Multfamily Real Estate is NOT Profitable - But I Know it CAN Be

[Jason Reinhardt]

My wife and I have been saving for 14 years - hard - we own two SFH rentals outright and are trying to get our start into multifamily. It seems every property I throw into my calculator is not profitable on day one unless you raise rents $100 or more (and probably not warranted given the condition) as soon as you take ownership. Here is an anecdote - a four-plex 5 minutes from my house is on the market for $360,000 and the net profit last year was slightly over $10,000. We are looking in Kentucky and southern Ohio for properties without much luck. We have a $200,000 down payment budget. Any suggestions for better markets?

[Henry Lazerow]

You should easily be able to find moderate cashflow at 25% down in most A/B areas atleast here in Chicago most any 4 unit works well. You do have to raise rents though and thats where you create the value. I doubled rents on my 4 unit over 3 years. I would say 90%+ of my clients raise rents 20%+ first year after mild updates and proper marketing. 

Make sure to look at total return. You don't need double digit cashflow to make a double digit return. If you get 8% COC and 5% mortgage paydown and 10% appreciation (all based of 25% down) you get a 23% annual return.