How to Buy a Small Multifamily Property (A Step-by-Step Case Study for Newbies!)

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I really like small multifamily properties, and I talk about them an awful lot. A while back, I wrote a post called “How to Make a Million Dollars in Real Estate,” which was designed to show the possibilities for building wealth through real estate—and the start of that plan was the purchase of a small multifamily property. I’ve explained many times that the goal isn’t to buy a property that fits exactly the description mentioned, but rather to teach the math behind the method. You could buy a triplex, a few duplexes, lots of single family homes, or whatever.

It’s the cash flow that really matters.

Since that post came out, I’ve been asked by a number of people how they should buy such a property. So, to help with this, I wrote this post to show you step-by-step how I managed to buy my newest real estate investment, with almost nothing down and significant monthly cash flow. It’s often easy to get caught up in the “theoretical world” of how real estate investing works—so hopefully this post will give you an idea of how real estate investing can (and does) work in the real world. All the numbers in this are true and accurate, though I sometimes might round slightly for simplicity!

This post is quite long, so be sure to fully understand each part before moving on. Don’t get overwhelmed! If you have any questions at all, please leave a comment below and I’ll do my best to help answer them.

1. Perform a 5-minute analysis.

A lot of people struggle with math. It’s understandable because, although it isn’t terribly difficult, it can be overwhelming to get going. So, I had the idea that it would be neat to show the BiggerPockets community how I analyze an investment property in under five minutes. This isn’t the real in-depth analysis (which we’ll get to), but simply the first “filter” to decide if the property is worth pursuing.

I sat down at my computer, pulled up, and picked a property pretty much at random to analyze. I made a quick video (it actually ended up being slightly longer than five minutes, but close enough!) and I looked at some of the important aspects of this property. Specifically, I looked at:

  • The location: The property is located in the town I do most of my investing in or around. I knew the location fairly well, because I own another property on the same street. I’d probably classify this as a “C+” (maybe “B-“) area with mostly rentals. The property was listed at $120,000, but had originally been listed at $140,000.
  • The number of units: Four units total—three 1-bedroom and one 2-bedroom.
  • The rent it brings in: The listing stated a total monthly income of $1,740 per month, and because I know the area well, I knew a typical 1-bedroom would rent for (at minimum) $400 in my area, and a typical 2-bedroom would rent for about $500, bringing the total monthly conservative income to $1,700.
  • The expenses based on the 50% rule: Half of the income left $850 to pay the mortgage.
  • The cash-flow, based on the 50% rule: I looked at the total mortgage amount for a $100,000 loan (buying at $120,000 and putting roughly $20,000 down).
  • The seller: I determined that this property was a bank repo that had originally sold for $149,777, but the bank had foreclosed on it and was selling it at a steep discount.

If you want to watch the video, you can check it out below:

The purpose of this five-minute process is not to nail down the specifics on a property. I don’t drive out and look at it yet; I don’t make a lot of phone calls or even show my wife yet. I do this same process dozens of times every week, mostly in my head in under a minute. There are two prices to note about the properties I examine:

  • The List Price: For 99% of properties I find on the MLS, the price is far too high and not worth it.
  • The Ideal Price: For 99% of properties I find on the MLS, there IS a price that would make it worth it, and I like to find out what it is. That’s the point of the video above.

Some investors choose to offer the “ideal” price on every property they see, and while I don’t think this is necessarily a bad idea, I’d rather not waste the time on properties that I’m not a fan of. My personal strategy is to buy a few amazing properties per year, rather than dozens or hundreds. I like the simplicity. However, when I find a property that excites me and the listed value is somewhat in the ballpark of the ideal price, I will investigate a little closer.

Summary of the Quick Analysis

By the end of the video, I stated that “at $100,000, this property starts getting very interesting to me.” Why? Because I like to see a minimum of $100 per unit per month on a property with nothing down using the 50% rule. If I’m putting down a large down payment, I want to see $200 per month in income. At $100,000 with nothing down, the projected cash flow would be right around $300, and purchasing it at $100,000 with 20%, the cash flow would be around $200 per month. That would be an OK deal. However, if you know me, you know I don’t want an OK deal. I want a great deal.

Don’t you?

Let me show you how this turned from OK to great.

Step #2: Take a closer look (and analyze further).

