What are people paying for 50 unit multi family?

Question

So some of the things I hear from real estate are.

1. Every one wants to be in multi family

2. 50 units or more is ideal.

With that said, what are people paying for 50 or so multi family units?

Rather than buy a sfr or duplex if I could save up the 25-30% down for a multi maybe that would make more sense? Just thinking

Jonathon Weber · Answer

The costs to buy apartment complexes with a lot of units has been on the rise and there is a big reason for it -  millennials aren't buying homes.

Multi-family is the easiest way to get super rich. In some markets you can find a 49-unit property priced at $35K per unit with an 8% cap for $1,75M.

If you pay cash for this deal at $1,75M, you would make roughly $140K for cashflow per year after expenses. With $450K down and financing $1,3M, the debt payment would likely be around $78K per year. This would make you $62K cash flow per year. This cannot be done without buying a ton of homes.

You could take the income from the cashflow, after taxes, and reinvest it into another purchase of another large apartment complex. You can also sell the apartment complex and do a 1031. Keep repeating this process until death and let your kids take things over. They will not have to pay taxes up to a certain amount.

Multi-family is by far the world's best way to create legacy wealth. Cash itself eventually gets spent generation after generation, but if a large apartment complex stays in the family generation after generation, the cashflow remains in the family.

When you get up to the 200+ unit properties you are competing against very wealthy individuals, funds, life insurance companies, and others like Blackstone.

Todd Dexheimer · Answer

Depends on the city and area. $30,000/unit to $200,000+/unit. It makes sense to start where you are able. If that is a duplex, then start there, if that is a 50+ unit, then start there. Educate yourself first, then determine the right path for you

Anthony Dooley · Answer

If you can find such a deal and if you can get financed for such a deal, then yes. Everybody wants what they can't have. For that reason, buying 50 SFR is more of a hassle, but it can be done incrementally over time. Either way, you end up with scale. With SFR, you get diversity because 50 homes are in different areas of your market. One multi-family is simpler for taxes, but if that  area of town becomes known as "the bad side of town" then, you are struggling. Multi-family sounds easy until you start looking for one that makes sense.

Robert C. · Answer

@Benjamin Bleasdale, That would be a $20mm to $25mm+ building around these parts...

Charles LeMaire · Answer

What are people paying for a car?  Seems to be about as clear a question.  There are a lot of variables and therefore no clear answer.  Even if that other fellow paid $XXX, you may not be looking at the same car.

Back to the 50 unit apartment: What CLASS (A,B,C,D)?  What is the NOI?  What is the CapRate?  How well is it being managed?  Yield play or Value play?  What potential is there for increasing that NOI.  Professional Management? (Go for 60 or 70+)  Or are you buying yourself a job?

I feel that you need to learn a lot about how apartments are valued, operated, etc. before you jump into this.  Apologies for my lack of tact.

Regards,

Charles LeMaire

Blake Garcia · Answer

@Benjamin Bleasdale

There appears to be alot of open answers to your open question. In west tn aartments ive paid from 25k with 400 per door income to 32k with 500 monthy per door per unit.

Most deals ive seen are advertised as 8 to 10 cap and actually perform between 7 to 9 cap.

TN market is relatively expensive compared to a few years ago. It is ripe for opportunity with some remodeling and renovations if you are willing to do paint, floor and basic updates. Lots of owners dont reinvest and are losing out on financing opportunity.

Ive increased most of my rents by 150-200 per unit with a 2k-4k investment.

35k all in appears to be the sweet spot in my area.

Tj Hines · Answer

@Benjamin Bleasdale

With that said, what are people paying for 50 or so multi family units? (This is such a broad question ... It really all depends on the market, the quality of asset and the area within that market. You can pay as low as 40-50K a unit all the way up 200K a unit. You need to figure out what your specific criteria is. Every investor has a different criteria. How to determine your criteria? Read books on multifamily. Listen to multifamily podcast. Attend seminars. Network with other multifamily owners in your area)

Rather than buy a sfr or duplex if I could save up the 25-30% down for a multi maybe that would make more sense? Just thinking (Starting out with a duplex, triplex or quad isn't so bad. Have you ever thought about passively investing in a real estate syndication? This can help leverage the funds that you're able to bring to the table.)

What are people paying for 50 unit multi family?

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