Well Rounded Investor

My journey of becoming financial independence by 35 years old

First 4-plex

Goal

My main goal was to diversified my investment, because back in July aside from my primary resident, all of my investment was the stock market. I want to be more well rounded.

Research

I know the housing market is still recovering, or has mostly recovered, however there are still deals out there. I’ve been “looking” since 2009, but I’ve never made the leap, mainly I was single and scared to walk into a house with problems. And it’s hard to work with contractor. And the economy was looming, and “cash is king” so, I was hanging on it as much as I can.

I came across “Retireby40.org” blog one day, and he has bought a 4-plex, and his plan was to become a – stay-at-home dad. While his plan didn’t work out as smooth as he was anticipated, it seems that had made money after he sell, and he was able to save on taxes.

I also come across article by Mr. Money Mustache, and Retirement Extreme, and some other dividend extremist, and passive incomer. They have inspired me to invest more in dividend growth stocks, and trying to make passive income. While some people rely on stocks strictly, some people rely on rental income strictly, I’d much rather be well-rounded, and I’ll do a little bit of everything, that way I won’t put my investment at as much risk.

I diligently look on zillow.com and realtor.com, loopnet.com to look for investment property. I also went ahead and try to get pre-approval to see how much I can borrow, what are the requirements. To my surprise, there are restrictions on investment property. The lender that I normally use wouldn’t do more than a duplex. So I had to go with Wellsfargo or other banks. Luckily I’ve found one.

Requirement: 25% down payment, 1 points to get the current point equal to the first time homebuyer with 20% down. Mine happens to  be 4.375% (a little higher than the conventional loan on single property), of course they’ll check your credit and etc.

So, I found one property. I was able to come down the price from $405K to $390K, but seller would not help repair anything. The property manager was so bad that he hasn’t done any repairs. He was trying to get me to hire him, but with this kind of management, I’ve decide to run it myself.

The break down:

Cost/Expense

At closing I’m required to pay………………………………………………. $115,000

Cost of repairs   ………………………………………….. …..(initial repairs)$30,000

Mortgage, insurance and taxes/mo  ………………………..$2,000 x 3 = $6,000

Misc………………………………………………………………………….$200 x 3 = $600

Income

Income/mo     ……………………………………………………. $4275 x 3 = $12,825

Return on Investment 2014 (I guess I’ll count the principle and interest, repairs, taxes, and for simplistic sake)

12,825/151,600 = 8.45%

I suspect, general repair in 2014 would be less, because I don’t have much to do. All I need is 2 units to be fully rented to break even with the payment. Let me know what do you think about my plan, and my calculation. Should I wait a year, or should I jump on another investment if I see one?

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One comment on “First 4-plex

  1. Pingback: Arguments Against Dividend Stocks for Younger Investor | wellroundedinvestor

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This entry was posted on September 26, 2014 by in Best post and tagged , , , .

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