After publishing the video on BiggerPockets, I kind of forgot about the property. I’m not exactly sure why, but I figured I’d take a look later and just kind of dropped it. A couple weeks later, I was driving near the property and remembered it, so I took a driveby. (Silly, yes, I know!) I called my real estate agent and asked him to meet me over there to look at it.

Because three of the units were currently rented, we could only get in the fourth unit to check it out without giving 24-hour notice (which I don’t like to do unless I’m really interested.) I was surprised by the overall cleanliness of the unit, though while the unit we were in was listed as the “2-bedroom” unit. it was functionally only a 1-bedroom (one of the bedrooms was really more of a walk-in closet). However, at this point the deal got a little better for me because I realized the units were not as ugly on the inside as they were on the outside.

I could easily expect $450 per month in rent from these units—not the $400 previously thought.

The Game Changer

While looking at this property, my agent told me something else exciting about it: This property was not a 4-plex, but actually a 5-plex. The bank had “decommissioned” the fifth unit in order to make the sale easier (4-plexes are MUCH easier to finance than 5-plexes, because a 4-unit is considered “residential” in the loan world, whereas 5 units and up are considered “commercial” and require a whole different set of standards and a much different approval process). We walked to the third floor and I was shocked at what I found—a large, 3-bedroom apartment that was in decent shape. The sellers had locked all the bedroom doors and called them “storage” for the other four units.


The numbers I had run before were based on 4 units and $1,700 per month in income. Now, it seems, the potential for income was MUCH higher. This was the catalyst to turn this 4-plex from a good deal to a great deal.

Related: The Ultimate Analysis: Cash on Cash Return vs. Overall Return

A Quick Estimate of Repairs Needed

Overall, the property was in pretty good shape. It looked pretty ugly from the outside (my favorite, really—it drives away competition!). It definitely needed a new paint job on the outside, and some of the shingles from a fairly new roof had blown off in a freak windstorm we had several years back (missing shingles are very common in my area because of that storm, though most homes have been fixed since then—this place had not). Additionally, the fifth unit needed some help to bring it into a rentable shape. I estimated about $10,000 worth of work to get the place fully finished, including finishing up the fifth unit.

Immediately, I recalculated my numbers based on the new unit that I could eventually get rented out. As it turned out, it looked like this:

  • Units 1-4 Rent: $450 each x 4 = $1,800
  • Unit 5: $600
  • Total Income: $2,400
  • 50% Expenses: $1,200
  • Mortgage at $100,000: $550/month ($650/month cash flow)
  • Mortgage at $90,000: $470/month ($730/month cash flow)
  • Mortgage at $80,000: $430/month ($770/month cash flow)

Remember, these numbers are based on having no money down—so they are far above my threshold.

3. Offer and negotiate.

Before I let you know the details about my offer and negotiation, understand that this strategy worked for me, in my market, because I knew my market. This market doesn’t necessarily act like other markets, and there is not a mass amount of competition for this kind of property here (another benefit of small multifamily properties—often less competition). If you want to learn more about making offers, check out “How Much Should You Offer on a Property?” to get more ins and outs on various philosophies surrounding where your offer price should fall. In my case, since I figured I had time and no real pressing competition, I sent a lowball offer first: $80,000.

Before I get into negotiations, I want to share one more thing that I tested on this offer. Although this was a bank REO, I also know that this was a small, local community bank with a very small department (or one person, probably) in charge of approving or rejecting offers. As such, I added a touch of “personality” to my offer—something usually only done with private sellers.

I drafted up a one-page cover letter that briefly explained that my wife and I wanted to buy the property for our portfolio and that we were local investors wanting to improve the neighborhood. Then, we included a photo of us ON the paper. My theory was that the person in charge of accepting an offer would feel more inclined to sell to a local nice couple than some faceless investor. Before doing so, I actually went on to the BiggerPockets Forums and asked if anyone had done this—and mostly received statements like, “Well, it wouldn’t hurt.” So I tried it—and I think it worked.

The official offer I had my agent draft up on the Realtor® form basically consisted of:

  • $80,000 cash offer
  • No financing contingency
  • 7-day inspection contingency
  • Close in 45 days
  • $1000 in earnest money

So I submitted the offer via my agent, and surprisingly, the selling agent didn’t laugh at us but actually said, “Well, that might work.” The next day, I got a call from my agent saying they verbally accepted but had to hand it upward to get signed off! I was super excited, but after several days of no response, I finally heard back that the deal was killed when the man in charge said, “We will not take a $40,000 loss on this property!”

