Real Estate 101 - Part 1.

[jy101]

so lately I had few friends came ask me why RE and why residential RE and why residential MFU RE, so I decide to write a mini series base on my very limited knowledge, and of course, I am not sure there ever be a part 2...

so first of all, and by purely looking at only residential properties, here is how I see residential properties should classified.

1. single unit SFH/condo.
2. 2-4 units duplex/fourplex.
3. 5-60 units apartment complex.
4. 60-100 units apartment complex.
5. 100-200 units apartment complex.
6. 200+

category 1 and 2, basically the same, and this is where we all started, easy access to finance, hands on DIY. but the truth is, if in term of management, SFHs are not efficient; no two SFH build alike and distance to travel varies, you can not stock standard parts and always have to rely on local warehouses, so it can be expensive both in time and money.

category 3, banks usually consider anything 5 units or more commercial and lending terms are much more strict, aka they don't want your business unless you sign over your first born child and have money in their depository account. but by the same token, sellers have harder time to sell, because not many banks willing to finance the deal so sellers more willing to carry out their own terms, aka seller finance. now if we looking at it from operation stand point, 30-40 units complex is the perfect size for small owner-operator, it is efficient, all within centralized location, all build similarly with standard common parts, and best of all, its rent roll can support a full time maintenance and a part time housekeeping, and you be semi hands free, only need to work 3-4 hours a day for scheduling and paper work.

category 4, believe or not, you can get financing for these, and its not that hard, all you need is a 90+% rent roll and P&L, Fanne Mae is happy to hand over you money, cost of fiance is about 6-8% so yes there is light at the end of the tunnel. but the issue is, with this size, you will need an office assistant but you still have to work as hard and same hours as smaller projects and make same amount of money, you will need 1 office assistant, 2 handyman and a full time housekeeping, the payroll ate all your gains.

category 5, actually I say 120 units or more, is the breaking point for true hands free, you are the boss and can sit on the beach and do everything from you cell phone as long as you have a trust worthy manager in place.

category 6, lol, I am still working on it.

for us self-manage small landlords, a well greased operation with a 40 units complex should able give you a NOI about 100k-150k each year while only require minimum office hours.

[SunshineInCA]

谢谢分享。

我们这儿40单元，是买不起的，有成功的小地主专门做8-15单元的MFU，至今，我还没敢下手。

[texastrader]

[瞎问瞎说]

JY101写得太棒了！简明扼要，清清楚楚！比我看过的任何 RE101都更直截了当，一枪命中靶心！！

Many thanks to JY101!

[monkeyboy]

40 单元以下的，为了节省开支，往往都自己管，为什么，让我们来算一下收入开支。

在德州以及广大的中西部地区，在Market 比较正常的情况下，Class B-的40 Unit的Apartment, $27K-$32K/Unit, Class C的 40 Unit的Apartment, $20K-23K/Unit.

以B-为例，假设是比较典型的Unit Mix, 2/3的1Bed/Bath Unit, 1/3的2/1 Unit。 1/1的租金在450-475， 2/1的租金在525-550. Occupancy Rate 88%

Gross Income = 0.88* (26*462.5 + 14*537.5）×12 = $206448
Expense = 3200*40 = 128000
Net Income = 78448

Cap Rate = 78448 / 1080000 = 7.26%

If you use a part timer to handle daily Management, you may increase income by 7-8K. If you handle management all by yourself, you can increase it by about $15K。

In Texas big cities (Dallas, Houston, Austin, San Antonio), you can hardly find Class B- units selling at $27000/Door. This has greatly reduced your return on capital.

[monkeyboy]

建议JY来个Real Estate Series

Real Estate 201 - Introduction to Commercial Real Estate
Real Estate 202 - Tenant Management
Real Estate 301 - Real Estate Financail Analysis
Real Estate 401 - Real Estate Redevelopment
Real Estate 410 - Conventional Loan
Real Estate 420 - Commercial Loan

我们推荐JY当校长

[Graphene]

写地太好了，受益匪浅！

[SunshineInCA]

[比花花还花]

[jeepster]

[SunshineInCA]