I'm considering investing into some real property in the near future and wanted to pick someones brain who has already walked this path. I have run the numbers and it looks like a 1.2 million dollar investment (on 3 separate 4 plex's right next to each other) would profit me about 2800 a month (if all 12 units are rented every month) for the 30 years loan but that doesn't include insurance, maintenance, repairs, snow removal etc etc.

So I'm basically trying to figure out if its a good deal or not for the average joe to manage on top of my own regular full time job. I do have some friends in the Hvac and construction trades so I could lean on them if needed for repairs. Any thoughts from someone who has done this before?

Thanks for the advice!

Seems a bit high on the initial investment side, unless these are in a fairly higher end area and are in demand.

If the 2800 a month is your pocket money after everything including taxes on the property and tax on your income, then that seems pretty good.

One of my friends owns a decent sized Land and Lanscape Co, but says he knows he can't do that forever and needs a way to retire or something less laborious than cutting grass and landscaping.

He buys 2-3 houses a year for as cheap as possible (between 2K and 25K), during the winter he uses his lawn guys to fix them up fairly nice then rents them.

Last I heard he was either at or over 15 houses.

He now has a some company that manages them for him, getting renters in, getting them paid and when one needs repairs, they call him and see if he want to do it or for them to farm it out.  If he an get to it, he does it.

I hate being a landlord and I own the house outright. I’d much rather just work a job and invest in some other way. It’s not working out for me. I can’t imagine trying to run that many units with a mortgage. Sounds like slavery to the investment to me. YMMV.

Is it an A, B, C D, or warzone?

100k for each unit seem high.

Try to get into the property for less than that.  In my opinon, you are running a fine line on going broke if shit happens.

You should see my escapade on squatters.

I completely agree that the price seems awful high.

I suppose I should have prefaced this with saying

The housing market is out of control ridiculous here in Utah lately. Houses that weren't worth 100K 5 years ago are selling for 250 within days of being listed. Most of the time getting above asking price just to secure the property and avoid having the property sold out from underneath them because they move so quick.

I am trying to patiently wait for the market to at least stabilize before investing so heavily but I feel kinda silly just stashing away gross amounts of cash and have an 800+ credit score.. I'm only in my mid 30's and do a fairly labor intensive job and don't want to do that for the rest of my life so I am trying to plan ahead now.

I am also maxing out my retirement and saving a fair amount out of each check and have all the toys any man could ever want with absolutely zero debt (I rent, don't own)

Its a great position to be in..

Seems like you're going to have a real thin margin there.  Things will happen.  Things will break.  What's your plan if you lose 3 or 4 tenants?  It can happen in a blink.

Is there room to raise rent?  How much can you go up?  Are the HVAC units R-22 or a newer refrigerant?  How quickly can you have 9 months of bills put into reserve?  Age of roofs?

I think it's not a great deal.  I'd continue to look.

I own a duplex. Based on the numbers your putting out I would strongly recommend not moving forward with it.

After mortgage insurance and taxes etc I make about $1200 a month. You should make much more on all those units.

If you have trouble getting them rented out your going to be in a really bad spot.

Thank you very much for the information. That is exactly what I am looking for. I was just playing with a loan calculator doing the numbers and that's what it came up with and it got me wondering "is that enough to make it worth it.." not to mention 1.2 million is a lot to commit to for 30 years. I think I would like to go more in your direction and just start with a duplex. something smaller and more manageable so I don't lose my ass if things go south.

Thanks for the advice everyone!

I own a duplex in a C neighborhood, and it nets me $1k per month.

You really have to weigh cash flow now or appreciation later.

Eventually after you deal with enough crap associated with C class, you can move up to B, and experience both sides.

This.

That's how the Utah market was when I lived there in 2012. I never bought.

I have over 50 now and I wouldn't touch those.  And you listed profit before vacancy, taxes, and maintenance. Vacancy, taxes, and maintenance are kind of the entire thing.  That's like saying my car gets 800 mpg but only if another car pulls it.

