*******Move, Expand, and Reduce the Map******* Modify Price, Features, and Search Entire MLS
-----------No Registration Required for Unlimited Searching and Site Usage-------------- ----------------Create Account to Save Searches and Get Email Alerts.-------------------
Multi-Family Property in Eagle River / Chugiak
Anchorage and Chugiak continue to be a great investment in Multi Family Properties. Of my clients, one couple in particular, have managed themselves with low risk, steady planning, and now are enjoying the benefits of income from their Multi Family Properties. I will call them J&S.
I met J at a church tire change (I hadn’t worked that hard in years!) and he told me that he and his wife S, wanted to plan a future with rental property. We met shortly thereafter and devised a plan. We listed and sold their zero-lot line home in West Anchorage and immediately put an offer in under S’s name only, for an FHA financed, owner occupied 4 plex and closed within 2 months. Here is where they timed it perfectly. J&S collected the prorated rent for the first month and the full rent for the second month for the three rented units. With the first payment, not due until the third month, they have already picked up roughly $7,500 of their $15,750 down payment. Over the next 10 months, they lived with $ZERO out of pocket expenses, meaning, no rent! That was an additional return of $12,500 for a total cash return of $20,000 or 126% cash on cash equivalent return, not counting other benefits like depreciation and other deductible expenses.
Here is the where the plan starts to accelerate. At month 10, J begins a search for a fourplex. J&S have saved the rental income and the rent they would have paid, and now have a deposit for another FHA Owner Occupied Fourplex loan. (Please note: You can only have one FHA loan. J&S did not make the fatal mistake of buying in joint names. I have more to say on this later.) Within three months, J closes on his own fourplex. Again, two months of rent collected before first payment, but now, they are saving their own “FREE” rent in the new fourplex and an additional $15,000 of rental income from their vacated unit. After 12 months, J&S (Now J&S and Little E) use J’s income (S is now a full time stay at home Mom) and the income from the two Multi Family Income Properties, and purchase an Owner Occupied Bank Owned Property. After mostly cosmetic improvements over the next 2 years, they have an additional equity of $60-80,000 and can now use the home as a single family rental property. Again, using only J’s income and the rental income, they buy the home they want and the entire family, J&S and Little E and now Little L, live on 2.5 acres in Chugiak, where their kids are being raised on 4 wheelers, chasing chickens and goats, and learning to live with dirt under their nails!
Regular folks, regular incomes, bigger ideas.
Buying and Owning Multi Family Property
There are lots of ways to value Multi Family Properties. One of my favorites, to just do a gut check on value is the Gross Rent Multiplier. These can be annualized or based upon monthly rents. These multipliers are based upon the relationship between rental income and the Multi Family Property sales price. Anchorage has historically calulated better than the national average. For example, with a Montly Gross Rental Value of $4,800, a Multi Family Property priced at $480,000, would have a Gross Rent Multiplier of ($480,000/$4,800) = 100. A normal range of values for the Gross Rent Multipliers would be as follows:
5 Units+ 90-120
The lower the Gross Rent Multiplier, the better the potential return. Of course, this does not replace actual numbers, but is often a big picture calculation I use in determining whether or not a Multi Family Property is priced within a normal cash flow value. One of my clients just purchased a Triplex with a Gross Rent Multiplier of 75! That was based upon a conservative rent value and she surpassed that! Yahoo!
If you are thinking to invest in Multi Family Property in Anchorage, you need to get an education. Read books, articles, surf the web. Here are some helpful links that may help you decide what you should do.
Bigger Pockets-Great Reading for Multi Family Property Decisions
Landlord Questions? Go to the source! The Alaska Landlord Tenant Act is your Landlord Bible! (See Video to the Right)
What should you read if you want to invest in Multi Family Property? My short answer? Whatever you can get your hands on! Each book you read will have a some thing that is not in the other books, or is presently differently or in such a way as to make sense. Here is a quick search of Amazon.com. Check it out and start with any.
The Joy of Landlording
Funny Landlording Videos
The Alaska Landlord Tenant Act (10 Videos)
How NOT to Landlord