I said OK—and let it go.

Several days later, the sellers called my agent and asked if I could do $100,000 and close in two weeks. I told them no (this is all verbal), but if they sent something over in writing for $90,000, I would accept it and close within two weeks. This kind of weird verbal negotiation went on for several days. Finally, after a week of negotiations, the bank signed off on $90,000, and they would do a few thousand worth of repairs that they had planned on doing—and I would close in two weeks. With that, I had a deal under contract. It might not be the $80,000 I really wanted, but it’s still a killer deal at $90,000.

The takeaway from this section on negotiations: Every single negotiation and deal I have ever done with a bank has been unique. No two deals have ever been the same for me. It’s always a little weird. No doubt, negotiating like a pro takes experience—but you can get significantly better (and more confident!) by learning tips from experts. Check out the new edition of our best-selling The Book on Negotiating Real Estate in the BiggerPockets bookstore for insight into becoming better and more efficient with your negotiating skills.

4. Arrange the inspection.

Because I had seven days to inspect the property, I immediately set out to arrange my inspection. After all, I had not even been inside three of the units because they had renters in them, and I didn’t want to waste everyone’s time until I had time to get inside. This is why the “inspection contingency” in the offer was a non-debatable clause.

If you are just beginning – I highly recommend that you hire a professional home inspector to go through any property with a fine-tooth comb. On this property I hired my favorite contractor to go through the property with me, so we spent several hours running through every aspect of the property, and he gave me a bid at the same time. We crawled onto the roof, under the building, in each unit, every closet, every fridge, every nook and cranny. In the end, I saw nothing that surprised me, which is always nice.

My early analysis of repairs needed were almost perfect—$10,000 to get it painted and get the fifth unit fixed up and ready to go.

Related: 4 Above-and-Beyond Home Inspections That Could Save You Money

5. Take an (even deeper) analysis (and watch this webinar!).

At this point, I had looked over every square inch of the property and had an accurate look at how much this would take to fix up. I also knew generally how much everything would cost. As I discussed earlier, I had already done my quick five-minute analysis of the property and decided it was worth pursuing. However, a quick analysis (and the 50% rule) are only rules of thumb. It was time to actually dig into the numbers and make sure this property would actually pencil out the way I think it would.

Since I started this project with the BiggerPockets community, I thought I would continue by doing my in-depth analysis with the BiggerPockets community as well. So, I scheduled a webinar and gathered all my numbers ahead of time. Then live, in front of dozens of BiggerPockets members, I spent a very awkward hour explaining the deal live on the internet via the first BiggerPockets Webinar. If you missed it, you can watch a replay below (though it’s an hour long, so be prepared!).

The numbers looked even better than I had hoped. I entered all the numbers into my trusty spreadsheet and came up with the following:

According to my spreadsheet, in a perfect month when I had no repairs and no vacancies, I would be cash flowing a $1,356.86 per month! This, however, is where most newbies screw up. This is also why the 50% rule is so important. I understand that in reality, I will have repairs and I will have vacancies—and I’ll need to plan for them. I don’t have a separate spot on the chart above for vacancies and repairs (I include it under “other monthly expenses”), but I typically assume around 10% of the monthly rent for vacancies/repairs and another 10% for long-term/big-ticket planning (new roofs, new parking, etc.).

6. Line up your financing (and define possible exit strategies).

I delayed talking about financing until this point, but understand that I had been working the financing angle from the beginning—even before I found the property. I always make sure I have several avenues to buy a property before I offer on one, or else I’m just wasting everyone’s time.

If you’ll recall, I initially asked for 45 days to close, which would give me plenty of time to go with a conventional loan. However, when I agreed to a two-week close, I closed that option off to me. Instead, I made a call to a private lender that I had actually met through BiggerPockets. (You probably know this lender—J Scott, who co-hosts the BiggerPockets Business Podcast along with his wife, Carol!)

I explained the deal, sent him all the paperwork, and requested the full purchase price—$90,000. He looked it over and agreed to fund the deal. I would cover the repairs and closing costs, and he would cover the purchase price. I would be taking a one-year note (meaning, I’d have to pay the whole thing off in less than one year—more on that in a second). Thus, I would need about $12,000 in cash to make this deal happen ($10,000 in repairs, $2,000 in closing costs).

