Are vacant multi-family properties a good investment?

[Fred Watson]

I was wondering if anyone has had success purchasing vacant multi-family properties? If I got a hard money loan to cover purchase and renovations, then rented it out, and then refinanced it, would that be a good strategy?

[Zachary Ware]

This value add strategy can be an enormous wealth-building machine but the value add part can be very different on different deals. This can be buying a 70% occupied property, putting new paint on the outside, doing some landscape, upgrading the interior of units with new flooring, counter, etc, and increasing rent and occupancy. Buying a completely vacant property sounds like a whole different beast and there are a lot of questions you need to get answered. A few that I think of instantly are: 

- Why is it vacant/Are there soil issues/Is there anything hazardous about the property itself/how long would rehab take and the property starts to produce income, are there large outstanding liens/easements on the property? 

A benefit of rehabbing multifamily units is that the property still produces cash flow while you renovate some units. You will want to make sure to have ample reserves with fully vacant property. But with risk comes reward, you could get a deep discount with a fully vacant unit if you have the experience and team to turn it around.