PASSIVE INCOME – El Dorado Hills Real Estate | Buying | Selling https://farmerrealestategroup.com Thu, 10 Feb 2022 23:26:22 +0000 en-US hourly 1 https://wordpress.org/?v=6.4.3 How to Buy a Property and Get Paid to Live There https://farmerrealestategroup.com/how-to-buy-a-property-and-get-paid-to-live-there/ Wed, 10 Mar 2021 03:21:16 +0000 https://farmerrealestategroup.com/?p=560 […]]]> This can be a real opportunity, and we’ve helped a lot of buyers do just that. By buying a multi-family home, this is all possible.  We call anything with more than one housing unit a multi-family estate in El Dorado County. These are then further defined as duplex (2 units), triplex (3 units). Multi-family real estate, as it takes advantage of economies of scale when buying real estate, is a tried and tested wealth creator. With 1 roof, 1 tax bill, 1 insurance bill, and 1 water bill, you’ll get 2-4 units.  That also means that you can generate revenue from each of those units to pay for your mortgage and operating expenses for the house. In contrast to a condo, most individuals are overwhelmed by the expense of multi-family homes. What they do not know is that the bank would provide you with more lending power based on the revenue generated from the units you do not occupy. These same financing plans are extremely lucrative and allow owners to buy them with as little as 3.5 percent – 5 percent down (meaning you live in the property).

So I want to clarify how you can get paid to live there now that we understand the multi-family aspect. I would like to use a real example of a couple we supported in doing this to make this easier. Via mutual friends, we met Neil & Samantha. Neil had financial experience and was already interested in the idea of buying an apartment building. We set out on the search after assisting them to better understand the economics of actually buying and running a house. After a few months of searching, the right opportunity emerged. In the El Dorado Hills Browns Ravine area, it was a four-unit property. The property was steps towards the lake trailhead and close to transit.

They wanted to make a bid after crunching figures and looking at similar transactions in the neighborhood. We ended up getting into a competitive offer scenario based on the position and price. Although we weren’t the highest bid, we won the deal and ended up securing the deal at $715k. Neil and Samantha took advantage of an FHA loan and, with only 3.5 percent down ($25,025), were able to close on the house. As a result, their mortgage, including principal, interest, taxes, and insurance, ended up being $4400 / month. After closing, they moved into the building and put around $35k into improving the house.  To really make it something they enjoyed, $26k of the upgrades were made to their private unit. This was not necessary, but it really helped to transform the house into a home. In the $35k of renovations, the other $11k came from small things across the house. From the 3 other units that are leased to tenants, the building now earns $5000 / month. As a result, once their mortgage is paid for, they remain in the house and earn $600/month in income after paying their mortgage.

This doesn’t even account for the tremendous savings from mortgage interest, property tax, and depreciation they earn. If you take these additional items into account, they put well over $1000/month into their pockets and they live in a house they own. Not to mention, with a $4400/month mortgage, they would raise $6650/month in revenue if they were to move out and rent their unit. I urge buyers like Neil and Samantha, to hang on to these properties and let the income pay off the mortgage while providing them with cash flow for the next 30+ years, regardless of whether they remain long.  Even if in 30 years this building did not appreciate a bit, they would have paid off a $715k building that they put down $25k to purchase and spent $35k in making renovations. Bear in mind that the cash flow and tax savings along the way do not account for this. If the building simply appreciates the same construction would be worth $1,363,146 in 30 years at 3 percent year. Not a horrible ROI?

Please get in touch if you are interested in learning more about multi-family property and exploring buying a multi-family property to occupy as an owner or simply as an investor. We would love to have a coffee and to talk more!

]]>