Advice on two multi-family properties I'm looking at.

[Bryan Grissum]

Hello All! My name is Bryan. I am a CPA in Missouri and currently work for a large corporation in the St. Louis area as an internal auditor. My wife and I just joined Bigger Pockets and are wanting to get started in multi-family property investing for the long-term. Our short-term goal is to replace the income she earns working as a Property Administrator for a large/national commercial real estate services firm. Like I said before, we are just starting out. We've both read the Bigger Pockets Ultimate Beginner's Guide as well as a book we purchased on investing in duplexes, triplexes, and quads. Just for grins, I searched for multi-family properties within our area and I found two 4-unit properties for sale. Each property was built in 1977, are listed for $180,000 (each), and the listings state that the properties are fully rented out/have great cash flow. In addition, the listings state that a Net Operating Income Analysis is available for each of these properties. The listings also state that property management is available for each of these properties. Lastly, I should mention that these two properties are right next door to one another and have each been listed for sale since February 2015. 

I was drawn to these properties because with some hypothetical scenarios I have put to paper, one of these properties could nearly replace 100% of my wife's W-2 income (although she plans to keep working for the first 1-2 years of our real estate venture). So I've already imagined how much our life could change by purchasing both of these properties. However, with opportunity there is always risk as well and that is why I am here. I don't want to jump into any decisions based on my daydreams! With being a beginner, am I too ambitious by looking into staring out with 8 units? I also wanted to ask for some feedback and/or advice from seasoned investors about questions I should ask and things I should look into/be aware of before making any decisions. As of right now I am strictly in the planning and analysis phase. I want to contact the realtor with a list of questions related to the property and my wife and I plan on driving by the properties later to day just to get a good look at them and the area they're in. Here is my request list for the realtor so far:

1.) Request the Net Operating Income Analysis mentioned in the listing. 

2.) Inquire as to why the properties have been listed for so long. 

3.) Inquire about the impact on the properties from the most recent flooding in the area (Dec. 2015). It seems like it is far enough away from the areas that were under water, but I'd really want to be certain. 

4.) Ask about the tenants and if there are lease agreements. I'd also ask if copies would be made available as part of the purchase contract for review before closing.

Please let me know if there is anything I am missing or if there are any additional questions/concerns I should raise? I am also curious if we'd be able to take a look at the inside of the properties given the fact that each property is currently rented out. I know tenants have rights, and I wasn't sure if looking at the inside is allowed. Could someone please provide some insight regarding this matter? I am looking forward to receiving your feedback and honest opinions. Thanks!! Here are pictures of the two properties from the listings. 

[David Hale]

@Bryan Grissum

Would like to preface this by saying I'm an amateur myself (bought my first triplex in Aug '15 and a single family home recently), but since you didn't get a whole lot of responses I figured I would weigh in. Anyone please feel free to correct me.

Could be numerous reasons as to why they've been on the market that long, could be that the owner is trying to sell them at or above market value, could be some issues with the properties, could be not much interest for properties of that type in the area, could be the area is over-saturated with housing and they're hard to get rented, any number of things.

To answer your question obviously you're going to want to look inside before you even put an offer, the general rule is the landlord gives 24 hour notice to tenants. I would not buy something I could not inspect before making an offer.

Also make sure to get copies of the leases before you even make an offer (they can black out SSN's or whatever if they need to), learned that the hard way.

It helps to have a realtor that actually works with investors. I know its tempting to go with your cousin or your friend, but don't settle for someone that isn't an expert. Ask them how many multi-family deals they've done lately, if they own any themselves, etc. A realtor that does a lot of homes may try to push you to buy the first or second place you look at, not know what you're looking for as an investor, etc.

Once you've had a chance to look at the places, and have all the paperwork in front of you run the numbers. I would personally not buy something I couldn't get at least 10% below market value on (not including immediate repairs it will need), that has a COC (cash on cash) return of 20% (for a fourplex). Make sure you're accounting for all expenses when you calculate COC return: debt services, taxes, ins, management, maintenance (overestimate this one to be safe), and more.

Also you need to consider how much in repairs you're going to need to do as soon as you purchase the property. Do not assume this number is zero, I would assume $10k on a place like those and adjust based off of the inspection. Do they need a new roof now or in the near future? AC? Furnace? Water heater? Pest problems? Mold? Foundation? Houses built before '78 may have lead paint, and may have asbestos. This is where a good home inspector will come into play. They should be going up on the roof, in every crawl space, radon and termite, the works.

I looked at a lot of places before buying my first property. Don't settle on the first one you look at unless it truly meets all your requirements.

Hope this was useful (and accurate).