How do I buy a 100 Multifamily unit with $4,000

Question

Hi BP,

My goal for 2015 is to find a 100 multifamily unit(s) to buy and I only have $4,000 at this time.  I've teamed up with an investor for 2015 to do 1 flip a month (first home under contract now).  Our goal is to net $10k to $20k or more per flip, each.  At what point would it be a good time to find this 100 multifamily unit? Would you use Hard Money or Private Money?

--If Hard money what is the max interest rate you would pay?

--If Private Money, how would you go about securing the PM, and what % is good to offer?

At this time, my plan is to take the profits from the first flip and Hard Money a $40K SFH to generate some monthly cash flow.  Should I save the profits, 1031 exchange each flip, and wait on the 100 multifamily unit? Or, buy a few SFH throughout the year, re-fi and then purchase the 100 multifamily unit?

Joe Fairless · Answer

@Dennis Williams if you want to invest in multifamily then I'd focus efforts on buying multifamily - not flipping. However, if you have no other source of income then you'll need money to live off of (so flipping might be an option) but if you have income coming in from a full-time job then I'd save the 4k, use about $100 of it to buy books, read them (first one I'd read is The Complete Guide to Buying and Selling Apartment Buildings by Steve Berges) and then partner up with someone doing multifamily deals by adding value in their life (either your time, connections and/or money).

Learn from that person, then follow the steps they took and do it for yourself.

Account Closed · Answer

I'm using my wholesaling and flip money to build my corporation's commercial credit, then I will leverage that to buy apartments and other commercial real estate.

Dennis Williams · Answer

Wow! Thanks to all that responded.  This helped me put everything into perspective.  @Brian Ortins I'm not firm on 100 units, I wanted to use this example so I could start developing a path to buying a 100 +/- unit building(s).  I wasn't sure if it was over ambition or if it was doable.  Now I see it is doable, I just need a bit more experience in SF flips and cash on hand for the purchase.

I would still like to know the following from someone:

Would you use Hard Money or Private Money?

--If Hard money what is the max interest rate you would pay?

--If Private Money, how would you go about securing the PM, and what % is good to offer?

Bill Exeter · Answer

@Dennis Williams

Flips do not qualify for 1031 Exchange treatment.  You must have the intent to hold properties for rental, investment or business use in order to qualify for 1031 Exchange treatment.  Properties acquired to rehab and then sell, or flip, are held for sale and not held for investment and therefore do not qualify.

Wayne Brooks · Answer

Buying 100 units with $100k out of pocket is not realistic, without stellar financials and a track record.  Also, flips don't qualify for a 1031.

Dennis Williams · Answer

@Joe Fairless Great advice. I will start looking for a MF investor to shadow next year.

Patrick L. · Answer

On top of the $300k for that downpayment you'd also have very high closing costs, inspections, surveys, etc.  When you go commercial everything gets a lot more expensive.  You will also need cash reserves, cash for deferred maintenance, etc.    If you're talking about $30k units then you're going to want to have at least $1M cash in hand before you can seriously make that purchase, $4k won't even come close to covering your inspections (whether you close or not).

Brian Ortins · Answer

Why are you firm on a 100 unit multifamily building?  That is a very specific property that may or may not exist when you are ready to purchase.  I agree with the other investors that you will need hundreds of thousands of dollars for this one purchase.  Why not build a portfolio of smaller multis, SFRs and whatever properties are a "GOOD DEAL"?  These smaller properties will allow you to pull equity in the future to make more down payments on other properties, or you can sell all of these properties for a down payment to purchase the large apartment building.

Troy Fisher · Answer

100 units is pretty ambitious for someone who only has $4k in the bank.  If you find something in the $30k/unit side of things at 100 units, puts you at a $3MM price tag.  Even if you found an awesome 10% owner carry back situation you'd still need to be at $300k!

Jabari Long · Answer

Dennis

Develop your skills in the fix and flip space.  This is a great way to increase the amount of cash you have in the bank.  Don't be in a rush to buy that 100 unit.  Gain more experience first.  Deals like that will always around.

How do I buy a 100 Multifamily unit with $4,000

Most Popular Reply