Perhaps you have heard about the “65% after repair value (ARV)” number that most hard money lenders stick to when making deals, and perhaps you are wondering how I got the full purchase price covered. A few thoughts on that:

  • Funding the whole $90,000 was very generous. If you are just starting out, a private lender or hard money lender may not lend the full amount, even if you’re under the 65% number. That’s just the truth. However, there are many lenders out there, so get to know a lot of them. Their terms may differ quite a bit. Be sure to check out the BiggerPockets Hard Money Lenders Directory for the most comprehensive list of lenders available.
  • The after-repair value of this 5-plex would be around $150,000 or more, so I am under the 65%—and the lender was covered.
  • I have been building my reputation for many years on BiggerPockets, which helped the lender feel comfortable lending on this project.
  • The property was already rented, and thus, the cash flow was there to pay the lender each month, meaning he had even less risk. With a typical flip, there is no income coming in at all, which means YOU have to pay the loan each month. Having tenants pay the bill definitely helps on this front.

But wait… a private loan is going to be short-term!? What then?

Like I said, I asked for a one-year loan on this property.

Why one year?

It comes back, again, to my desire to have multiple exit strategies with everything I do. I cannot stress this point enough—you need to ALWAYS have multiple exit strategies. So, my strategies are as follows:

  • Refinance the property through a bank, This is my first plan, and I am 99% confident this will happen. I was already pre-approved through a bank to buy this property in the first place, so unless something drastic changes in the lending world in the coming months, I can refinance this without a lot of problems. However, in order to refinance, the bank requires that it be “seasoned” for six months—meaning I have to wait six months before the refinance will go through. Knowing that my monthly payment will drop significantly once I refinance, you can bet that the day after six months has elapsed, I will be closing on that refinance. However, if that doesn’t work, there is always option two…
  • Find a long-term private lender. If the lending environment changes and I cannot get a loan, I would look for a private lender who wanted a long-term investment. With the stability of the property and the magnitude of the deal, I’m confident I could find a wealthy individual looking to earn a solid interest rate for 15 years or more.
  • Add a partner on and refinance. If I couldn’t find a long-term private lender, I would bite the bullet and find a partner to add to the deal. I’ve talked about this strategy a number of times, and while I would be giving up a significant portion of equity, it would work to get me out of the deal. I have a partner I’ve worked with on a few projects who makes great money, has excellent credit, and holds a stable job—so getting a loan is as easy as signing a piece of paper for him. I would simply add his name to the title on the loan, wait for the seasoning to end, and have him refinance the deal. Again, this isn’t ideal, but it’s an exit strategy (and would be excellent for him!).
  • Fix and flip. Finally, if all other options were not possible, I would simply sell the property. With the $2,400 per month in income this property produces, I know I could make a hefty profit by simply selling it. However, this is my last option because I don’t care about the $30,000-40,000 I would make—I care about the $800 per month I will be making if I can get exit strategy #1 to happen!

“But what if I don’t have any money?!”

Like I said earlier, the private lender will be funding the purchase price of $90,000 on this deal, and I will be funding about $12,000 in repairs/closing costs. But what if I didn’t have that money? Because I’m a big fan of learning how to invest in real estate with no money, let me share just a few ideas:

  • Credit Card: I could pay for all the repairs on credit. I don’t necessarily recommend doing this, but it is possible.
  • Partnership: I’ve mentioned this before, but I could add a partner to the deal. I could find a friend with an extra $12,000 and offer him or her part of the deal.
  • Another Private Lender: Finally, I could use another private lender and borrow the $12,000 secured with a second mortgage on the property. This would probably be the most difficult to do, but also plausible.

Remember, there are not a whole lot of “rules” when it comes to investing in real estate, and one of my goals of this long post is to bring you inside my mind and share some of the ways I look at creative real estate investing. Before moving on, I want to share a tweet quote from one of my favorite authors Ken McElroy:

See? Ken agrees.

7. Close on the property!

In my state, we close real estate transactions with title companies, though in some states, you might use an attorney. Either way, the process is pretty much the same.

