Small multi family near KCMO

[Ryan Guffey]

Does any one have any experience or advise on trying to start investing in Small multi family properties around the Kansas City area? I was originally looking towards single family and still want to consider it. But I think mult family makes more sense to get started if I can.

I'm curious on the best places to look, would it be the same as single family areas?

What would I need to look for to determine if it is a good deal?

Are there many differences between looking for small multi family compared to single family?

Any other information that I should know? I'm just starting to look into multi family so I'm sure there's a lot I'm missing.

Thank you. I appreciate any help

[Austin Sine]

@Ryan Guffey 

I'm curious on the best places to look, would it be the same as single family areas?

If you’re not familiar with a city and its neighborhoods you definitely need to do some initial research to understand where the best schools are, what crime rates look like, household incomes, etc. Be sure to note that just because a neighborhood checks those demo boxes doesn't mean it’s a good place to invest (this is also highly dependent on your investment style) So, understand the demos then take a more quantitative approach. Understand the yield (rent-operating expenses) / (acquisition price + rehab)

How this works in understanding where to find value. (1) Cost of rehab doesn't change depending on the area. (2) Operating expenses are relatively equal no matter which neighborhood/city you’re in.

So we know the cost of rehab and cost of operating remain relatively the same no matter where you are. What does vary? (1) The purchase price and (2) rents.

What does this tell us? Since costs (opex & capex) don't change much depending on location, you need to find neighborhoods/cities where you can buy cheap and rent expensive. The most difficult part is understanding rehab costs on a project-by-project basis and understanding what rents can be achieved upon stabilization.

What would I need to look for to determine if it is a good deal?

*This stuff is highly dependent on your goals & style*

See above. Compare the yield to the cost of debt you can achieve. Depending on the market, if you have a 100-200 bps spread to debt costs you may have a winner.

Are there many differences between looking for small multi family compared to single family?

If by small you mean 2-4 units then the answer is more or less, no. Why? Because the lending & valuation is treated similarly. Beautiful thing about 2-4 multi is the long-term debt.

Any other information that I should know? I'm just starting to look into multi family so I'm sure there's a lot I'm missing.

Shoot me a DM, always happy to help. Can also share some resources if you like digging into demos.