Searching for Multifamily Properties

[Ally Mager]

Hello,

We’re looking to 1031 out of our properties here in Portland, but cannot find a property that we would like to transition into.

We have multiple offers on our properties, but will not sell/list until we have found the correct property to transition into due to not wanting to be under the strain of a 1031 time clock.

Over the last year we’ve been in contact with realtors throughout many states, and have been using LoopNet/Crexi, etc., My question is, what other search sources do you use to find property?

We’re looking for a property that fits the following criteria:

- Value between 18-28 million

- Located in a red state with good landlord-tenant laws (Texas and Idaho are our preference)

- If Texas, not near the boarder, San Antanio or Houston area. We self manage and do not want to live in those areas.

- One building, or 2 if very close together

- No student, affordable or high rise housing

- Built after 1980

I understand that we’re looking for a needle in the haystack given the current market conditions, but would appreciate any advice on other sources to look into!

Thank you😊

[Peter Nikic]

What about Nashville?

[Ally Mager]

@Peter Nikic

Yes, we’re willing to look into Nashville!

Central Texas and Idaho are our main 2 choices, but we’re looking at other areas we also. A red state with good Landlord-Tenant laws is a must though.

Here’s a few states that I’ve been looking at:

North Carolina

South Carolina

Texas

Idaho

Wyoming

Montana

Georgia (outside of Atlanta)

Mississippi

Alabama

Kentucky

Tennessee

South Dakota

Oklahoma (not preferred, but will go for right deal)

Arizona (not preferred, but will go for right deal)

Florida (not prefered, but will go to Northern FL for right deal)

[Andrew Bilis]

@Peter Nikic @Ally Mager I think Nashville is a great rental market and a great place to live. I work with investors who have numerous rentals all over East and West Nash. With the market being so hot, many people believe you cant find 1% rentals, but all the properties I work with are all either at 1% or just under. 

[Jeffrey Donis]

Hey Ally!

Based on your price-point, it seems like you are looking for a larger asset. Typically these tend to be highly competitive, especially in good markets. We are in NC and we build relationships with brokers in our target markets who find us deals. This has been the best way for us to find deals, however it is very time consuming and typically does not happen quickly. I would say finding a partner who is currently doing deals and would be open to partnering with you on an asset that suits your needs would be the best way to go about it, if that is something you would be open to. Someone who already has experience with larger assets, relationships with brokers who are finding deals, and the ability to execute. 

[Ally Mager]

@Jeffrey Donis

Thank you for this information. Time consumption is not a worry of mine, as I understand that good deals take time and it’s been very educational for me, as I’m only 22.

We have a few realtors that we’re working with in specific areas, such as East Idaho, but are not wanting to partner into a deal with another investor.

[Ally Mager]

@Andrew Bilis

If you don’t mind me clarifying, what do you mean by “1% rentals”? I’m assuming you’re referring to vacancy rates?

[Jeffrey Donis]

Originally posted by @Ally Mager:

@Jeffrey Donis

Thank you for this information. Time consumption is not a worry of mine, as I understand that good deals take time and it’s been very educational for me, as I’m only 22.

We have a few realtors that we’re working with in specific areas, such as East Idaho, but are not wanting to partner into a deal with another investor.

Ok awesome. Brokers are your best bet in my opinion. If you have some you are working with already that is great- best of luck with everything!

[Andrew Bilis]

@Ally Mager 1% rental basically means that one months rent is 1% of your all in price on a rental property.

[Don Spafford]

@Ally Mager The 1% rule is meaningless for large multi-family that you are looking to do. That's just a rule of thumb that is more for 1-4 units. The more units you add, that becomes less helpful. In this area of Eastern Idaho there are not a lot of properties for the price range you are looking for. At least not to put that much value on a single apartment complex. You could maybe split it out over several. Unless you want to build them yourself. But that may not work for your 1031. There are some 20 and 30 units that would total about $5M together. Have you considered other commercial property, such as office, retail, or industrial space? Otherwise you may have to spread it out over several properties, and honestly that may not be a bad thing. You can use that 1031 toward as many properties as you'd like. So you could buy something in several of the states/cities you are interested in rather than deciding on just one.

[Cristian Vences]

I have a 106 unit condo bundle here in Houston.
$878/month per unit
10K EMD
$8,200,000

[Ally Mager]

@Don Spafford

Thank you for explaining the 1% rule!

We had found a few properties in East Idaho that fit the price range, however had too many 1 bedrooms. Due to self managing, we don’t want to be spread out over several cities nor more than 2 properties.

We currently have a 60 unit building, 28 condo complex and 7 4-plex’s all within 1 block of each other, which works nicely.

In the past we did look into commercial, but my father decided that he would like to stay in multi family.

