio of them.

one thing there is NO need for is to live in the prop your rehabing.  if you dont have a house yet, get one, or rent but to live in the house as its being rehabed isant cool. this is a business and you should treat it as such. some of the best advise i got when i first started was to act like the C.E.O. of a fortune 500 company even if you have 5 bucks in the bank.

the ceo of a construction company wouldnt live at the mall being built and neither would you. if you treat it as business and grow it like a business then thats what it is.

anyway thats my 2 cents.

if i had 80k and needed to find something to do with it i would buy the biggest multi unit property i could find.

[davidmollison]

I know it's like giving up the golden goose but where and how would you do it? Do I need to start looking out of state.

I love what you said and have been worried that without help I might develop small timer syndrome.

[micheal1949]

I really like the new construction market. You get a lot more bang for your buck and in the right area your risk is much less.

[L.A.Investor]

David and Multiman,

After reading your posts I am in a similar situation. Though I am not interested in rehabs my focus is now on obtaining the largest possible apartment complex that makes sense.

I believe that David may choose to pursue what he know best, rehabs. They may be difficult to find but there are some in LA. It may involve adding a bathroom or bedroom, adding a jacuzzi or other luxury type extras. I know of two people that are very successful doing this, though they are rehabbing homes over 1MM, investing $100-$200K and then reselling.

Multiman has the right idea. I also have equity in my current home ($100K) and I have located a commercial lender that will go 90% with a 680 mid FICO.

I think there are many advantages to multi family investing. First of all, it should be obvious that you need to buy right. Double digit CAP rates, 9-10 x NOI or better, 1.2 DSCR or better, and look for something that you can add value to.

If you can locate an emerging market or a stable one, you may find a great deal on a property with high vacancies, in need of repair, and poor existing management. Just imagine how quickly you could turn something like this around with a competent management company and value added amenities such as landscaping, painting, added storage facilities, wireless internet, etc. thus higher rents.

This is dependent on location of course but you could also collect rent from a billboard or a cellular antenna. You could use creative marketing techniques to lure tenants away from other buildings in the neighborhood.

Also, when you do have vacancies it is only a small percentage of your income, not 100% as with a SFH.

Though I am investing in several SFH's (discounted precon's with L/O T/B to minimize risk and costs, all done with 100% financing) out of state of course.

 

[davidmollison]

Thanks for the sway of focus.

I've just found a 9 unit to research tomorrow. It's $620,000 and is said to make $55,000 at present. I don't see any imediate ways to add value and there's on parking.

Using an online mortgage calculator at 6.5% $620,000 will be $39,200 + 10% managment = $43,120 30 year out going.

How can I get this financed so I can keep these figures positive or even better them?

[multiman]

there is lots of stuff you can do.
see if you can find a private lender that will lend you the top 10%
that way you have no money going out at first.
the money gets payed back by a cut from the collected rent every month.
lets say you have a 4000 profit every month,
you pay the hml say 1000 + 10% for your prop mgt.=1400
4000-1400=2600

making  $2600.00 a month sure beats paying a $62000 down payment. it would take you almost a year and a half at 4000 a month to break even.

also, a 90% commercial loan is going to run you 8-10% intrest not 6.5

[davidmollison]

Any hot areas to look in?

[niravmd]

don't look in areas that have already gone up 100%.
maynard keynes said 'investing is anticipating what other people will anticipate'.
go to undervalued areas that have started showing strong signs of economic growth.

[cayenne]

i am an investor in the chicago market and there are a number of investors who need short term financing for their acquisitions; most are same day or next day flips. a lot of the properties are less than 100k. you could finance flips like a bank, except that you wont have to wait years for a return only a day!