Transition from SFR Investing to Multi-Fam?

[Vincent D.]

Hello all. Having built a cozy stream of SFR revenue, I'm considering getting my feet wet with apartment ownership.

I'm strong with cash flow paradigms and pro forma analyses. From a Real Estate perspective, what does experience suggest I do to prepare and enter this market? For example, how do I look for deals? How does the game of negotiation change from that of SFR? etcetera?

Thanks!

[Steve L.]

I am no expert and there are people that have looked at way more then me.

I have slowly been looking to do some commercial deals. I closed one and have it performing (probably my best deal ever) and I am in escrow on a second one right now.

Here are some of my observations.

1. There is not official standardized listing place for all deals, like the MLS for single family. LoopNet is close. Banks special asset managers also will sell directly to buyers. Brokers do control inventory and have their favorites.

2. Sellers are usually much smarter and willing to be more flexible compared to single family banks. They allow loans, changing vesting, carry backs, etc.

3. There is a lot of money chasing big apartments (200 units plus) and in my area they typically sell for a cap rate in low 5's. I think a lot of this is due to the relatively cheap financing available in the space right now.

4. You need a lot more money to play the game. My first deal sat vacant for 4 months while we were negotiating with potential tenants.

5. The factors for success have been the same for me. To get the good deals there needs to be some element of distress that you can fix. Deferred maintenance, occupancy issues, deferred maintenance seem to be the catalysts on the deals I have done.