How to Find A Multi Family Property

[Corwin Hernandez]

I'm having trouble looking at properties. I don't plan to get mine for a while but I'd like to start look at properties so I know how to identify a deal so when I'm looking for my own property, I won't have a problem identifying whether or not what I'm looking at is a deal. How does everyone find deals or evaluate them when looking at multi family. I'm looking to get a FHA loan and a four plex.

[Jeff B.]

I focus on the cash-flow:

sum of the rents/month, less monthly expenses(including taxes & insurance) minus the mortgage (p&I only).  If that's not positive OR just too low, I walk away.

[Account Closed]

Hi Corwin, I'm hoping to buy a multi-family building in the next year or so as well. I'm currently interviewing experienced commercial realtors. A realtor can set up a search for you on the MLS so that as properties come onto the market and sell in the areas you're interested in, you'll be emailed a notification. I think that helps a lot in seeing where the market is headed in your area. I plan on watching the areas I'm interested in for 9-12 months at a minimum before I make my purchase.

I also highly recommend Ken McElroy's book ABCs of Real Estate Investing. He has several chapters in the book that go through a real life example of how to evaluate a multifamily building to ensure that it cash flows. There are far more steps to this process than I'd originally thought, but Ken lays it out in a very methodical way that makes sense. It's definitely a great read!

My last suggestion is to talk to a property manager. Someone just made this suggestion to me yesterday. By coincidence, our insurance agent for the small business that we run was over this morning, and I learned that he is a property manager in his spare time. I asked him if he knew of anything for sale, and he replied that he didn't have any owners currently interested in selling, but that he thought he'd have a few that would be for sale in the next year or so because of the market downturn my area is experiencing. Property managers are probably some of the first people in your area to know when something is about get listed. Good luck in your search!

[James Syed]

@Corwin Hernandez

Welcome to BP. 

You need to check in to price sale prices for your farm area for fourplexes (since you mentioned fourplex in your post). 

An investor friendly real estate broker or commercial broker will be more suitable. Once you find what prices are these properties going for, you could make a decision based on that.

Make sure you compare apples to apples i.e., age, square footage, style, rental income, etc. are the same or very close. 

Hope it helps.

[Patrick Antrim]

Look at the cash flow the property generates monthly. Find out what the price per unit the properties are trading for. Take into consideration if it's a A property vs. a C property.

I look for rents below market, some type of re-position/value add, and of course the general local area. Are there good renter jobs in the area?

Sometimes 3 & 4 unit properties can be over priced as some FHA buyers are driving up price as they live in one unit and rent out the others.

[Kevin Kroll]

you can set up auto alerts on sites like zillow looking for "multi" as a keyword. You also have to be realistic about where you are looking and whether or not there is a population of multi-family properties available.

For example in Augusta, GA there just aren't a whole lot of 4 unit buildings. There are some, but many many more SFRs and then large complexes.

[Corwin Hernandez]

Thank you for all of your input. From searching a few cities on Home.com, it looks like there are not too many smaller multi family homes. Mostly duplexes or larger multi family units, 5 and above. From everything I've learned, I think I would like $100 positive cashflow from each unit. Maybe I should look into getting into real estate in a different way or perhaps keep looking

[Roy N.]

Originally posted by @Account Closed:

Hi Corwin, I'm hoping to buy a multi-family building in the next year or so as well. I'm currently interviewing experienced commercial realtors. A realtor can set up a search for you on the MLS so that as properties come onto the market and sell in the areas you're interested in, you'll be emailed a notification. I think that helps a lot in seeing where the market is headed in your area. I plan on watching the areas I'm interested in for 9-12 months at a minimum before I make my purchase.

Marcia: I should have mentioned this in your other thread. Another reason to work with an experienced commercial broker is the real deals never make it to MLS/ICX in the commercial world. The broker will shop it his/her buyers and then to other agent with whom s/he "shares".

Occasionally a deal gets listed right away - around here that typically only happens if a residential realtor catches a tiger by the tail and has neither the experience or the contacts/clients to sell the property out of pocket.

I also highly recommend Ken McElroy's book ABCs of Real Estate Investing. He has several chapters in the book that go through a real life example of how to evaluate a multifamily building to ensure that it cash flows. There are far more steps to this process than I'd originally thought, but Ken lays it out in a very methodical way that makes sense. It's definitely a great read!

Another good reference for you - as a Canadian planning to purchase in Canada - is Pierre Boron and @Claude Boiron's "Commercial Real Estate Investing in Canada".  It's a weighty tomb (with a weighty price), but a good long-term reference, even if a little Ontario-centric.

[Account Closed]

@Roy N. Thanks for the info... that was definitely the feeling I got from talking to this PM this morning. I could not help think to myself that there are a ton of properties that never make it to MLS, it's all back room deals. Note to self: network, network, network!

And I will definitely check out the Boron book - I feel like I've kind of exhausted my library's offerings, and I'm looking for some new material. Thanks again for helping a new investor like me!

[Roy N.]

Originally posted by @Account Closed  (not Boron) ... the {U.S.A. centric} autocorrect feature on my Android phone appears to be uniquely unilingual.

[Mitch Stanley]

You should  consider - 

1.An Accounting Class Or a RE Investment Course at your community college . My wife & I attended one in Portland,OR at PCC.

2. RE School ( Az School of RE & Biz) - The School had an excellent RE Investment class in Scottsdale,AZ. as part of one obtaining ones RE License. 

Best Wishes, Mitch S. 

[Corwin Hernandez]

Thanks for all of your unique imput. I just talked to someone about a FHA mortgage and they said the interest rate would be 3% with 3.5% down. I was looking to do this in 2017 probably. I have found lots of smaller multi family units in my area after searching. Some that are run down and would probably qualify for a 203K loan. Lots more research to do. Thanks everyone!

[Samuel Sedore]

Good tip about the pocket listings! I would also recommend being ready and able to put an offer on within the first 2 3 hours something hits the market. I notice the best deals last less than 24 hours on the MLS , I would have your realtor put offers to tie the property up before you view it to save time.

I would spend atleast 2 months browsing all new listings, this will give you a great idea of what you're market values are