Basically, I am a younger guy who (after renting several) wants to get into owning apartment buildings. I currently don't have a ton of free cash sitting around, but should be able to have about $30-50k to invest in something around this time next year, and the same the following year. (Stocks, Savings, Bonuses)
My long term idea is to find properties that I can just turn the keys over to a management company, auto-pay the mortgage from an account, and hopefully do absolutely nothing (other than sign a check for maintenance and repairs) and pay off the mortgage in 10 years. And hopefully, repeat this each year thereafter with an eye to retire in 13.
Is this a reasonable possibility in the most general sense?
I see lots of towns across the US where 6 unit buildings are fully leased at $900/month, and cost <$300k (Found some for as low as ~$150k). Assuming 5% (of rental income) repair budget, 8% cap-ex, 8% vacancy, and a 10% + 1/2 first month management cost, it looks like these buildings would turn a small profit on a 10 year mortgage at 4%, and then be returning almost $3k/month after that.
BUT, that is an insane investment return, so it begs the question "Why aren't people with loads of money just buying every one of these properties?" What am I missing? Here is an example I just pulled off of Zillow to illustrate my point
- 6 Units
- $700 average rent (total guess, but online looks like average is $800-1100 for 3bed)
- 5% repair budget ($240/month)
- 8% Cap-Ex budget ($384/month)
- 8% vaccancy rate
- 10% + 1/2 first month management cost ($633/month)
- $1200/month insurance+taxes (just guessed)
That would leave a monthly income of $341 on a 10 year mortgage at 4.125%.
What am I missing on buildings like that? This just seems too good to be true. (I have not factored in the cost of water or heat, because I don't know what that runs, but can it really be more than $6k/year?)
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