Thinking about purchasing my first Quad-plex apartment building

[Jonathan Kim]

Hello  BiggerPockets Community...

So I'm at the point where I am now thinking about buying a 4 family house. I purchased the duplex I'm living in now about 3 years ago. Completely run down but one side was in good condition and had a tenant. I gutted and totally renovated the other side I'm living in and saved enough for another decent size investment. I particularly enjoyed the financial bump up you get going with this investment options. Passive income, loving it! 

So in the 3 years I started down this path, I got handy enough to fix general house issues (replaced sump pump and leaky sinks and tubs), manage tenants, lease issues and with an ever realizing thought in my head that real estate is not easy. It needs to be respected and you have to be vigilant or it all can go south on you quick.  

In any case, that's my back story and now to the task at hand...

I'm looking at a Quad apartment building right now and the numbers looks right to me. The condition is okay and the roof is in good condition. I didn't see any signs of water damage or structure problems but I'm not an inspector. I'm thinking of pulling the trigger soon but I needed to consult everyone here on how should I approach this. I need suggestion on how to prepare and things to look out for and more immediately... Should I start a LLC and buy the property under the LLC name?

Thanks in advance for the advice and your time.

[Jennifer Beadles]

If you plan on buying the property in an LLC you need to find financing outside of the traditional Fannie Mae/Freddie Mac loans because they do not allow you to purchase in an LLC, they require you purchase as an individual. You'd need to get a portfolio loan through a local bank, pay cash or get seller financing.

Many investors get a conventional loan with 25% down in their name, and then quit claim the property into their LLC after it closes. You'll want to consult with your attorney on this as it can potentially trigger the due on sale clause if caught, and to do it right you'd want to get it cleared by the title company.

If you hadn't already planned on it, I'd suggest you get an inspection before you buy as well. 

If the 4plex is tenant occupied be sure to review the leases and get as much info from the seller as possible. Often times I see multi family sellers not to move in checklists and lose leases etc so just know what you're getting in to.