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Updated over 3 years ago, 07/21/2021
5-20 Unit "Sweet Spot" Properties
Hello BP community!
So I currently have yet to purchase my first property, and I wanted to hear some opinions on my preferential strategy. After researching quite a bit, I have come across the niche in which investors seek out 5-20 unit commercial properties for a variety of reasons. First, this market is less concentrated than others. From what I've heard, the vast majority of investors are scared to enter the commercial industry because they feel overwhelmed by its "complexity". On top of this, I've heard that most experienced commercial investors are not looking for such small properties, and would prefer to invest in large multifamily (80-100+ units) to increase their return. This leaves the smaller, 5-20 unit commercial space with less concentration and more opportunity for deals (especially in particular markets around the country).
Beyond this, I also am attracted to the fact that commercial value is based upon NOI and cap rate, rather than on comps, so the value is more in control of the investor and less based on the surrounding properties. From what I've heard, this allows investors to add value without as much rehab to the property (through raising rents, adding in additional revenue-building assets, decreasing expenses, etc.).
However, I do know that is is harder to find quality property management for these sizes of properties, and it is also harder to sell them (due to less demand). Also, commercial loans are also a bit more complicated (at least to me) than residential loans, so I would need to learn much more about how these work before ultimately cracking down on the strategy.
I am curious as to what are your guys' thoughts are on skipping the residential realm and hopping directly into small, multifamily commercial properties? Also if anyone has any advice, tips, or resources, I'd love to hear them if you'd be willing to share.
Thanks everyone!
That's basically the exact unit range that I'm currently seeking here in Florida and it's been very tough trying to find anything that makes sense. I'm looking for 6-20 units from Palm Beach County up through Central Florida.
@Brian Garrett How are you searching for deals? Are you working with an agent/broker?
Originally posted by @Ben Morand:
@Brian Garrett How are you searching for deals? Are you working with an agent/broker?
Brokers, wholesalers, FB groups, MLS, etc.
@Brian Garrett Interesting. Have you considered looking into other markets as well?
@Jason James
I own one in that range out of state. I am in southern ca and the property is in Phoenix, AZ. With property managers you can call some up but it might be easier/better to talk with the broker and ask for a couple of references. It also depends what strategy your implementing. Value-add? Turnkey? Try to find a management company that can help you achieve your goals.
@Darin A. Scavella Jr I don't think you always have to syndicate unless downpayment funds are the issue? I've been working on making sure buyers have lending on the same size properties and there is decent commercial lending out there. This may be market specific though. Where are you investing?
Originally posted by @Ben Morand:
@Brian Garrett Interesting. Have you considered looking into other markets as well?
I'm wondering the same. Does it have to be FL?
Originally posted by @Kiera Underwood:
@Darin A. Scavella Jr I don't think you always have to syndicate unless downpayment funds are the issue? I've been working on making sure buyers have lending on the same size properties and there is decent commercial lending out there. This may be market specific though. Where are you investing?
Hi Kiera, I am investing in The Bahamas.
@Darin A. Scavella Jr oh understood! Have anything in the states?
Originally posted by @Kiera Underwood:
@Darin A. Scavella Jr oh understood! Have anything in the states?
Nothing in the states. Born, raised and live in the Bahamas.
@Darin A. Scavella Jr Understood! I'm in OKC and there's a 12 unit property for sale now for only 850k, fully remodeled! So of course it's fully market dependent on what time of lending you've got to use where. What's a typical price range on something like that in the Bahamas?
Originally posted by @Kiera Underwood:
@Darin A. Scavella Jr Understood! I'm in OKC and there's a 12 unit property for sale now for only 850k, fully remodeled! So of course it's fully market dependent on what time of lending you've got to use where. What's a typical price range on something like that in the Bahamas?
Good day. I pray all is well with you and your family.
I recently viewed a property here in the Bahamas. Here is a bit of information on it:
- solid b- property
- 22 units in total. All units are very big and spacious.
- six 2 bedrooms that are town house style the consist of two floors
- six one bedrooms
- 11 studios
- laundry room
- pool that has outdoor kitchen. Kitchen portion about 90% done
- the asset is on the canal with 200ft of dockage. Boater can be charged at least $1.00 per linear feet of vessel. Dockage slips are not in yet but approved plans for them come with the asset.
- An added plus is the the entire place has hurricane impact windows ( a huge plus here)
- the asset is less than a 3 min drive to the beach
- The asset is not 100% remodeled yet (about 85% done) but the ones that are, are lovely! The units are remodeled with a designer flare (for example cedar in closets).
- Based on comparables in the area here is the type of rents you can get: two bedrooms $1800 to $2000 p/m, 1 bedroom $900 to $1200 p/m, studio $800 to $1000 p/m. Note ;the studios can be rented @ $125.00 per night
The asset is listed for $3,900,000.00
@Darin A. Scavella Jr it looks like we play in different worlds haha! What's your next step at this point?
Originally posted by @Kiera Underwood:
@Darin A. Scavella Jr it looks like we play in different worlds haha! What's your next step at this point?
Why do you say that?
My next step; meet with potential investors, give a presentation (if needed), do a joint partnership (or syndicate), and then get a property (ies) under my portfolio.
@Darin A. Scavella Jr just drastically different markets and properties! My comparison was a fully remodeled row of townhouses for only 850k. It's in OKC in a developing area where appreciation is low and slow, but steady. I'm surprised it's still available! What's appreciation like in the Bahamas?
Exciting that you're developing the syndication! I'm connected with quite a few investors. If anyone mentions syndication on bigger multi I'll send them your way!
Originally posted by @Kiera Underwood:
@Darin A. Scavella Jr just drastically different markets and properties! My comparison was a fully remodeled row of townhouses for only 850k. It's in OKC in a developing area where appreciation is low and slow, but steady. I'm surprised it's still available! What's appreciation like in the Bahamas?
Exciting that you're developing the syndication! I'm connected with quite a few investors. If anyone mentions syndication on bigger multi I'll send them your way!
Appreciation is dependent on the island. There are several "main" islands here in The Bahamas. The top 3 (based on population/ commerce/industries) are New Providence, Grand Bahama, and Abaco.
I'm on the island of Grand Bahama and appreciation is stagnant (at the moment). This is mainly due to the effects of hurricane Dorian followed by covid. However, there are major developments going on and I anticipate there will be a steady increase in appreciation on the island in the not too distant future. One such development is an American medical school. They almost done with their 1st phase of a massive campus being built on Grand Bahama. With this, there will be faculty, the American/International medical students, and the auxilary jobs that will be as a result of this. And of course, all of these persons will need a place to live :-)!
New Providence appreciates at a moderate rate and Abaco is a bit behind New providence in this regard.
Thank you for the investors you are about to send my way.
God bless you and have a great evening!