First Multifamily Purchase

[John Penola]

I am looking to buy a multifamily investment property. I am narrowing my search to a 2-4 unit building in the Indianapolis area.

I am starting the process with 2 activities:

1) Reaching out to brokers in the area

2) Analyzing deals (from BP and Loopnet) to learn the market

My goal is to purchase a property by the end of 2019.

Any advice would be appreciated - thanks!

[Jim S.]

Originally posted by @John Penola:

I am looking to buy a multifamily investment property. I am narrowing my search to a 2-4 unit building in the Indianapolis area.

I am starting the process with 2 activities:

1) Reaching out to brokers in the area

2) Analyzing deals (from BP and Loopnet) to learn the market

My goal is to purchase a property by the end of 2019.

Any advice would be appreciated - thanks!

 Hi John,

Great goal! After buying a few 2-4 units myself in two different markets (both remote) I would recommend giving my system a shot:

1) Ask around on BP/search topics for great property management firms in Indianapolis. Call the top 2-3 and set up 15 minutes with them to discuss which sub-markets are worth investing in, how many units each company manages, what software they use, how many employees they have, and what services they offer. If they offer an in-house brokerage, try using one of their agents who you know will only be looking for investments properties, if they do not have an in-house brokerage ask them for a referral to an agent. Ideally the PM company is well respected and handles acquisition, renovations, & property management all-in house.

2) Talk with the agent about the same idea of which sub-market/neighborhoods you should look at investing in. Overall I don't see a great reason to use more than one agent when you are first starting so pick the agent that you seem to have the best relationship and get setup with an MLS search. You can always drop your agent if they are not meeting your needs (assuming they haven't had you sign a buyers agency doc).

3) Review deals for the 1-2% rule, for the first property I’d recommend nothing deeper than a cosmetic rehab so “as-is” properties should get a deeper explanation from your agent. Your goal will be to learn over the next year what items need maintenance, and see what kind of crazy scenarios can happen when you have 4 tenants. Download a sample pro forma from online or send me a PM and I can give you the one I built to analyze 2-4 units and small commercial multi-family deals. Always ask your agent if they can get current rents/expenses but if not you’ll eventually get a feel for what the market rates look like for water, sewer, garbage, and any other utilities you need to pay for.

Less than two years ago I was in the market for my first MF property and with some luck if these two deals close I’ll be at 25 units by the end of September. Good luck!