Tips Heading Into First Time Multifamily/Property Purchase?

Question

Hi Everyone!

I'll preface this post telling you all a little bit about myself and how I got to this point today: I am 25, turning 26 in July, and have spent the last 28 months aggressively paying off my student loans. I managed to pay off $61,000 in that time, as well as a $2,000 personal loan from my mother for my first car. Because of these efforts, I'm now completely debt-free and ready to start my journey into real estate investing... something I have been waiting for for many, many months!

I currently work for Enterprise Truck Rental as an Assistant Manager, earning a target income of $58,000 (likely a tad more with bonus incentives and higher-than-normal commissions due to the fast growth of the division). I currently live with my parents and am looking into getting my first duplex/triplex in the central Connecticut area, as I do not know where my next promotion to a Branch Manager will be yet (I want to make sure I buy somewhere that won't make my commute completely miserable time-wise).

My step sister's father owns a brokerage in CT and I will be meeting with him next Tuesday to discuss what exactly I'm looking for; I'm hoping he will be a dangerous weapon when locating quality deals, whether on or off market, to make sure that my first deal is a solid one.

The following bullet points are questions I will have for him, but I want to ask all of you the same so that I can hone in on some specific numbers/details that I lack as a first-time real estate investor:

- What criteron should I focus in on as far as making the numbers work for a deal to be a "good deal"? $ per door? ROI? Ease of landlording?

- If any of you are CT real estate investors, which towns/cities should I be looking for these kinds of properties? I've been thinking the Manchester area, but I don't want to get tunnel vision and limit myself to one area if there are other attractive areas to look into!

- I'm likely going the FHA route with my first purchase, so what are some of the key things to look out for as far as gotchas or things most first time investors fail to catch on investment #1?

Thank you all in advance for your involvement in helping out a fellow rookie! I look forward to reading everyone's responses!

Brian J Allen · Answer

@Tyler Daly check out this meetup in Putnam CT.  Tony Chabot is fantastic guy.   https://www.facebook.com/event...

and he is good to work with.  I do Multifamily in Worcester, MA but refer buyers to Tony in the Quiet Corner of CT.  Another word on FHA, look into streamlined 203K so if the property has a few flaws you can take care of them at the beginning.  A lot of sellers and agents are afraid of the FHA inspection/appraisal so they won't take your offer.

Tyler Daly · Answer

@Jonathan Bombaci Thanks so much! It wasn't an easy battle but it was worth it! Chances are I'll end up down in Old Saybrook if all of the dominoes fall the way I'm expecting them to, so it's probably a decent idea to stay in the central CT area.

Do you have any tools you'd recommend as far as running the numbers go?

My step sisters dad has an extensive network of financers so I'm hoping at least one of them is well-versed in FHA lending! I'll definitely have a detailed list of questions for whoever I speak to!

Appreciate your response, I'll be sure to keep ya updated!

Andrew Freed · Answer

@Brian J Allen - Streamlined 203k? Do you mean a FHA 203k rehab loan? If so, that could be a good strategy for targeting some of these 3 families that won't pass FHA requirements but don't require major renovations. Do you find the financing approval process to be longer or more stringent? I hear you need to coordinate with a contractor and hud inspector, which might make the closing longer and more challenging. I'd love to hear about your experiences / thoughts.

Joshua Janus · Answer

@Tyler Daly You have a perfect credit score? Wow. Well that is awesome. Review the guidelines on the FHA website and there are some useful videos on YouTube. Make sure you are watching one that is recent as the terms will change. Your in a great spot!

Brian J Allen · Answer

@Tyler Daly the Streamlined should be pretty easy.  make sure you work with a banker who does them and can explain it..  I would also encourage you to search out realtors who work multifamily in the market you are searching for.  I work Worcester, MA and since I do a ton of business, I hear about 30% of the properties pre MLS.  I am sure there are CT realtors who are similar in what they do.

Jonathan Bombaci · Answer

Hi @Tyler Daly congratulations on paying off your debt and deciding to househack. I started with a 3 family househack in Vernon Ct and grew up in Manchester so I know that area well. I think those are good markets to target given you don’t know where you will be working yet. They’re right in the center of the state it’s easy access to the highway which makes for a reasonable commute to just about anywhere in the state. - as far as what to look for I’d say run your numbers and get good at running them. Your first property needs to be a good one so you can snowball it into your 2nd and 3rd property quickly. When living there you’ll likely have to pay yourself some rent but the property should produce positive cashflow if/when you decide to move out.

- fha is a great loan but it comes with some headaches. Make sure you pick a lender that does a lot of FHA loans and has done them on MF’s in the last 3 months. The rules are always changing and you want someone who does enough business to understand the current underwriting guidelines. The self sufficiency test and 3-6 months of reserves should be things you ask them about.

- as far as mistakes I’d just say don’t bite off more than you can chew on your first one. Some value add is good, maybe 1 “problem tenant” can be dealt with for a good deal, but don’t take on too much in search of a “good deal”. You need to have fun with your first one and overloading yourself could result in an unfavorable experience.

I’d also like to add try to find a real estate networking group in CT to join. We host 5 Free monthly ones on MA and NH (Lowell, Waltham, Worcester, Manchester NH, and Virtual) but nothing on CT yet. Check out the events tab here on BP to see what’s local and start networking with other investors. You’ll be more likely to get an off-market deal from there network than from a residential broker.

Best,

Jon

Tyler Daly · Answer

@Joshua Janus wow I'm not sure where I got 850 from maybe in a dream or something! I'm actually sitting at a 787 credit score currently. So not perfect, but still respectable! And good call on checking on how recent any YouTube videos on FHA loans are. I'll definitely do my reading on it too!

Jonathan Bombaci · Answer

I actually have family in Old Saybrook and used to spend my summers there growing up. It’s a great town but expensive. Maybe checkout markets like New Haven, New London, and Middletown. It’ll keep your commute to under 30 mins if you think OS is where you’ll end up.

As far as tools we use the BP calculators. They’re great and when you start dealing with commercial banks this outputs are simple and easy to understand. That being said there are plenty of FREE calculators out there to use for now and you can upgrade to BP when you’re doing multiple deals per year.

I’ll be in OS quite a bit this summer if you ever want to grab coffee or a drink.

Best,

Jon

Tyler Daly · Answer

@Brian J Allen awesome that gives me good confidence moving forward, thanks Brian! and WOW, 30% pre MLS, that's solid! I'll definitely have to find some local realtors for those hookups!

Tyler Daly · Answer

@Brian J Allen is it any more of a headache to get a streamlined 203k loan than a regular FHA loan? I'm probably keeping the door open to properties that need some TLC to build some equity right off the bat, and a streamlined 203k loan seems to be a great tool to do that. I'll definitely check out your guy in Putnam, thanks for the referral!

Tips Heading Into First Time Multifamily/Property Purchase?

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