Our Multi-Unit Property Investments
What Are Multi-Family Properties?
Multi-family properties are residential buildings with five or more units. Unlike smaller properties (one to four residential units), these are considered business investments and come with unique benefits.
Why Invest in Multi-Family Properties?
Our ultimate goal is financial independence. We believe multi-family properties are a great path to that goal because they offer:
Cash Flow: The net income after expenses and mortgage payments.
Forced Appreciation: Increasing property value through smart management and improvements.
Leverage: Increases investor return on investment.
Tax Benefits: Building depreciation to offset net income, deductions related to the costs of owning, maintaining, and operating the property.
Our Story
We’re two friends who met at a pool and bonded over our passion for real estate investment. We decided to team up and dive into this venture together.
Our first big investment was a 6-unit property purchased for $540,000, with a 25% down payment ($135,000). We saw potential because the rents were below market, and demand was strong. By the second year, our annual cash flow was nearly $38,000, which we reinvested to fix up the place. This represented a cash-on-cash return of around 25%!
How We Manage Our Investments
We’re meticulous about managing our expenses to maximize net operating income (NOI). Here are some examples of what we do:
Property management systems: Develop systems, automate, and utilize tools to enhance operational efficiency, while simultaneously ensuring the long-term value and sustainability of real estate investments.
Vendor Management Best Practices: Building strategic partnerships while obtaining Multiple Quotes for any maintenance work, whether it's bathroom renovations, electrical, plumbing or tuckpointing."
Energy Efficiency: Asking tenants to remove window AC units for better heat retention in winter and using motion sensor LED lights in common areas.
Effective Waste Management: Ensuring tenants break down cardboard boxes and compact trash to avoid overflow charges.
The Power of Forced Appreciation
We boost our NOI by raising rental income and cutting costs. Our current NOI for the 6-unit property is around $60,000. With a cap rate of 6%, this values the property at over $1 MM, significantly higher than our purchase price of $540,000. This is what we mean by forced appreciation—making the property worth more through our efforts.
Our Future Plans
We’re planning a cash-out refinance when interest rates are favorable. One scenario is to pull out around $600,000. After paying off the original mortgage (just under $400,000), we’ll have about $200,000 left. With this, we plan to buy another multi-unit property, essentially recouping our initial investment.
Achieving Financial Freedom
We are having very respectable cash flow from our six-unit property. We are in the process of stabilizing our second 12-unit property. By reinvesting and growing our portfolio, we continue to get closer to our goal of financial independence.
Join Us on This Journey! Are you a multi-unit investor too? We’d love to hear your experiences! Thinking of starting but have some reservations? Whether it’s funds, the idea of being a landlord, or something else, let’s chat and find solutions together!
Disclaimer: We are not financial advisors. The content we share is purely for informational purposes, based on our personal journey and experiences in real estate investment. We recommend consulting with a professional financial advisor before making any investment decisions.