From SFH REI to MF REI (and potential partner sourcing)

Multi-Family and Apartment Investing
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From SFH REI to MF REI (and potential partner sourcing)

Brandon Beaudoin
Rental Property Investor · Henderson, NV · Member since 2019 · 105 posts · 60 votes

Good evening BP fam!

First post here but I've been plowing through the forum and articles. Long story short I'm (mostly) getting out of the SFH REI marketplace (I have 3 SFH rentals) and looking to branch into multi-family commercial properties. Shout out to Grant Cardone and his BP podcasts (yes, I've been flipped) for the extra motivation I needed.

I wanted to lay out my position below, seek some thoughts and feedback on options/approach and also test the water for any interest in partnering my first MF deal.

1. Selling 2 of my SFH rentals that are in great seller markets with anticipated closings no later than Sep or Oct at the very latest. Combined sales price will be in the $810k-860k range (depends if I do remodel on of the homes).

2. Sales will be 1031 exchanges. Looking at a local QI in San Diego, CA (Exiter 1031 a good possibility) but haven't yet talked to any

3. I should net ~$75k -$90k from the SFHs depending on final sales price and closing costs. That's about half the down payment I'd need for a 20% commercial loan on a like-kind property. I have ~800 credit scores and pretty substantial primary income (i.e. not self employed, have solid income history and a decent DTI).

4. Looking at 8-12 cap properties with no less than 8 doors in AZ, TX, FL, possibly OH and a couple others. Looking at properties in the $750-950k range (no mobile homes). NOIs north of $60k.

5. Willing to consider partnering with another investor but am also considering using a HELOC on my current primary residence to come up with remaining down payment.

Thoughts? Advice? Additional questions? Interest?

Thanks much and looking forward to hearing from the crowd!

B

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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7y
Originally posted by @Brandon Beaudoin:

Good evening BP fam!

First post here but I've been plowing through the forum and articles. Long story short I'm (mostly) getting out of the SFH REI marketplace (I have 3 SFH rentals) and looking to branch into multi-family commercial properties. Shout out to Grant Cardone and his BP podcasts (yes, I've been flipped) for the extra motivation I needed.

I wanted to lay out my position below, seek some thoughts and feedback on options/approach and also test the water for any interest in partnering my first MF deal.

1. Selling 2 of my SFH rentals that are in great seller markets with anticipated closings no later than Sep or Oct at the very latest. Combined sales price will be in the $810k-860k range (depends if I do remodel on of the homes).

2. Sales will be 1031 exchanges. Looking at a local QI in San Diego, CA (Exiter 1031 a good possibility) but haven't yet talked to any

3. I should net ~$75k -$90k from the SFHs depending on final sales price and closing costs. That's about half the down payment I'd need for a 20% commercial loan on a like-kind property. I have ~800 credit scores and pretty substantial primary income (i.e. not self employed, have solid income history and a decent DTI).

4. Looking at 8-12 cap properties with no less than 8 doors in AZ, TX, FL, possibly OH and a couple others. Looking at properties in the $750-950k range (no mobile homes). NOIs north of $60k.

5. Willing to consider partnering with another investor but am also considering using a HELOC on my current primary residence to come up with remaining down payment.

Thoughts? Advice? Additional questions? Interest?

Thanks much and looking forward to hearing from the crowd!

B

 Saw you were considering Ohio as a place to park some of your cash. If you do go into further research on the markets here in Ohio I recommend reading The Ultimate Guide to Grading Cleveland Neighborhoods as Cleveland is one of the more popular markets in Ohio for Out of State Investors. Always need to know the risk level of the neighborhoods you are buying in. Most important part of the game. 

P.S. 

If you do go out of state Cleveland or otherwise below are some best practices to keep risks as low as possible.

  • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
  • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
  • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
  • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
  • Make sure your property manager is a licensed real estate brokerage.
  • Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.
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  • Greg Dickerson
    Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    7y

    @Brandon Beaudoin Sounds like a good plan.  Single family is very difficult to scale as you have experienced.  I would definitely go bigger that 8 to 10 units. Feel free to reach out if I can help.

    0Reply
  • Brandon Beaudoin
    OP
    Rental Property Investor · Henderson, NV · Member since 2019 · 105 posts · 60 votes
    7y

    @Greg Dickerson

    Thanks and I agree. I am not limiting myself to 8 units, per se. But based on my price range I've been researching and filtering properties based on what I can do solo, minimum cap rates, what's turnkey, and non (or minimal) value add properties I found a lot more in the 8-12 unit range based on where I was looking.

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @Brandon Beaudoin:

    Good evening BP fam!

    First post here but I've been plowing through the forum and articles. Long story short I'm (mostly) getting out of the SFH REI marketplace (I have 3 SFH rentals) and looking to branch into multi-family commercial properties. Shout out to Grant Cardone and his BP podcasts (yes, I've been flipped) for the extra motivation I needed.

    I wanted to lay out my position below, seek some thoughts and feedback on options/approach and also test the water for any interest in partnering my first MF deal.

