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Updated almost 6 years ago, 02/13/2019

User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts

Multi family acquisition

Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Posted

Hello, I’m a 27 year old novice in terms of multi family investing. Currently own 4 single family rentals with no mortgage on any properties. I’ve found a great 8 unit property I want to make an offer on, and need as much insight and advice as possible prior to stepping outside my comfort zone.

User Stats

10
Posts
5
Votes
Tasia Larri
  • Baltimore, MD
5
Votes |
10
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Tasia Larri
  • Baltimore, MD
Replied

This is great--good luck on your finds! I am looking to get my first property and ideally would like it to be multi-family for purposes of house hacking as my tunnel into real estate investing. 

User Stats

696
Posts
660
Votes
Richard Sherman
  • Rental Property Investor
  • Salem, OR
660
Votes |
696
Posts
Richard Sherman
  • Rental Property Investor
  • Salem, OR
Replied

@Dorian Guin Do not be afraid, they are just like SFH as far as running the numbers. Make sure you get an inspection, make sure you get the financials and understand where the problems are (problems = money when you fix them) low rents, vacancy, those are my favorites. In your market do apartments have any extra expenses (inspections by the city, extra taxes etc?) do they have higher vacancies?

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User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Replied

@Richard Sherman inspection are higher in comparison to SFH but that was expected. It's currently 75% occupied (6 units) and also after looking through the financials I observed one frequent tenant falling behind on rent often and another falling short twice over the last 12 months. Nothing else special is needed outside the normal here.

User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Replied

@Tasia Larri I intended to start with house hacking multi families but do to my circumstances it wouldn’t work with the space we needed for my children. So I did another house hacking technique moving into one of my own homes that I would’ve made less money on renting it out, in comparison to where I was paying rent at. Now things come full circle and I’m excited to be back looking at multi families

User Stats

696
Posts
660
Votes
Richard Sherman
  • Rental Property Investor
  • Salem, OR
660
Votes |
696
Posts
Richard Sherman
  • Rental Property Investor
  • Salem, OR
Replied

@Dorian Guin how to the unit costs compare to SFH in the same area (i.e. cost per unit vs. what a SFH costs) do you have an idea on why the other units have been vacant?

User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Replied

@Richard Sherman one unit recently vacated and needs renovations and the other unit same scenario but has a tenant scheduled to move in just after the holidays. As far as comparable SFH comps this is Detroit and it's a interesting market unlike many others right now due to so many circumstances. I think to sum it up with the building being priced at 215k I thinks it's a great price in comparison especially since there is current cash flow.

User Stats

696
Posts
660
Votes
Richard Sherman
  • Rental Property Investor
  • Salem, OR
660
Votes |
696
Posts
Richard Sherman
  • Rental Property Investor
  • Salem, OR
Replied

@Dorian Guin awesome, sounds like a great deal!  I always want to know why things are vacant, why rents are low etc and if I can correct those and get the place turned around then that is money in the bank when you do it!

User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Replied

@Richard Sherman thanks so much for your insight. Seems like a good opportunity. There’s two commercial comps on the same block within half a mile. One is a 10 unit 1 bedroom needs a complete rehab priced at 70k but I have no clue what the expected rehab cost and honestly I’m not in the position to take on that risk. And another 10 unit one bedroom sold two months ago for 300k. Looks almost identical with the exception of updated exterior features. And there rent prices are actually higher. So I see what I have the potential to do.

User Stats

696
Posts
660
Votes
Richard Sherman
  • Rental Property Investor
  • Salem, OR
660
Votes |
696
Posts
Richard Sherman
  • Rental Property Investor
  • Salem, OR
Replied

@Dorian Guin thats good news.  What's your estimate for sprucing this property up to match the 300k property?  That is your comp right there.

User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Replied

@Richard Sherman now that’s the question I haven’t quite getting a clear answer on. Most of the work needed is cosmetic. And I don’t have a contractor that I think is qualified to take this task on in the way I want it performed. But off hand I anticipate around 40k but I can be completely off.

User Stats

6,603
Posts
6,945
Votes
Bjorn Ahlblad
Pro Member
#5 Multi-Family and Apartment Investing Contributor
  • Investor
  • Shelton, WA
6,945
Votes |
6,603
Posts
Bjorn Ahlblad
Pro Member
#5 Multi-Family and Apartment Investing Contributor
  • Investor
  • Shelton, WA
Replied

@Dorian Guin Congrats on the find. At current pricing you are looking at average 25k/door? What is the average rent currently. Future rents don't count for much price everything at todays rents. Can you deal with the class of tenant in the building currently? I would screen everyone including the new tenant don't take the tenant unless YOU think it is a good one. Are the delinquent renters late because the LL is lazy and tired of the place? When was it built? You have to turn over every stone to get a clear picture to asses if this project is worth the risk and meets your goals. I would recommend an inspection done by a licensed pro. Make sure you have cash for reserves if you move ahead. Keep us posted. All the best!