I'd keep looking.

Thanks for all the advice guys.

What type of margins do you guys look for? obviously higher the better,, but what is realistic?

Also, what other costs am I missing other than maintenance / repairs, taxes, unrented units.. I'm assuming insurance? landscape & snow removal? what else am I missing?

That profit is far too low,especially if you haven’t accounted for all associated costs to include vacancy, taxes, insurance, mortgage interest, maintenance, landscaping, snow removal, etc.

$2,800/month profit on a $1.2M investment is only a 2.8% return on investment. That doesn’t account for property appreciation, increase in equity due to paying down the mortgage, or inflation. It’s hard to account for those variables, but I’m sure there’s information out there to help you.

You can almost get those kinds of returns in a savings account, you can get those returns in CDs, you can beat those returns in some low risk investment funds, you could smash those returns in a moderate risk investment strategy.

At a very minimum, use the 1% rule.  If you buy a house for $100,000, you should be getting $1000/ month in rent, MINIMUM.  Margins will vary by location, but in very few circumstances would i buy for less than that.

Public water and sewer has to stay in the owners name around here.  It adds up.

You aren't providing enough information for anyone to give you a good answer no matter how you look at it.

This is a pretty simple math problem but you are going to need to fill in the following blanks:

1)  Annual Rents
2)  Down Payment
3)  Interest Rate
4)  Annual Property Tax Cost
5)  Annual Insurance Costs
6)  Vacancy Rate Assumption
7)  Upkeep Rate Assumption
8)  Appreciation Rate Assumption

Give me all the raw numbers unfiltered and I'll run a calculation for you.  I've got a nice handy little spreadsheet calculator I built for this very purpose.

If you don't have a good guess for #6, #7, and #8, I can fill in the blanks as a starting point and then the forum can debate the validity of them.

I love being a landlord but can't see doing it unless you're cashflowing very well.

Does it have a basketball court?

you get 2800 per month free cash flow on 1.2 million dollar investment?
So 33,600 per year
That's less than 3% return annually, right?

No way.  You can get 3% via a CD right now without worries over vacancy rate and tenant lunacy

Real estate isn't as appealing when you pay cash. The thing about real estate is that you can use leverage.   Assume 25% down ($300k), the cash on cash return is 11% if OP was actually profiting $33k a year. He invests $300k and gets back $33k every year that doesn't even account for his tenants paying off his mortgage for him.

OP, you said "would profit me about 2800 a month (if all 12 units are rented every month) for the 30 years loan but that doesn't include insurance, maintenance, repairs, snow removal etc etc." you're missing a lot of expenses in that case and would likely have a pretty low return when all said and done. I wouldn't move forward based on the information on hand.

I invest in 2-4 units. My biggest criteria is I need a minimum 15% cash on cash return, granted I also know when I can raise rents or force appreciation so that's not always a hard line. I invest in B class properties and have explored purchasing A properties, obviously would give up some return for those. When looking for deals I'm looking at PITI, any owner paid utilities/ services,  account for capex, maintenance,  property mgmt(even if self managing) and vacancy. Nothing else is really coming to mind,  unless it's property specific,  for example I have properties with in ground sprinklers, I pay a service every spring and fall and that also means higher water bills.   Don't know if any of that helps but that is my experience in West Michigan.

This.  I can do 17% with leverage.  Not even beat inflation with cash. Want to use cash,  just invest in mutual funds.

Run the numbers is P&I, taxes, and insurance. Then add in a minimum 10% for management, 5-7% for repairs, Capex, and vacancies each from all rents collected.

After that is all said and done tell us the numbers. I bet the juice ain't worth the squeeze.

Now with that said, if you can value add to it, it MIGHT be a possibility. Sub divide all utilities on individual meters, increase rent, and refinance for a much higher purchase price than it might work out.