Looking for my first multi-family

[Philip Anderson]

Hi everyone!

I am looking to find my first multi-family. I would like to know what resources people recommend to find a market that would be a good place to do that. I am also open to recommendations from seasoned pros if they are willing to share. I would like to find one soon and start the journey. I have approx 450k to start with. I have been studying CAP rates, GRM and COC. I just would like to know how to apply those and find a good market so i can learn what the local CAP rates are, etc.

I own a single family LTR and have been managing that for 7 years.  That cash flows 900 a month. I will be investing my SDIRA for this new multi-family investment.  Anyone that has experience in using a SDIRA for their investment property, I would also welcome any tips or tricks when it comes to that aspect of the investment. 

BTW, I live in CA but am looking to invest outside of CA.

Thank you!

[Arn Cenedella]

@Philip Anderson

1. I’d want to be very clear about SDIRA regulations regarding self-involvement. Your “I will collect the rents” sounds like property management functions. I do know for a fact, your SDIRA could NOT pay you as an individual any PM fee. Whether no PM payment to you as an individual negates the concern over self-involvement, I do not know. I suspect it’s not quite as simple as you perceive but I could be wrong. 🤷‍♂️

2. Be sure you understand how UBIT tax works for an investment purchased with debt and SDIRA ownership. It’s not a deal killer per se but I find far too many investors are surprised about this issue after they have already made the investment. Figure this out first. Rates for SDIRA loans are often higher than rates for non SDIRA loans.

3. Be sure to understand how debt will work and how SDIRA purchase impacts this. Given your $450K down, you’ll be looking to buy something for $1.5M - $1M loan. This most probably will be a recourse loan from a local bank or credit union. With a recourse loan, the lender may ask you to sign a personal guaranty. Does that violate SDIRA regs? Don’t know, but you need to find out.

In terms of market, you want to choose a market where you can get to easily - 2 or 3 hour drive or non stop flight. If it takes all day to get there, you won’t be able to spend enough time to get there as often as you need.

4. I am a San Francisco Bay Area expat now living in Greenville SC and loving it - great place to live great place to invest. My caution is there are lots of sharks out there looking to take advantage of a big money CA investor - this is of course a generalization- but often CA investors overpay going to a new market. Be sure you take the time to really understand the lay of the land. Talk to the folks in the coffee shop or restaurant - the Uber driver - people out and about. They have nothing to sell so you will get the straight story from them.

Good luck 

Arn