Multi Family Buying Criteria

[Lauryn Meadows]

Needing some guidance! I've been reaching out to agents to find small- medium sized multi family deals and haven't had any luck. Today, however, I contacted a commercial lending broker at a local bank and he's actually giving me the time of day (hallelujah!). He's asked me to send him my buying criteria via email.

My husband and I are interested in value add multis. With that being said, what's a good place to start on coming up with this guideline for our criteria? I know a reasonable cap rate in my area is 12%. Should I go off of the purchasing cap rate or the ARV projected returns?

Also he's asked about my budget. I explained that if the deal can make money, I have partners that may be interested. (By partners I mean family- maybe). Technically we only have about $30k cash, plus $100k in retirement funds that would wind up being much less than that if we used it to invest in real estate at this time. So $30k isn't much to invest in a multi family with traditional financing. How do I work my way around that question without sounding novice or unclear in my criteria? 

Any other tips on what I should include in this criteria? 

Thanks BP community! I always appreciate everyone's help on here. 😃

[Moshe H.]

Hey @Lauryn Meadows, I think one of the best ways to get people to take you seriously is to learn the lingo. Make sure you know what DCR/DSCR is and then let that roll off your tongue when you're talking to lenders (they seem to like DCRs of 1.2 or more). You look like you're in a rural market so make sure lenders know that.

$30k is enough to make a down payment on a $120k commercial property. Prices in your area don't seem so high. I don't see a ton of multi-families, but it looks like there's a 6-unit in Huntington WV for $100,000.

You can tell the lender that you are looking for multi-family properties for $100,000 and up with a 12% cap rate and a minimum 20% cash-on-cash return (or whatever you determine your criteria to be) - and if the deal is good enough your investors would potentially be willing to spend up to $(fill in the blank).