step-by-step process to purchasing a small MF complex

Multi-Family and Apartment Investing
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step-by-step process to purchasing a small MF complex

Andrew Caldieraro
Collinsville, IL · Member since 2018 · 98 posts · 17 votes

Hello,

I'm hoping I can get an idea what steps I need to take, in which order, for possibly purchasing a small MF complex.  Below is a list of things that I need to do, but I'm not sure what order I go about these.  Does this step-by-step look about right?

A.  Find a complex I'm interested in and run quick numbers / a little research to see if it likely could make sense.

B. Submit an offer, pending inspection and due diligence (Do I need to have a realtor submit my offer?).

C.  Due diligence (how much time should I request when I receive due diligence info from previous owner?).

D.  Have an inspector evaluate the property.

E.  Have any other professionals (contractor, roofer, etc.) evaluate the property based on inspectors findings.

F.  Re-negotiate offer, if needed, based on findings of inspector and/or other professional.  

G. Find an attorney.

H. Find a PM.

I. Find a realtor (is this needed if I find the property on my own?).

First, are there any additional steps that I missed?  Secondly, how does this step-by-step process look?  I'm wondering if I need to find a PM much earlier in this process?

I'd appreciate any help/suggestions!

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Hadar OrkibiPro Member
Rental Property Investor · USA / NZ · Member since 2016 · 1k+ posts · 812 votes
8y

Set up your goals and determine your buying criteria and budget.

Research a market 

Target one market and 3-4 sub markets 

Visit the market

Meet with all professionals involved including: PM's, Brokers, Attorney if required, fellow investors in local BP or REIA meet up.

Consider your finance option

Search /hunt for deals via Brokers, FSBO, Marketing etc

Make an offer

Negotiate

Due Diligence 

Process financing

feedback from PM you chosen to work with. 

Get repair estimates if required

Re negotiate if required. 

Confirm the contract.

Close on the deals 

Transfer management to PM

Start repairs

Advertise property for lease,

Rent 

refinance and roll if you BRRRR

Or just seat back and asset manage the property.

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  • David Cruice
    Rental Property Investor · Raleigh, NC · Member since 2018 · 179 posts · 192 votes
    8y

    That's a lot of questions for a single post, @Andrew Caldieraro, but here goes with at least a couple of answers/suggestions.  

    You're missing setting up your financing.  Get pre-qualified so you know how much you can borrow.

    What is your definition of "a small MF complex"? How many units. If 4 or less get yourself and FHA low with 3.75% down.

    Depending on what state you're in you might not necessarily need G (an attorney)

    H depends on if you intend to "house-hack", i.e. live in one of the units yourself.  Personally, I believe the best way to lean how to manage real estate is to do it yourself (warts and all)

    Why are you brining in an agent at the end of the process?  You should be doing this at the beginning (if you want to go that route.

    1Reply
  • Hadar OrkibiPro Member
    Rental Property Investor · USA / NZ · Member since 2016 · 1k+ posts · 812 votes
    8y

    Set up your goals and determine your buying criteria and budget.

    Research a market 

    Target one market and 3-4 sub markets 

    Visit the market

    Meet with all professionals involved including: PM's, Brokers, Attorney if required, fellow investors in local BP or REIA meet up.

    Consider your finance option

    Search /hunt for deals via Brokers, FSBO, Marketing etc

    Make an offer

    Negotiate

    Due Diligence 

    Process financing

    feedback from PM you chosen to work with. 

    Get repair estimates if required

    Re negotiate if required. 

    Confirm the contract.

    Close on the deals 

    Transfer management to PM

    Start repairs

    Advertise property for lease,

    Rent 

    refinance and roll if you BRRRR

    Or just seat back and asset manage the property.

    2Reply
  • Andrew Caldieraro
    OP
    Collinsville, IL · Member since 2018 · 98 posts · 17 votes
    8y
    Originally posted by @David Cruice:

    That's a lot of questions for a single post, @Andrew Caldieraro, but here goes with at least a couple of answers/suggestions.  

    You're missing setting up your financing.  Get pre-qualified so you know how much you can borrow.

    What is your definition of "a small MF complex"? How many units. If 4 or less get yourself and FHA low with 3.75% down.

    Depending on what state you're in you might not necessarily need G (an attorney)

    H depends on if you intend to "house-hack", i.e. live in one of the units yourself.  Personally, I believe the best way to lean how to manage real estate is to do it yourself (warts and all)

    Why are you brining in an agent at the end of the process?  You should be doing this at the beginning (if you want to go that route.