    1. Selling 2 of my SFH rentals that are in great seller markets with anticipated closings no later than Sep or Oct at the very latest. Combined sales price will be in the $810k-860k range (depends if I do remodel on of the homes).

    2. Sales will be 1031 exchanges. Looking at a local QI in San Diego, CA (Exiter 1031 a good possibility) but haven't yet talked to any

    3. I should net ~$75k -$90k from the SFHs depending on final sales price and closing costs. That's about half the down payment I'd need for a 20% commercial loan on a like-kind property. I have ~800 credit scores and pretty substantial primary income (i.e. not self employed, have solid income history and a decent DTI).

    4. Looking at 8-12 cap properties with no less than 8 doors in AZ, TX, FL, possibly OH and a couple others. Looking at properties in the $750-950k range (no mobile homes). NOIs north of $60k.

    5. Willing to consider partnering with another investor but am also considering using a HELOC on my current primary residence to come up with remaining down payment.

    Thoughts? Advice? Additional questions? Interest?

    Thanks much and looking forward to hearing from the crowd!

    B

     Saw you were considering Ohio as a place to park some of your cash. If you do go into further research on the markets here in Ohio I recommend reading The Ultimate Guide to Grading Cleveland Neighborhoods as Cleveland is one of the more popular markets in Ohio for Out of State Investors. Always need to know the risk level of the neighborhoods you are buying in. Most important part of the game. 

    P.S. 

    If you do go out of state Cleveland or otherwise below are some best practices to keep risks as low as possible.

    • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
    • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
    • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
    • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
    • Make sure your property manager is a licensed real estate brokerage.
    • Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.
    2Reply
  • Twana RasoulBusiness Member
    Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    @Brandon Beaudoin Congrats! If you can figure out your market and start discussion with some of the main brokers in town to see what's going and or what they may have coming up would be good. Be nice to identify a property (off market) if you can, prior to listing your SFH. You don't want to be forced to buy something not so great due to time limits.

    Also, be careful of filtering online properties such as loopnet by cap rate. A lot of brokers don’t know how to run numbers properly or others who know very well how to run numbers tend to not include proper numbers in their calculations. Only trust your own calcs. Also, have you talked to a lender yet? Might need more than 20%.

    Best of luck!!

    Compass5122 Reviews
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    1Reply
  • Christopher Hunter
    Investor · Atlanta, GA · Member since 2016 · 335 posts · 144 votes
    7y

    @Brandon Beaudoin Hello Brandon. Sounds like you are taken the necessary action steps to put you in the right frame of mind. Have you thought of private investors before you do a HELOC? I would find several investors with the same goals and interest as you. Boots on the ground and a PM is going to be your most valuable asset right now. Your GP or JV partner will have some of the things you need to bring this thing together. Happy hunting

    0Reply
  • Brandon Beaudoin
    OP
    Rental Property Investor · Henderson, NV · Member since 2019 · 105 posts · 60 votes
    7y

    @James Wise I truly appreciate the reference and feedback. Your tips are noted. Cleveland and Cincinnati were two areas I was considering, albeit lower on the list in priority.

    1Reply
  • Brandon Beaudoin
    OP
    Rental Property Investor · Henderson, NV · Member since 2019 · 105 posts · 60 votes
    7y

    @Twana Rasoul Appreciate the feedback, Twana. I 100% plan on drilling down target market areas and getting in touch with some brokers. We haven't listed our properties yet so we have some time.

    As for the 20%, I'm an optimist :) I understand it will likely be 25% minimum but we'll see. I plan on reaching out to a handful of lenders on Friday.

    Thanks!

    B

    0Reply
  • Brandon Beaudoin
    OP
    Rental Property Investor · Henderson, NV · Member since 2019 · 105 posts · 60 votes
    7y

    @Christopher Hunter Hi Christopher, thanks for the info. I'm considering private lenders as well but like some of the flexibility in a HELOC (low, as of right now, rates, ability to keep going back to the well, etc).

    Once we have identified a list of prospects, talked to some lenders, and further researched our targeted market areas you can bet your bottom dollar I'll be physically out and inspecting the properties/areas.

    Cheers!

    0Reply
  • Jason Graves
    Rental Property Investor · San Diego, CA · Member since 2018 · 242 posts · 234 votes
    7y

    @Brandon Beaudoin

    I’m happy to help...

    I did the same thing 18 moths ago and bought 26 units, Closing on 27 more this month all in Kansas City MO because of the job growth...

    Sent you pm

    1Reply
  • Jason Graves
    Rental Property Investor · San Diego, CA · Member since 2018 · 242 posts · 234 votes
    7y

    @Brandon Beaudoin

    I put 20% down on my first two buildings

    The 3 rd on I did 100% financing 80 first, 20% 2nd w Hilcoc. Still positive CashFlow

    1Reply
  • Brandon Beaudoin
    OP
    Rental Property Investor · Henderson, NV · Member since 2019 · 105 posts · 60 votes
    7y

    @Jason Graves Great to hear from you. It's good to know that someone is living out a recent similar experience. Looking at your PM now.

    0Reply
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