How to filter deals.

Question

Just looking for insight regarding purchasing my first multi family. My current process is I first look at landlord friendly states, then I filter down with unit amount, and cap rate. But what else would you filter from that list. I know some say economics of the area, others say population ( once heard not to invest in a area less thank 200k pop). Some say do not purchase a property, if there is a similar unit next door, like if its 30 unit complex divided into 2 buildings. Make sure you can get both. What are your thoughts? Am I on target, what else would you consider?

Freddie Williams · Answer

Hey Justin, I appreciate your input. Yea I heard that look outside major areas, smaller population but they commute. Seems like those have higher returns. I would definitely only consider bigger complexes (units) so to help with management of the complex.

Job growth is a good one.

Justin Moy · Answer

Job growth is a big one and wage growth as well. Job diversity. Population size yes but people do crush it in small markets so I wouldn't say its absolutely necessary, you'd just have to understand your buyer pool when you go to sell it will be smaller than in a big town.

I'd be more comfortable investing in an area with a smaller population if it was nearby a large city where people commute in and out of. The thing with smaller areas is also the availability of managers and contractors so those are considerations too.

Not sure about the similar units concept. I think anywhere you go you will see units that are similar. Comps are a good thing to have.

Bob S. · Answer

You are misreading my response, I said whomever told you that is clueless,

All the best

Freddie Williams · Answer

Thanks Bob, Yes I believe they were agreeing with you not to buy a building if there is a similar one next door. 18% net cap, wow. ok thanks for your input. I really appreciate you taking the time.

Bob S. · Answer

Its all about the numbers. Me I will not do anything for less the 18% net cap, based on cash purchases. My clients get typically 10% or better.  "Do not buy a building if there is a similar one next door," Not sure who told you that but they are clueless. One of the most ignorant things I have ever heard in RE.

All the best

Freddie Williams · Answer

Anything to add @Jay Ben