Home Buying in Anaheim>Question Details

Lina Mi, Home Buyer in Anaheim, CA

hello! i'm struggling between getting a 4 unit MDU around anaheim/orange (600K),or 2 single family in Azusa(500k). really can't decide

Asked by Lina Mi, Anaheim, CA Mon Feb 6, 2012

which way to go these single family have quite bit lot size around 6000 each. small room around 1150ft. built around 1950. rent is probably around $1800. but i really think the 4 unit MDU has better ROI tho even i can be quite short-sighted on that.

This is first time i'm trying to get a investment property with all the loan and cash i could get, so please share some of your expertise view on these...really appreciated.

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Answers

11
One thing to think about is if you are going to manage this investment property or have someone else manage it. If you are thinking of doing it on your own then I would get the property that is closest to where I live. Nothing like having to drive a bunch of miles to take care of a problem in the middle of the night or get the place ready for renting when someone moves out. If you buy a property and it is a break even point right now, with the projected rents going up over the next few years because of all the people haven't to go back to renting, then you can't go wrong unless you buy in an area that is not very nice. Make sure that you talk to some of the people around the units so that you make sure there are not problems with crime and drugs that the agent dosen't know about. Having managed a 4 plex in Fullerton, I know that there are things that you can only find out by talking to the neighbors in the area.
If you would like to know more about the role of a property manager to decide if that is the way you should go I would be happy to help you out.
Good Luck,
Lori Hanson
Realtor DRE #01405146
OC Homes Realty
714-585-5236
2 votes Thank Flag Link Mon Feb 6, 2012
Work the numbers. Joe's absolutely correct.

Do the numbers on each property. Financing costs, maintenance costs, etc. And the income numbers. If you need management for one, or both, factor that in. But have two completely different sets of calculations--one for each of the properties.

As for appreciation--forget about it. Appreciation is nice, and you don't want to buy into a declining/deteriorating community. But an investment property is an investment. It's not necessarily where you'd like to live. (Unless you're planning on living in one of the units, in which case you're not talking about a pure investment.) But don't bank on appreciation. And while I'll readily concede that a California agent knows a lot more about your market than I do, please think twice about looking at relative appreciation from 8-10 years ago. Even if the results did show that one did distinctly better a decade ago (as the real estate bubble was expanding), that's no assurance that the same pattern will repeat over the next 10 years.

As for interest rates, sure they're great. But just because they're low doesn't mean you should borrow as much as you can. Again, work the numbers. It's possible you'll get a better ROI on the less expensive purchase. I don't know--but neither do you until you work the numbers.

Advice: Work with a Realtor who really understands investment property. I'm sure the California licensing process is different from Virginia (where I'm licensed), but out of the 60 hours of mandatory pre-licensing classes I attended, a whole 15 minutes was devoted to investment properties. Tip: Ask prospective Realtors: "How many investment properties do you own?"

Hope that helps.
2 votes Thank Flag Link Mon Feb 6, 2012
Don Tepper, Real Estate Pro in Burke, VA
MVP'08
Contact
Hello Lina,

Without considering loans or tax benefits my thoughts are:
* How are areas homes are in, near tenants needed things, shopping, transit, schools...?
* 4 rents instead of two (do the 4 apts = the 2 sfrs? in $$)
* If there is one vacancy then 4 apts has less of an impact on you.
* 4 apts may have more maintenance issues, 4 of each appliance vs 2 of each in sfrs.
* Can laundry be additional income in MDU? also can be more cost when breaks.
* If need to sell, may be easier to sell 1 or both sfr than a 4 unit MDU.
*Consider your costs, building/maintenance costs, taxes, etc and the rents and benefits on paper to see if it pencils out. Do what I call a 'Ben Franklin' on it meaning write down the pro's and con's on paper and weigh them to see which direction makes the most sense to you or fold paper in half one side pros the other cons and see which side is longer.

