BiggerPockets

conventional logic would be that you spread your risk over 5 doors instead of one. the only part that might be more difficult is obtaining financing as most mf lenders will require a deposit of 20% or more. good luck!

Brandi,

You will probably notice if you ask five investors a question like this you will get at least six answers.

I used to wholesale sfh and had a few I rented. Now, I only do multifamily. There are lots of reasons and a big one is getting competent management. It is almost impossible to get great management for sfh investments. And if you do find them they are expensive. Expect to pay 10% or more.

With multis I can always find great management I can work closely with even if I am accross the country at a much better price. The one I recently did in Spokane is being managed for 4% of the collected rents. I do have a bonus tied to them reducing expenses and getting the occupancy up but it is independant of the basic 4% of collected rents.

On one hand I kind of like that everyone is afraid of multis. On the other hand it is kind of lonely counting the money all by myself. ;)

Then only thing about negotiating better rates from your property management company is if that market gets hit with high vacancies then guess who's units get rented last and also who's units get the least desirable tenants?

-Michael

Keep in mind that 5 units or more will require commercial loans. Also, you could always start out with residential multis like duplex and quadplex units. You can develope some experience without getting yourself too deep.

If the owner is willing to carry, go for it! If not, you will have to come up with the money. It can be from your line of credit, HELOC, 401k, IRA (rules apply), or partner. If you have the "knack" for locating and negotiating great deals, money partners will jump on it.

Originally posted by Michael Shadow

Then only thing about negotiating better rates from your property management company is if that market gets hit with high vacancies then guess who's units get rented last and also who's units get the least desirable tenants?

-Michael

I didn't "negotiate better rates," 4% is the going rate in that area for a complex with that many units.

Originally posted by Will Barnard

Gary,
In that area you mentioned (by the way, what area is it?), is that the only average charges from the PM on units of that size? In other words, do you also pay all costs such as advertising, payroll, etc. and are there placement fees in addition to the 4%?

Spokane, WA

There are costs in addition the the 4% fee but I would have those anyway. If I was managing the complex, I'd still have to advertise, I'd still have maintenance and all. There is no placement fee for the first 12 months or until we reach 90% occupied, whichever comes first. After that, placement fees are tied to occupancy not falling below 85%.

There is a bonus tied to expense reduction, project management of the current rehab and getting the occupancy up to 95% by June of 2009.

Beyond that and the other normal expenses I'd have even if self managed, it is 4% of collected rents.