Need advice on real estate multi-unit rental properties. Is it better to pay 5% down (with ~$200 cash flow after mortgage, utilities, and capex) or wait until I have 20% down to increase monthly cf?

likeupliftinghelpfulfunny
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International Chinese girls are the best tenants.
No pets. They’re quiet. They’re clean.
The only parties they have are study parties

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Always vet your tenants OP.
- Check credit scores
- 4 recent paystubs
- Past rental references (at least 2, but 1 is okay as well)

This is horrible to say, but you should discriminate. If the potential tenant smells like weed and looks hungover, or seems like someone of a “lower social status”, then steer away.
Sorry if I offended anyone here, I’m only speaking from past experience.

Sorry, not sorry

likehelpful

The only class you can discriminate against in Boston anyway is students.

But yes vet tenants. Ideal are international grad students. Clean, respectful, and pay on time

likehelpful

Not enough details!
Is the property in question a residential or commercial (more apartment building style)?
If it’s commercial, 5% down won’t get you a mortgage. Rule of thumb is, 35% minimum down for commercial property.

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IBM is right. I was assuming you had an actually transaction in mind for the 5% down.

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It’s a residential triplex in a tier 1 city. At 5%, cash flow estimate is around $200 / mo, but with 20% down, cf increase to roughly $1000 / mo. In escrow right now, but wondering if I should just save more and wait

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My advice: have about 5-10% of property purchase price for upgrades & renovations. Three reasons for this:
1) happy tenants are well-paying tenants
2) you can increase rent down the line (not right away!)
3) property value in general increased

And remember, fixer-uppers are always more profitable than “turn-key investments"

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If you can get away with 5% down and it’s a tier 1 city I would do that. You will get tax benefits off the bat and you have exposure to appreciation. Key risk is to make sure you always have good tenants

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Thanks for the advice everyone!
@IBM1 - I have a couple friend interested in renting one of the units....would you advice against renting to friends? Assuming I’m living in one of the units as well.

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Depends on strategy. If the play is appreciation then as long as cash flow positive pull the trigger. I like to have as little of my own money in the asset as possible.

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OP, I rented to a friend before, only one time, and he was a fantastic tenant. But it could be a hit or miss to be honest.
Just make sure they are good people, have stable income, and won’t be living in complete filth that attracts pests & rodents.

Best of luck dude! real estate investing has been good to me, but not to all. Cheers!

helpful

Just make sure that they have an understanding that you have to pay mortgage etc so they don’t take advantage - “hey my buddy’s the landlord so it’s cool if I pay late etc”

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Deals are tough to come by. I say do it now and then pay down the loans when you have the money.

Which tier 1 city? I’d thrown down a bit to lower the debt load! (After some DD of course)

Depends. You can use that extra money and invest it in something else, diversify

#MAGA

How did you find a deal like this? Are you in a C/D neighborhood?

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