Multi-Family and Apartment Investing
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated almost 6 years ago, 02/13/2019
Multi family acquisition
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.
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.
@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?
@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.
@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
@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?
@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.
@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!
@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.
@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.
@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.
#5 Multi-Family and Apartment Investing Contributor
- Investor
- Shelton, WA
- 6,945
- Votes |
- 6,603
- Posts
#5 Multi-Family and Apartment Investing Contributor
- Investor
- Shelton, WA
@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!
@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.
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.
@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.
@Michael Gabriel thanks, when you say much different process do you means in terms of obtaining the loan.
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?
@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.
@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 ?
@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
@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.
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.
@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.