Good luck with you decision,

Brian Wilson, Realtor
DRE# 01321478
949-933-0852
1 vote Thank Flag Link Mon Feb 6, 2012
Hi Lina,
I agree with Lori that if you are going to manage the property yourself then go for something close to home if all things are equal. By that I mean if you will show the same profit. I understand this is your first investment. The very best advice I can give you is to take off your emotional hat! The only thing you want to think about is your ROI. Make sure you have a realtor who is versed in investment property. Any realtor canshow you properties but you need someone who will be able to show you your return before and after taxes. Remember this is an investment. If you were going to by a stock and they cost about the same price but one was going to give you more return for your investment that would be the one you would buy. You would not say oh I know stock A will give me more money but I like the sound or name or anything else about the other so I will buy that one would you? No you would buy the one that was going to give you the most money back. This is the same. Buy the one with the most Return, this is a no brainer!
Best of luck to you,
Connie Bramble
Prudential CA Realty
714-337-8718
0 votes Thank Flag Link Mon Feb 6, 2012
Hello Lina_M,

This is a very good question and one that comes down to your personality as an investor. The key here at the end of it all, before you buy, will be your answers to a series of questions in order to identify your investment goals and creating a plan of action.

Since we cannot do this at this moment I will keep it simple and to the point.

First off since you are a first time investor I wish to share with you a fun site to use which will provide you some insight on investing based on numbers. The site provides you a “Case Study Calculator” which will provide you figures based on your purchase and cash flow analysis. This will help open your eyes a tad regarding your question:
http://casestudy.ownamerica.com/

Second, it’s all about the numbers! Ask any well versed/season investor and they will tell you to look at the bottom line regarding any investment. Work the numbers, calculate cost and future expenses and determine if it makes sense. In some cities you’re better off buying units, while in other cities a home is your best bet.

What I will share with you is to be very careful in selecting your REALTOR. Make sure he/she has the knowledge and understanding regarding investing into real estate. Also understand that you will need to hang on to this property for a while if you are seeking to gain on appreciation. And if you do plan on selling don’t be greedy, there are programs out there which are very similar to what stock brokers use to watch the market trends which would in turn advise you when would be the best time to sell.

Good luck, feel free to contact me and please do your homework. Numbers…numbers….good real estate agent is your key to success.
0 votes Thank Flag Link Mon Feb 6, 2012
thank you all for you details and great info. i think my biggest problem is that I know very least about the potential growth ( decrease) on neither area.
0 votes Thank Flag Link Mon Feb 6, 2012
If you would like me to do an analysis for you on how single family homes in Azusa appreciated in value between 2002-2005 vs. 4plexes in Anaheim/Orange in the same time frame, please let me know. ROI is one thing, but overall potential for future appreciation is another ball of wax.

Shoot me an email directly if you want to talk about this some more, I don't look back on this same Trulia thread for answers posted after mine.

EmilyKnell1@yahoo.com
562-430-3053 c
Realtor Since 1996
Main Street Realtor
0 votes Thank Flag Link Mon Feb 6, 2012
Hi Lina,

There are so many factors that go into a decision like this. First, the financing is different between 4 units and 2 units, so you need to speak with a lender and see if you're comfortable with the terms available for both purchases. Rates are fantastic right now! The financing will also be affected by whether you plan on living in one of the units or not. If you are looking to live in one of units, will you be renting the other units to family members, or looking for tenants? Where do you work, in Anaheim or Azusa? Your commute is a factor too. I'd welcome the opportunity to sit down and discuss your plans with you so I may help you see the "big picture" and help you determine what's best for you and your finanical future. Please call me any time at 714-742-3997.

Thank you!
Karen
0 votes Thank Flag Link Mon Feb 6, 2012
Hi. Interest rates are great right now. If you can qualify, get the max amount of units, so 4 would be the best and it will still be considered residential. Give me a call or email me with any questions. I would love to help :)
0 votes Thank Flag Link Mon Feb 6, 2012
Hello Lina;
As far as the choice of city, it is all about how far do you live yourself? Do you mind if your income property to be far from you and have it managed by a local Realtor? or you want to manage it yourself and stay close. If you are currently living in Anaheim and want to be close , just go Anaheim, as far as the value goes and appreciation in the future, you would not have much of the difference in the value between Azusa or Anaheim. Also depends of which area in each city you end up buying. As far as your rate of return, you need to do more homework than just asking in Trulia. I suggest that you work with a Realtor from the get go and let him or her to put a worksheet together for you. If you need help in either cities, for loan and real estate, give me a call and we can talk more.
you can call me direct at 949-510-1955.
Regards,
Shadi Kian
Broker
DeltaMax Mortgage/Realty
0 votes Thank Flag Link Mon Feb 6, 2012
Lina,

You need to work the numbers and figure out what you best ROI would be. If you need help I can send you a worksheet. Let me know.

Joe Homs
Joe@joehoms.com
Web Reference: http://thehomsteam.com
0 votes Thank Flag Link Mon Feb 6, 2012
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