Let’s do a quick re-cap:

  • I found the property online.
  • I did a quick, five-minute analysis of it.
  • I walked through the property quickly.
  • I offered on the property.
  • I negotiated on the property and finally agreed on terms.
  • I inspected the property.
  • I arranged financing.

At this point, I was ready to proceed. My real estate agent sent over the purchase and sale agreement (the signed agreement between both parties) to the title company, and the title company went to work. It took about a week or so to finish the process, where they did a title search and prepared all the documents, including the promissory note and deed of trust between me and the private lender. I arranged for insurance (which was a little less than I thought!) and made an appointment to sign the documents.

Then I closed on the property. As an added bonus, the property management company who was looking after the place before closing actually found a tenant for the fourth unit before closing, so I inherited the property completely full (except for the fifth unit).

Going forward, I will get the fifth unit repaired, and in six months, I plan on refinancing the whole property into a 30-year fixed mortgage. Between now and then, I expect to pretty much break even, due to the higher loan payment and vacant fifth unit. You see, I can’t completely finish the fifth unit before six months is over because I want to refinance this property as a “residential” property, not a “commercial” property. So, the fifth unit will stay “decommissioned” for the time.

Now comes the fun part: landlording. If you want to learn more about my landlording tips, definitely check out “How to Be a Landlord: Top Ten Tips for Success.

Anyway, that’s the story! If you stuck through this whole time, I sure hope you take a second and leave me a comment below and let me know what you learned or what I forgot!

Ask any question—I’ll do my best to help!

About Author

Brandon Turner

Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He began buying rental properties and flipping houses at age 21, discovering he didn’t need to work 40 years at a corporate job to have “the good life.” Today, with nearly 100 rental units and dozens of rehabs under his belt, he continues to invest in real estate while also showing others the power, and impact, of financial freedom. His writings have been featured on,,, Money Magazine, and numerous other publications across the web and in print media. He is the author of The Book on Investing in Real Estate with No (and Low) Money Down, The Book on Rental Property Investing, and co-author of The Book on Managing Rental Properties, which he wrote alongside his wife, Heather, and How to Invest in Real Estate, which he wrote alongside Joshua Dorkin. A life-long adventurer, Brandon (along with Heather and daughter Rosie) splits his time between his home in Washington State and various destinations around the globe.


  1. Eric Hettena on

    Thank you for this. I love the video. If real estate investing gets boring for you, you can totally be an actor.

    I love how you simplify and break down each step. Well done and thought out.

    I would kiss you, but I’ll just give you a virtual high five…for now hehehe.

    • Brandon Turner

      Hahaha thanks Eric! I once wanted to be an actor… then I realized the sad truth that I can’t act. So I settled on real estate! And I’ll take the virtual high five … this is a family website! 😉 Thanks for the comment!

  2. Great post!! I love the step by step walk through. I’m new and I learned quite a bit. I appreciate the time you put into this and the real life example.


  3. Chris Bounds on

    Great post Brandon! That definitely covers a lot of the fine items that newer investors tend to not understand or overlook. It also illustrates the importance of follow up. A declined offer is only a temporary “No.”

    Question, why do you have to wait 6 months of seasoning for a refinance? I’ve been refinancing out of my hard money loans as soon as all repairs have been made, within 1-2 months usually. As long as you are not requesting cash out and the HUD was done correctly with the acquisition the you should be able to refi after repairs are done.

    Right now I’m working on my first (discounted) turn-key property. You can bet the refi application will be submitted the same week of closing!

    • Brandon Turner

      Hey Chris,

      Thanks for taking the time to read that thing! And as for refinancing, the local bank that I use require it. Now that you’ve said that, though, I’m going to do some serious calling around to different banks and see if I can’t make something happen faster! It would be nice to not just break even for the first six months but actually start making money! Thanks for the kick in the pants – I’m on it!

      • Chris Bounds on

        Yes, look around for an experienced loan agent/broker that knows how to do those type of refis. I’d imagine hard money lenders in your area should have some good referrals. That’s where I found mine. If you need a referral PM me. Cash flowing within 90 days is much better than 120!

    • Brandon Turner

      Hey Mike,

      Thanks so much! There are some really good ones in the BiggerPockets FilePlace, that you can download for free anytime! Also, I just made my own on Excel – which is also a great way to internalize the math and make it all make sense. It’s not the easiest – but it’s really important! Hope that helps. Thanks for reading that behemoth post!