[Ally Mager]

@Cristian Vences

Thank you, but that property doesn’t fit what we’re needing. Do you have any others that are between 18-28 million in the DFW/Waco/Lubbock area?

[Marc Rice]

@Ally Mager

In my local market, most large multi are selling for $75-100k/door.

[Tim Polk]

@Ally Mager

Interested in Indiana? Red state very landlord friendly

[Stephen Brown]

Some parts of Northwest Ohio have the characteristics that you're looking for. We aren't a red state but we aren't blue, we've got newer builds where you can purchase multiple buildings close to each other, they cash flow well and they'd be good investment for 1031'ers.

[Randall E Collins]

I have knowledge of a vacant 22rm motel located in a rural area of Dallas, near Cedar Creek Lake?

[Remington Lyman]

Originally posted by @Ally Mager:

Hello,

We’re looking to 1031 out of our properties here in Portland, but cannot find a property that we would like to transition into.

We have multiple offers on our properties, but will not sell/list until we have found the correct property to transition into due to not wanting to be under the strain of a 1031 time clock.

Over the last year we’ve been in contact with realtors throughout many states, and have been using LoopNet/Crexi, etc., My question is, what other search sources do you use to find property?

We’re looking for a property that fits the following criteria:

- Value between 18-28 million

- Located in a red state with good landlord-tenant laws (Texas and Idaho are our preference)

- If Texas, not near the boarder, San Antanio or Houston area. We self manage and do not want to live in those areas.

- One building, or 2 if very close together

- No student, affordable or high rise housing

- Built after 1980

I understand that we’re looking for a needle in the haystack given the current market conditions, but would appreciate any advice on other sources to look into!

Thank you😊

I cold call a lot in Columbus, Ohio. 

[Ally Mager]

@Tim Polk

We have some family there, but have never looked deep into it due to not wanting to live there personally. I’ll do some more research on the state though! Thanks!

[Ally Mager]

@Randall E Collins

Thank you, but that property would not fit what we’re looking for.

[Brandon Sturgill]

@Ally Mager what you are attempting is highly complex and the assumption of risk without the right team could be detrimental...the people in the room helping with this exchange should have the best connections to get you into the property you are looking for.

If you have time, take a year to build your broker connections in the locations you want to be...find the top 1% of all commercial multifamily brokers and work on your relationship.

The only place you're going to see your target asset listed is on Marcus and Millichap or maybe Loopnet...

[Ally Mager]

@Brandon Sturgill

I forgot about looking on Marcus & Millichap! Thanks! There’s a lot more properties on there that I can’t find on loopnet or Crexi.

[Cody L.]

Originally posted by @Don Spafford:

@Ally Mager The 1% rule is meaningless for large multi-family that you are looking to do. That's just a rule of thumb that is more for 1-4 units. The more units you add, that becomes less helpful. 

I disagree completely.  The rental income to price ratio is one I look at constantly.  In fact, when I'm sent a deal it's the first thing I look at.  How much do they want per door, and what's the avg rent per door.  If a $70k/door multi doesn't have at least $700/month rents (1%), I pass.

I've been doing this since I started and still look at this on large ($20m+) deals ever day.

If anything, it DOESN'T work on 1-4 family as well since those tend to be much harder to get good rent ratios due to competition from home buyers and access to cheaper 30 year debt. 

[Cody L.]

1) M&M is garbage (IMO).  Find a local broker who specalizes in that submarket.  There are 4-5 groups that do 80% of the Houston deals.  M&M is not one of them. 

2) Don't rule out Houston.  It's an awesome place to live if you move to the right area (midtown/montrose/heights).  I enjoy being in Houston almost as much as San Diego

3) Don't rule out 80's or older or you're going to rule out the majority of buildings in many submarkets.  ie. in Houston it seems 80% of class C was built about 1965.  If it's been kept up they're fine.  I have two buildings in downtown Houston (32 unit and 56 unit) that are ~100 years old and gorgeous 

(see pics)

Good luck!

[Harrison Hildahl]

Hello Ally, I highly reccomend working with an agent at Marcus & Millichap, they have excluive listings across all 50 states and canada in all commercial real estate product types: Multifamily, Self-Storage, Industrial, Triple Net Retail, Mobile Home Parks. It is essentially a rotating list of exclusive exchange properties that not many people have access too. Reach out to me if you are interested in speaking! I would be happy to set up a more formal time. I focus in Multifamily at M&M Portland Office. There are about 62 texas apartment listings right now! 

[Ally Mager]

@Cody L. We currently own pre 1980 construction units, but would prefer to transition into newer construction. I agree that if a property is well taken care of, then the build year isn't such a factor. You can have a property that was constructed in 2010 be in worse shape than one from 1970! All depends on how the property was taken care of. 

We're ruling out Houston due to the weather and being so close to the coast. While we will follow where a deal takes us, we also want to be comfortable with where we're going to live.