Buying a 6 unit building as my first property

[Roger Park]

Hi! I'm 28 years old, and looking to invest in a 6 unit apartment building. I've been renting ever since I was 18, and finally discovered biggerpockets and have now been educating myself in buying my first rental property, as an investment and to live in. The owner of the 6 unit apartment building that I currently rent, told me he is going to sell his property soon - due to old age and he doesn't want to keep traveling an hour just to check up on the property. After 3 weeks of chatting with him about the property and telling him about how I want to start investing in properties, he said he wants to sell the property to me rather than an investment group or someone else. He is going to get an appraisal for the building but said he expects it to go for over 800k. That is something I cannot get finance through the bank but he is open to owner financing. My question is, am I biting off more than I can chew? This property seems like a great deal, based on the 6months that I’ve been reading up about rental properties haha. Below are more details

Me – I’m 28, have a salary of 80k, been with the company for over a year now, my previous company was bought out so I was laid off, but before that I was with them for 8 years. I have roughly 50k in my bank account, and about 30k in savings and 401ks. I have 0 loans, and my expenses are just rent/utilities/food and travel – which is roughly 1800 all in.

The property – 6 unit building, new roof 2 years ago, each apartment (1br/1bt)rents for about $900– but is $200 under the current market. He told me he priced it this way because he doesn’t want high turnover, tenants here have been renting for 15+ years, only I’m the newest tenant. New Water heater installed in 4/6 units, 4/6 units renovated with new lvp floors, bathroom fixtures and kitchen and cabinets this year. Taxes are roughly 6k, and the landlord also pays 5k in other items like water, sewer, snow removal, grass, trash, water/electric, and insurance – per year. The area that it is located in is surrounded by businesses, and is a great area for recent college grads.

Again, just wanted to get some advice from people who have experience. All comments are welcome as I’m still new and will greatly appreciate the help. Thanks

[Sean T.]

Great advice above from @Blaine Alger and @Jason Bott.

I will comment on the pricing. With commercial multifamily(like this one) make sure you understand the math, Cap Rate, NOI, etc. Appraisal or not, owner financing or not, make sure the price makes sense based on what other similar properties are going for. It is important to be disciplined because this is part of the "bit off too much" that can bite back.

The appraisal is one thing but the current rents and area cap rates are what you should focus on before agreeing to any pricing.  You could approach a lender for the primary loan, have owner financing for a piece of it, and leverage your savings as well.  My point being, there are many ways to think about this.

All that said, @Roger Park,congrats on taking the steps either way!