How to determine where to buy small mult-families?

[Evan Swanson]

Hey all, I'm trying to determine where to buy my first multi-family property (duplex or four-plex) in CT. I've heard that it's best to narrow your search to one town or area. What tools can I use to determine the best town/area for buying a multi-family?

[Grigory Pekarsky]

How to determine where to buy small multi-families?  This is a question that I see time and time again on forums like BiggerPockets, as well as in-person with my clients. Many people (myself included) try to buy property in the town/city where they currently reside because it is most convenient. This may work out okay if you are interested in buying a single-family home or two-family home. But what about those of us who want to buy a four-plex or larger? Just adding one unit per floor can significantly increase your housing costs per month. Luckily, there are some things that we can look at when trying to decide which Connecticut city to buy your first multi-family property, which would be a profitable investment. You need to start learning as much as you can about your target city's property values and available properties. Once you have a significant amount of research under your belt, think about the following:

1. What is my intent for buying this property?

2. How much can I afford?

3. What kind of property am I looking for? Two-family home or four-plex? If purchasing a two-family, what type (raised ranch, side x side split etc.) would be most beneficial given my current housing costs in relation to the purchase price per unit in comparison with four units?

4. Do I want an apartment building with off street parking or do I want individual units. 

5. Am I comfortable managing a property? Will I hire a management company or use a friend to manage it?

6. How is the area demographic now and what can I project for growth/decline over the next ten years?

7. Is this an investment or do you plan on living in a part of the units as your primary residence or as another source of income (Airbnb etc.) such that you will live there half time and collect rent from there half time? What does cash flow look like if it were to be used as an income-producing property vs. an owner-occupied property- how would maintenance, taxes, and insurance cost change with each different scenario?