    Thanks for the reply.  As you can tell, I'm new to this process.  I don't have an exact property picked out yet.  Some that I am looking at are duplexes.  Others have 12-units.  Either way, I'll be good on the financing as I have already spoken to the bank.  I am in Illinois.  I wasn't sure if an attorney was needed to evaluate any of the seller's paperwork, lease agreements, etc. or I needed one initially.  I thought that it might be a good idea, but maybe I'm wrong.  I do not plan to live in one of the units at this time.  Also, I didn't know about the agent.  I figured they would be good to use to sift through all of the paperwork, title work, etc.  But, once again, I have no experience with this process.  

    0Reply
  • Jeff Kehl
    Rental Property Investor · Charlottesville, VA · Member since 2012 · 1k+ posts · 726 votes
    8y

    @Andrew Caldieraro rather than giving you any specific suggestions on the list you posted let me just say that you have a very good idea on what is needed and the specific order or if you're missing a step (check zoning?) is not so important. I'd say you're one of those 'analysis paralysis' people and you should just start making some offers.

    Most investors find out a lot of those steps along the way.

    You asked if you need an agent. My answer would be yes absolutely if you can find a great agent they are worth their wait in gold. If you can't, just proceed without them until you find a great one.

    In short, I think you have 'analysis paralysis' and think you should just start.

    Actually... now that I said that I do have to criticize your list a bit.

    First, as someone said earlier, establish what your goals are.

    Second, pick a market. Are you absolutely set on investing in Illinois? I've lived and invested there before and am not a fan.

    But, if that's where you're at, I think you can probably do pretty well there. Just get started!

    1Reply
  • Andrew Caldieraro
    OP
    Collinsville, IL · Member since 2018 · 98 posts · 17 votes
    8y
    Originally posted by @Jeff Kehl:

    @Andrew Caldieraro rather than giving you any specific suggestions on the list you posted let me just say that you have a very good idea on what is needed and the specific order or if you're missing a step (check zoning?) is not so important. I'd say you're one of those 'analysis paralysis' people and you should just start making some offers.

    Most investors find out a lot of those steps along the way.

    You asked if you need an agent. My answer would be yes absolutely if you can find a great agent they are worth their wait in gold. If you can't, just proceed without them until you find a great one.

    In short, I think you have 'analysis paralysis' and think you should just start.

    Actually... now that I said that I do have to criticize your list a bit.

    First, as someone said earlier, establish what your goals are.

    Second, pick a market. Are you absolutely set on investing in Illinois? I've lived and invested there before and am not a fan.

    But, if that's where you're at, I think you can probably do pretty well there. Just get started!

     Thanks for the reply. I am in Illinois, so that may be the easiest place for me to learn the game. Then again, I live 30 minutes from St. Louis, so that may be a smarter decision. Regarding goals, that’s where I struggle. Many of the MF apartments  in my area rent out for 400-450/month. The overall cost is less, but IL taxes are more. A 4-plex in St. Louis might cost the same as a 10-12 MF apartment complex in a rural IL town, and the monthly rent isn’t quite as much. But there were be fewer units and tenants to manage. I’m torn...

    0Reply
  • George SkidisPro Member
    Rental Property Investor · Belleville, IL · Member since 2017 · 875 posts · 529 votes
    8y

    You should update your profile to include your city and state. Most of your questions will end up being state specific. 

    0Reply
  • Andrew Caldieraro
    OP
    Collinsville, IL · Member since 2018 · 98 posts · 17 votes
    8y
    @George Skidis I’m currently in Collinsville, IL. Not far from you.
    0Reply
  • Alina Trigub
    Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes
    8y

    @Andrew Caldieraro You've already gotten a great advise from @Hadar Orkibi and @Jeff Kehl. I'd say to learn from other people mistakes it is a good idea to network with like-minded investors via local REI clubs, listen to REI podcasts, and read books on the relevant topic.

    0Reply
  • George SkidisPro Member
    Rental Property Investor · Belleville, IL · Member since 2017 · 875 posts · 529 votes
    8y

    Andrew, Illinois REIA has monthly meetings in Belleville and Cottage Hills. The Belleville meeting is this week on Tuesday the 18th of September. PM for details. My contact information is below.

    0Reply
  • Scott Morongell
    Investor · Charlotte, NC · Member since 2017 · 791 posts · 479 votes
    8y

    @Andrew Caldieraro I would find a PM and Attorney first so you can underwrite the PM fees more accurately.  

    0Reply
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