Small mixed-use multifamily properties (3-4 doors)

[Jake Harrington]

I'm looking to pick up my first property and I'm trying get a good deal on it, so I've been cold calling distressed sellers in the Houston area. 

One common distressed seller I've been finding are landlord-managed multifamily properties that have a commercial side and residential side in C/C- areas.

At first glance, they have good cash flow... but they come with a tangled mess of existing tenants who pay way less than market value and usually have a longer term lease on the commercial side, meaning you'll have to sink in a lot of time and energy to maximize their profit.

It seems like it could be a good niche to go after if you know how to maximize the cash flow OR it could just be a massive headache and money sink if approached the wrong way. 

Plus they seem hard to sell further down the line because they have such a small buyer pool.

Finding a good local property manager could be a solution, but I wouldn't know where to start with that. Keep in mind most of the tenants would be immigrants who may or may not speak English.

Honestly, these seem like a total headache and I can understand why these sellers want to sell. So my question is, how do you go about navigating these deals?

If the price is makes sense, at the very least it could be a good wholesale deal, right?

[Melanie P.]

Quote from @Robert Rixer:

The way I like to underwrite these deals is if the retail part was vacant, would the property still cashflow? If the answer is no, then I'm out. My confidence in backfilling Class C retail is low, but that's also because I'm not a specialist in it. May not be the right way to look at it, but it works for me.

 Your analysis is spot on for these. Vacancy can run into years when a commercial unit vacates.