  4. Brandon, I really like your synopsis on the multi unit. We’re neighbors; I own one on Perry and two on Harding, small world! I’ve owned 4 different multi units calculated everything right and the best I could do is brake even, SFH is for me the ONLY WAY. Speaking of which, why didn’t you make an offer several years ago on the 8-plex that I had on Chehalis St.? Gave it away!!!

    • Brandon Turner

      Hey Jim,

      Funny, I feel the same way about single family homes! It seems I can’t make good money on the SFHs here, cause no matter how much cash flow I get, the repairs when they move out end up being too much! I love real estate because of how different types appeal to different kinds of people. And too bad – I would have totally bought that 8-plex on Chehalis St from you! 🙂

  5. Steve Babiak on

    A few things to watch for with that 5th unit.

    First is the zoning for this building. Either the building is zoned for 5 units or it’s not; if it’s not, then putting a fifth unit into service might be “illegal” (at least it violates the zoning); if it is zoned for 5 units, then the lender should pick up on that and refuse to do the loan as “residential”.

    Next thing that might happen is that this building maybe a “use” allowing 5 units that is grandfathered; but these sorts of things sometimes expire. I have seen cases near me where the multi-unit use that was allowed before a foreclosure was no longer allowed due to the change of ownership; I have also seen a case where the grandfathered use lapsed since the building had been vacant over a year.

    Just pointing out some possible gotchas. Good luck with your new building.

  6. i tried to refi after 6 months but they would refi only 75% LTV of the PURCHASE PRICE, not what’s worth.

    they said i need to wait 1 yr, get a new appraisal and get 80% of the appraised value.

    • Brandon Turner

      Hey George – According to the local banker, they will reappraise after 6 months and do 75% of the appraisal amount … but now I’m a little nervous so I better find out for sure! If I had to refi at 75% of purchase price, I could in a pinch… but I sure wouldn’t want to! Thanks for the heads up!

  7. B-man, you are the best and brightest of this world wide web medium of dissemination of sage wisdom! This is what makes BP special! Josh, give that man a raise!

    Thanks for your big heartedness! This helps us noobs more than you could ever know!


  8. Nick Johnson on


    After I read nearly every article you write, I find myself having less and less of an excuse not to get started! As always, thank you for the detailed post.

    BTW – Because of you I find myself 3 steps ahead of where I am, often thinking about how great my craigslist ad will look for a property before I even look at purchasing it 😉


  9. Brandon,

    Great article. I have spent the past few hours breaking it down a little. I am following all of your numbers except the the “ROI per year average” calculation. The closest I can get to your number is 136.22%. Little help? Sorry for such a nerdy comment!

    • Brandon Turner

      Hey Jonathan,

      So, my ROI per year average is my total profit I would make over 5 years (95,179.93) divided by the total amount of cash I would have into the deal ($12,000, from directly above, which is a copy of “Down Payment (includes all contributions)” from the top of that column) divided by 5 (the number of years.) That was confusing, let me re-phrase:

      Average ROI = ( Down Payment / Total Profit ) / Years

      Because, I theoretically would make $95,179.93 over the next 5 years, which is all the cash flow and appreciation added together. I would divide that by 12,000 to determine my return on investment. Then divide that by 5 to get my average over 5 years.

      Hopefully one of those makes sense for ya! 🙂

  10. Brandon-

    So the hard-lender cost was only $900? Is that a typical fee, 1%?

    Congrats on the property — looks like it fits your “awesome deal” criteria perfectly!

      • Thanks for the reply, Brandon!

        So, I’m trying to figure out why a hard money lender would tie up $90k for six months for such a low return of just 1%? And you mentioned you’ve even paid zero? Am I missing something here? lol

        • Brandon Turner

          Hey Scott- the fee was on top of the mortgage interest, which is 12% annually. So the lender will get 12% on his money, plus the 1% fee. So, if we went for a whole year- he’d make 13% total return, which is better than they are likely to get elsewhere. That’s why! Hope that helps!

        • Ah, ok.. thanks for the clarification Brandon =)

          I just watched the entire webinar and I just wanted to express my appreciation for being so transparent and open on the details. I actually preferred this live version as opposed to some scripted piece I’ve read or watched about real estate. Watching you take us through the thought process and numbers was incredibly insightful. You did an awesome job and look forward to any follow-up webinars on this property!