User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Replied

@Bjorn Ahlblad current rent is $550 for one bedroom and $650 for two bedroom. I'm comfortable with the class of tenants I'll be dealing with at this project. I have non traditional ways of getting around bad tenants if that problem arise. Property was built in 1962. I'm familiar with the area I currently have a SFH 1.5 miles away. My cash reserves after a closing I have scheduled with my planned down payment would leave me roughly just over 40k. Which part of that would need to be used for my renovations. Thanks for your direction and any other insight you can offer.

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User Stats

1,825
Posts
1,506
Votes
Brian Ploszay
  • Investor
  • Chicago, IL
1,506
Votes |
1,825
Posts
Brian Ploszay
  • Investor
  • Chicago, IL
Replied

Pretty good to own four properties free and clear at your age.  I see you are from Detroit, so there are some cheaper properties in that area.

For a multi-family, stay in Oakland County if you can.  Detroit is really a single family rental game.  Near downtown, I am very bullish.

Renting an apartment is basically a similar skillset compared to renting single family homes.  There are efficiencies for the apartments, such as one boiler, one roof, one location.  But I find better tenants with houses.  

It is difficult to grow a rental portfolio when you only have single family houses.  Try the eight unit and see if you like it.  Don't overpay for it, and you will be able to get out of the investment if it doesn't work for you.

User Stats

13
Posts
12
Votes
Michael Gabriel
  • Realtor
  • Willow Grove, PA
12
Votes |
13
Posts
Michael Gabriel
  • Realtor
  • Willow Grove, PA
Replied
@Dorian Guin I would definitely link up with a commercial lender on here and ask them about some of the unwriting guidelines. I bought a mixed use 5 unit back in the spring. It's been a much different process and the loans have different terms.

User Stats

13
Posts
12
Votes
Michael Gabriel
  • Realtor
  • Willow Grove, PA
12
Votes |
13
Posts
Michael Gabriel
  • Realtor
  • Willow Grove, PA
Replied
@Tasia Larri I would definitely try to keep it at 4 units and below for a house hack. You can still do a 3.5% down FHA on a quadraplex

User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Replied

@Brian Ploszay Thanks, I love the SFH, but two one I moved in 80-90% rehabbed to house hack and left our townhouse we were renting. And I still have two not bringing in income in need of rehab in great neighborhoods. So to some things up I have a cash flow problem. This is my reason to transition into a multi family then make my way back to SFH as well.

User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Replied

@Michael Gabriel thanks, when you say much different process do you means in terms of obtaining the loan.

User Stats

379
Posts
242
Votes
Jamiel Strickland
  • Rental Property Investor
  • Detroit, MI
242
Votes |
379
Posts
Jamiel Strickland
  • Rental Property Investor
  • Detroit, MI
Replied

I have a spreadsheet that runs multi-family numbers you can use. Also, I may be able to show you some contractors that can help. 

Would you manage this property by yourself?

User Stats

13
Posts
12
Votes
Michael Gabriel
  • Realtor
  • Willow Grove, PA
12
Votes |
13
Posts
Michael Gabriel
  • Realtor
  • Willow Grove, PA
Replied
@Dorian Guin Yes they have different qualifications and terms. I would be wise to talk to them before just so you know what you're getting into. I found a commercial lender in CA that's pretty good I can send you his info

User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Replied

@Jamiel Strickland is truly appreciate that spreadsheet. If I got it correctly you and one of your colleagues cleaned up well at the Wayne county auction this year. Congrats. And my intentions is to manage the property myself along with assistance from my sister to cut cost and get hands on experience.

User Stats

267
Posts
212
Votes
Kenneth Reimer
  • Rental Property Investor
  • Sacramento, CA
212
Votes |
267
Posts
Kenneth Reimer
  • Rental Property Investor
  • Sacramento, CA
Replied

@Dorian Guin

What is your gross income on a monthly basis, what expense ratio of income can you expect for your market and vintage of the building, and what are current cap rates in your area ?

User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Replied

@Michael Gabriel please forward that info, I’ve already submitted an offer with contingencies that has a financing clause amongst other things that’ll hopefully allow me to withdraw if things don’t appear at it seems

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User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Replied

@Kenneth Reimer when you say income you mean my personal income, or expectations for income on the property? Also I’ve seen cap rates and have been learning how to calculate them. But again I’m a novice in commercial/multi family. So I see what they have it listed at, but when I do my own calculations the cap rates often aren’t exactly the same as stated.

User Stats

134
Posts
43
Votes
Lisa Misuraca
  • Tucson, Az
43
Votes |
134
Posts
Lisa Misuraca
  • Tucson, Az
Replied

Wow Dorian did you just say that 2 of your single families that are fee and clear are not rentable. I’d say you got 2 pieces of yard art.Why in the world haven’t you got them ready rentable and bringing in income?Finish what you have all they’re doing is costing you money.

User Stats

24
Posts
19
Votes
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
19
Votes |
24
Posts
Dorian Guin
  • Rental Property Investor
  • Detroit, MI
Replied

@Lisa Misuraca 🤣 thanks but it’s a complex situation. I was financing renovations myself through a commercial cleaning company I own. I overworked myself and had to make cuts which caused me to gaily renovations. One of those lawn arts you mentioned is scheduled to be sold. That’s where some of the finances to help me see this deal through is coming from.