Multi family investing

[Saul Clavijo]

Hi! Novice looking to get into multi family investing in Detroit, Cleveland, Columbus, or Cincinnati. Currently own my home and two other properties which I do STR and LTR in. Hoping someone could help me get into multi family in these areas for under $150k.

Thanks!

[Sam McCormack]

Quote from @Saul Clavijo:

Hi! Novice looking to get into multi family investing in Detroit, Cleveland, Columbus, or Cincinnati. Currently own my home and two other properties which I do STR and LTR in. Hoping someone could help me get into multi family in these areas for under $150k.

Thanks!

 Hey Saul! Shooting you a message now

[Austin McClain]

$150k will be hard to get anything 2+ units relatively turn key in Columbus. I'm not familiar with Detriot, but it looks like Cleveland would make more sense in the 150k price range 

[Samuel Diouf]

Hey Saul, for under $150k you'd be able to find a solid cash flowing duplex in the Cleveland market. 

I wouldn't fall for any deals in the D or F areas where the prices look like steals... Because the expenses and vacancies are going to be a lot higher. There are some great lower entry points in multiple C locations. In your budget, I like neighborhoods like Clark Fulton. 

[Regina Blake]

Hi, yes Ohio is a place where people from all over the world are investing in real estate. Please feel free to reach out with questions. Best Wishes!

[Jimmy Lieu]

Quote from @Saul Clavijo:

Hi! Novice looking to get into multi family investing in Detroit, Cleveland, Columbus, or Cincinnati. Currently own my home and two other properties which I do STR and LTR in. Hoping someone could help me get into multi family in these areas for under $150k.

Thanks!

Hi Saul, to be honest with you, properties at that price point here in Columbus are going to need some serious TLC. You will need to factor in rehab costs, which could easily eat up another $50-75k depending on the condition. For turnkey MF properties, prices start at $190k. Happy to connect and answer any other questions you may have.

[Drew Sygit]

@Saul Clavijo make sure you understand you will be getting into Class C properties at those numbers.

Food for though below, DM us to chat more about Detroit:

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Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?

Similarly, if you put several Class D tenants in a Class A 4-plex, what do you think will happen to the property?

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

The City of Detroit has 183 Neighborhoods we’ve analyzed.

[Min Zhang]

You can definitely find multifamily options under $150k in Cleveland, but when it comes to Columbus and Cincinnati, that price point is pretty much a no-go. However, in Columbus, you might find duplexes in decent shape for around $200k to $250k, usually located in C-class neighborhoods. Hope that helps Saul!

[Zeke Liston]

Quote from @Saul Clavijo:

Hi! Novice looking to get into multi family investing in Detroit, Cleveland, Columbus, or Cincinnati. Currently own my home and two other properties which I do STR and LTR in. Hoping someone could help me get into multi family in these areas for under $150k.

Thanks!

 Hey Saul, I would try to narrow the search down to 1-2 cities. It's going to be hard to fully focus on four different cities. I've heard good things about all four cities, so I would personally see what cities I can build the best teams in and go from there. Obviously, a good team will be crucial for you since you'll be investing out of state. Good luck!