Questions about multi-family investment

[Chase Gu]

Hello, fellow investors. I have several single-family rental properties and I am in the process to buy my first multi-family property. I am looking for small apartment with 5-20 units (also interested in mobile home park). I have several questions I hope you experienced investors can help me with.

1. Is now the right time to invest in small apartment? I know multi-families are hot and the cap rate has been decreasing in the past few years. Is the price too high right now and thus not a good time to enter market? What stage in the cycle is multi-family at?

2. I will invest out of state. Where can I still find properties with reasonable cap rate (8%?) and cash flow? I am doing research for Tampa/St. Petersburg and Triangle area in NC. I am looking for areas with strong job opportunity and growth potential and where multi-family has not yet peak. 

Thank you very much in advanced for your response! 

Chase

[Sam Grooms]

@Chase Gu, You can still find deals in multifamily, especially in that unit range. The biggest problem with that range is finding a good property manager. 

As for what stage of the cycle we're in, no one can tell you with certainty. People said to sell off in 2014. They've been saying it every year since. There's also evidence that we're no where near the top. I was at Joe Fairless' conference in Denver last week, and they had an hour long heated debate on where we are in the cycle. No one knows. 

If you plan on holding forever, just buy right (cash flow now, long term financing, don't max out LTV, cash reserves) and don't try to predict the market, you'll go crazy trying to.

Areas with 8 caps can be found all over. I can find a 20 unit with an 8 cap here in the Phoenix area. If it's your first multifamily, and only 20 units, consider buying close to home. As you go larger, you can move further out. The larger properties can practically run themselves. The smaller ones, not so much. Also, the cash flow of the larger ones can justify your expenses to visit it. On a 20 unit, it's hard to justify flight/hotel to see your property, which are the ones you'll need to visit more often.