All Forum Posts by: Trevor Richardson

You should use Chat GPT to respond to answers, it saves a ton of time.

Stick to under 4 and under units for your first deal, you can get preapproved and they are best for newer MF investors. “Commercial” multifamily loans 5+ units can be really complicated. 

There are deals on the MLS, you just have to analyze them. It looks like you are but are you analyzing every single duplex every day? That's how we do it.

2-4 units are in the small multifamily category and even though some think it’s popular to live in these. That’s extremely rare at least in our market. Typically these buyers you are commenting about are just investing in the real estate for appreciation and tax advantages. They just buy rentals.

I don’t think it’s talked about very much on places like BP about how BIG that pool of residential investors actually are, really concentrated between 1-4 units. They are not concerned about anything that hits 8% or 7% or 6% or whatever. They pick the best options that are available and that they like. 

In our market (Reno, NV) we see mom and pops buying single family rentals about every single day, based on our data tracking SFR rentals. When we calculate returns on single family we typically get 4 caps all day. So every day in our market real estate investors are buying 4 cap houses. Like that's the most consistent investor in our market. Today someone will close on a house and rent it out in a month and we will calculate it at a 4 cap or lower. I admit, we are still also still trying to discover why they picked one 4 cap home over another haha.

There is a very large pool of equity investors who “just buy” rentals consistently. That’s my conclusion. They don’t care about the returns. 

BTR for SFRs is still really new, the large rental funds like American Homes really took off with it several years ago. Though it’s more established now it’s a fairly new product/method. If you go back 8 years there was not something like an entire neighborhood of detached homes that were designed to be rented like multifamily.

That said BTR isn't new, in fact every apartment building ever built is essentially BTR. It was “built to rent”. It was not designed for the owner to occupy. Anyone doing MF for SF BTR is going to want to sell it stabilized. The only way they are not going to do that is if they are distressed in some sort of way. Investment properties are sold based on cash flow, if there is not any cash flow it’s really difficult to get a good price or sell at all.  

Quote from @Nathan Gesner:

From what I've read, rent rates in Nashville have increased by more than 10% in the last year. You could increase your tenant 5% and they would still be below average.

Better yet, don't listen to statistics and averages. Study your market and really understand the value of your specific property, then charge what it's worth. 

If you feel these tenants were burned by the early hiccups, let them move out and start fresh with someone else that won't experience the hiccups and is willing to pay market rate.

Correct. It’s amazing how many SFR owners don’t know their real rental rate for their home. I could poll 100 owners and maybe 5 would actually have researched it and know what the monthly rent for their house could be. 

Duplexes are a viable part of a small multifamily platform. They hold their value well and usually sell for a higher per unit price than other multifamily. They are also a great way to get started in real estate investing. Our duplex reporting is just part of our Reno Multifamily Report that helps investors stay informed on what is happening in the multifamily market.

Quote from @Evan Polaski:

@Trevor Richardson

This is where things become really sticky.  MF is commercial OVER 4 units from a lending perspective, since you are outside of conventional Fannie and Freddie lending products (until you get into over $1mm balance from the Small Balance program).  

The use type is certainly residential, but the common market perception is residential is primarily owner occupant product.  

Then you get into "commercial" brokers.  In Ohio, there is no distinction in licensure, so the commercial brokers that focus on retail, industrial, office, etc, and even large apartment complexes have the same exact license as the realtor repping buyers and sellers for single family homes.  

I will note, that whether you think a 200 unit apartment complex is residential or commercial, the multifamily brokers, just like the industrial and retail and office, tend to all be specialists.  You may see a little crossover in the smaller mixed use product, where an "apartment broker" is listing a 6k sq ft mixed use building with first floor retail and 8 apartments up top, but whether they are their own shop or not, they are certainly their own team.  CBRE, Cushman, Marcus, etc all have their multifamily group, their office group, their retail group, etc.

Correct. Yes I’m well aware of lending brokerages etc… I exclusively focus on Multifamily brokerage. I’ve done about 80 or so multifamily transactions from duplexes to 250 units. 

My issue, is that from a consumer standpoint the industry perceives to switch from residential to commercial at 4. I understand the lending changes but when dealing with clients they are looking at 2 units 4 units 6 or 8. It’s based on their purchasing power, which I know changes at 4 because 5+ we will calc DSCR to determine LTVs. 

It’s all multifamily, they don’t care about the terminology. Only the industry we work in cares about the terminology. That’s the frustrating part, it’s confusing to our clients. 

American Homes 4 Rent owns 60k SFR homes they rent out. Are they not “commercial”. They own more units than some commercial multifamily groups.

Its all residential to me but also by definition the only difference to me is purchasing power. A tiny office space 200SF for lease is completely in the “commercial zone” without question. But a $500k house as a rental property is residential? 

Your points are all correct I just love breaking down this topic and finding out how others in the industry perceive it. The license part is also correct. In Nevada it’s the same. So you can sell homes, 4 units, 25 units, 300 units with the same license.  

Quote from @Evan Polaski:

@Michael A., I am not sure if the customary relationship is the same in Canada as in the US, but when you get into commercial listing in the US, typically the buyer is self represented and the broker is representing the seller.

That being said, are you looking to buy or sell property? And in the US, there is no "official" threshold of what a commercial multifamily broker is. I have seen 20 unit properties on the MLS with a standard agent that is selling single family homes, and I have seen 6 units on Loopnet with brokers that only focus exclusively on (fill in the threshold) type listing. The local CBRE multifamily broker won't take listing below roughly $10mm (if I recall my conversation from years ago).

I would start by searching the MLS (assuming there is one in your market) and Loopnet for listing similar to what you are either looking to buy or sell. And then, regardless of if you are interested in the actual property, reach out to the broker and offer up coffee to get to know each other.

You tapped on one of the most confusing parts of real estate. Multifamily is really not commercial, it’s residential by definition no matter the unit count. It’s just thrown into commercial offices build around commercial leasing. Small multifamily 2-10 units is completely a forgotten black hole in the real estate industry. I believe multifamily as a brokerage should be in its own shop, unless the market is too small.

If you are considering Reno it’s a day drive from your location. Reno is expensive but I have seen some awesome deals this year. Like the best I’ve seen in 7 years.

We operate a “investor friendly” brokerage where we just help clients buy investment properties. We do top to bottom advanced analysis for any of our clients to help them understand all the numbers.

For instance we saw a 4 plex hit today and have already completed an underwriting analysis to completely understand the investments potential. There are about 30 multifamily properties on the market in N. Nevada and we have all of them analyzed all the time. Hopefully you are working with an investment brokerage that will give you complete analysis for every property in the given market. 

Single-family investors are a prominent force in the real estate market. As of 2023, about 27% of single-family transactions in the United States were real estate investors. This is a significant increase from previous years, and it is likely to continue to grow in the future. This trend is similar to what we are seeing in Reno, Nevada.