Thank you for reading my post. Please let me know if I should be posting this in another category. I'll start by saying that I am a newbie. Other than my primary residence I bought in 2011, I have yet to make any moves in the market and like many new investors I am scared to make my first move. That being said I feel like if I can afford to, the right move to make is a big one. One address/as many doors as possible. I figure that a 2 Million dollar building with a few dozen units (maybe more) could be a target for my first investment. Couple questions for those who are well educated in this space... 1- What type of NOI can one expect today on a property like that? 2- It seems like anything I have found listed online (Loopnet) claims to be in the 5-7% range. For a 1st time investor do you think is a 5-7% NOI is enough to tie up that much cash (20% down payment) on a 2M building? 3- How would you go about looking for a "good deal" (below intrinsic value) in this space? What cities? 4- Should I only be looking in the state I live in? 5- How would you go about perhaps finding a successful mentor that will help find and go in the deal with me allowing us to maybe buy more than one building together? Thanks in advance for your input. I love this forum because I can hopefully get answers from experienced folks without having to attend local REI meetings and filter through the BS, the wannabe's, and the ones that are just their for prospecting. No offense to those meetings. I think they can be a great forum, but time is money and it is so frustrating for a newbie to break away from their family on a weekday evening to drive across town and attend one of these meetings only to leave more confused then when they stepped foot in the place and feel like they are back do the drawing board.

Thank you for taking your time to make such an invaluable contribution to this thread.

Yes. As long as your referring to property taxes and not income taxes. NOI= EGI - OE EGI (Effective Gross Income)-The amount of income produced by a piece of property, plus miscellaneous income, less vacancy costs and collection losses. In simple terms it all the dollars you actually collect. OE (operating expenses)- All the costs it takes to run the property that are not specific to an indivual owner. To your question, no mater who owns it they will have to pay property tax and therefore it is a operating expense. A mortgage payment depends on the owner. One owner may pay cash and not have a mortgage another may get a 3% interest rate and another may take a 10%. because the mortgage payment expense varies depending upon the specific owner it is not a operating expense and therefore does not effect NOI.

@Jered Sturm Thanks for sharing. I just started reading it and will make sure I read in its entirety. I just have one question for now about the $1M apartment complex with 8% CAP rate example you start the article with. Does the 80k NOI before paying the mortgage payment on 800k take into consideration the annual taxes you pay for owning the building?

@Justin Cabral Here is a recent blog I wrote that aligns/answers your questions very well. I hope you find helpful. https://www.biggerpockets.com/renewsblog/how-the-wealthy-invest/

What type of ROI can I expect on a $2,000,000 MF?

Roy N.Pro Member

Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes

10y

Originally posted by @Justin Cabral:

...

Couple questions for those who are well educated in this space...

1- What type of NOI can one expect today on a property like that?

That is a bit like asking what fuel economy would you achieve with a $70,000 vehicle. Depending upon "what" you purchase - ie. a 2-tonne truck versus a electric car - your fuel economy could be drastically different.

The same is true with a building: If you purchase a 60-yr old, 50-unit building where there have been no improvements to the envelope; where heat is provided by an antiquated central boiler; and there is a tonne of deferred maintenance, your operating costs may be 65 - 75% of your gross revenue.

Conversely, if you were to purchase a 10yr old, 24-unit building - even one built to our lax North American minimum code requirements - where each unit has its own, independent heat and ventilation, your operating costs may only be 45% of your gross revenue.

LoopeNet is {generally} where the unsaleable collect. The "good" deals are long-gone before anything is ever listed. Find yourself an reputable commercial broker experienced in the area(s) where you are interested in investing. He or she will know what properties are coming available - or could be made available - long before you will find them on MLS or LoopNet.

We find our multi-unit prospects through word of mouth (networking) or from brokers who know what types properties fit our profile.

That is a business strategy you will have to decide based upon your comfort level. However, with a multiunit building of 24+ units, you will likely have both live-in superintendent and professional management - the larger the building the more necessary this will be. If you have good professional property management, then you need not be in the same City, state, or even, country.

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Jason Hirko

Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes

10y

@Justin Cabral what market are you looking at? And keep in mind, the NOI listed on loopnet is based on a cash buyer. I think you'd be hard pressed to get the financing you're talking about for any type of long term based on that return. Most lenders on that type of thing will only give you a 20-30 year amortization period, but have a balloon payment at 5 or something. The best ones will still only lock in your interest rate for a certain number of years, and then let it float, which could eat away that whole 5% really quickly

What type of ROI can I expect on a $2,000,000 MF?

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