Wow @Tayvion Payton you struck gold I think I upvoted every initial reply on this thread. Good stuff.
@Matthew Drouin had a great reply:
"Typically 50% of revenue is going to go right to operating expenses on small multi family. Lessons Learned: I should have transitioned to larger commercial deals sooner. It took me 11 years, 25 properties, and 76 doors just to replace my income. It took me 1 property and 1 deal to replace my wife’s."
@Drew Sygit
@Drew Sygit had an excellent response regarding property class. Only thing I would add here is to take a birds eye view of the area and try to decide if it will gentrify in your favor so the property appreciates at a higher rate than other areas. How much money is entering the local area? Do you see rehabs and dumpsters showing up and roads being repaved or even sidewalks being redone with pavers, etc? Any new commercial, industrial projects nearby? Maybe attend a chamber of commerce meeting and ask around where development will start. Ask the township for their 3-5 year development plan...
@Joshua Christensen brought up some good points as well. Get familiar with proformas. Really a MF deal is similar to a SF deal but there's more moving parts and more at stake if things go wrong. You won't "add" much value to a Class A property. It's already an "A".
I'll only add when talking to brokers have a "buy box" defined and research commercial deals to understand it as best you can before you have your first meeting or your broker contact will likely consider you to be a low-chance buyer and not take you seriously.
@Preston Dean Mentioned seeing the property. Totally agree! Until you build trust with a team or contact you should view every property esp a MF that is a larger investment. I'd only add to get a professional inspection done with a very thorough team. Sellers are in it to get the most money for their property. As an example I was looking at a multi unit, smaller building and within 90 seconds of viewing the proforma I saw the maintenance/repair figures were "low". Figuring the seller was milking the property and doing minimal upkeep, the inspection team report has so far already helped me bring the seller down several 100K in asking price. Do your due diligence.
Only thing I'd add is consider off-market as well. Brokers either get leads through a network of brokers in other disciplines or organic contacts. You can do this too! If you want a certain type of MF in a certain area, build a list, make some calls, you'd be surprised. There's always someone getting older, or something going on in their life, and wants to sell out. Going direct saves you and the seller money, giving you a lower cost to entry which helps all your numbers, but you have to put in the extra work to find that deal. It's also easier to neg direct with a seller without brokers in the middle imo. But again, as mentioned, get fam with COC, Cap, IRR, etc.
You said later you had $80k to invest in a multi family. One thing I'll add to an off-market deal is you might find a seller willing to do seller financing.
You said, "I don't think the time exchanged to manage SFH would be worth my time and the cash flow most likely wouldn't be reasonable enough to hire a property manager. I would be open to a 3-4 unit, but my ideal sized property would be 10-20 units."
Comparing workload, a multi-unit property will still require showings, maintenance etc for multiple units. If tenants stay one year on average, you will need to show 12 units for a 12 unit property every year. A SFH will require showing just one. 12 maintenance calls vs 1 maintenance call. Etc. So some things will be easier and more convenient (one roof to repair) but many tasks will simply be a multiple based on the number of doors.