        • Hi Brandon. Nice article, and thank you for sharing with all of us.

          Related to Scott’s observation about the hard money lender tying up his $90k for a year, you mentioned that the lender will receive 12% in interest (or 1% per month), and also the 1 point for a total of 13% in one year.

          In your terrific spreadsheet, I cannot find where the interest cost was included. At 1% per month, that’s $900 per month in interest charges to the lender. I think the $900 per month would have a significant impact on your calculations.

          Maybe I’m missing something though. Thank you for any feedback.

        • Brandon Turner

          Hey Ken,

          Thanks for the comment! So yeah – the spreadsheet above is a little confusing because it has a few sections that make sense in my head but might not in everyone elses! So, section 2 (the bottom left) is the “Flip” Calculator, which let’s me know how the property would perform if I flipped it. The 1% fee is in there. The 3rd section (top right) is the long-term calculator – which let’s me know long-term how it will perform as a rental.

          So, right now, for the next several months, neither of these calculators adequately describe what I’m doing, because I’m using hard money until the refi. So section 3 is what it will be like, after the refi. Between now and then, though, I’ll be making nothing. To determine cash flow between now and then, I just changed the interest to 12% ($900 per month) and re-did the calculations, but didn’t post that one on this blog. However, I also didn’t include the 1% fee on the 2nd calculator because … well, I forgot! 🙂 However, I figured $500 for holding costs, which I’ll have none so I guess that covers most of it. The rest I’ll shave off in repairs – which should be far less than what I was thinking.

          • So in reality, for the next 6 months:
          • the mortgage payment will be $900,
          • the insurance $100,
          • the taxes $160,
          • the other expenses $400

          For total monthly expenses of $1560 per month (plus repairs/vacancies)

          It’s bringing in, with 4 units rented (can’t do the 5th yet) around $1800 per month. So on paper it cash flows, but I’m assuming I’ll break even each month until the refi goes through and I can get the 5th unit rented, at which point section 3 of the spreadsheet will kick in.

          Anyways I know that was clear as mud 🙂 Hope it helps some!

        • Thank you, this was very well laid out for all to understand. I am new to real estate investing, so there is great value in this post for me. I am very great full i found the bigger pockets website.

  11. Dominic Green on

    Great article Brandon especially on the walk through analysis and the different exit strategies use considered. I’ve been considering using a hard money lender to acquire my first investment property to which I’m aiming for duplexes and refinancing into a long term loan. I know I have been pre-approved for a FHA loan to which I would use as another option if I had to move into one side of the property.

    • Brandon Turner

      Awesome Dominic, that’s not a bad way to go. That said, a HML probably won’t let you live in it (depending on which state you are in) but if you ask around enough, you might find one. Or you can wait to move in until the refi is done. Let us know how it goes!

  12. Brandon,
    Thank you for this case study that chronicles the various steps and phases in this purchase. Hope that after several months you’ll update the case study.

    Especially appreciated you sharing the cash for keys strategy. Thanks!

  13. Good stuff Brandon, thanks for posting the webinar. A couple questions, what points, fees and interest is your hard money lender charging? Is it interest only or amortizing? It looks like your hard lender is rolling the fees into the loan, is that correct? How did you handle the fact that to get under the 65% ARV you were modeling all five units cash flowing yet your plan is to leave the fifth ‘decommissioned’ until you refi and take out the hard money guy?

    • Brandon Turner

      Hey Giovanni, thanks for reading (and watching!) My lender is charging just 1% for this loan, which is lower than most hard money but a little more than I usually pay “private money” – where this is sorta in-between (it’s hard money, but a friend… so it’s like both…?)

      I actually paid the 1% at closing, which I don’t think I mentioned above. The rents from April covered all the closing costs, so my earnest money covered the lender fee. I think I brought like $50 to closing.

      As for the ARV question – it worked because the lender understood the property and the situation. Having 5 units is still the result of the repair, thus the ARV is still based on 5, but I’ll just be paying him off before the repairs are 100% done. He knows that the value is there. I guess that’s the nice thing with private/hard money – you can actually talk this stuff out, unlike a bank who would have ridged rules.

      I hope that helps answer your questions! Let me know if not!

  14. Jason Carter on

    Thanks for sharing all of this and being so transparent Brandon. I’m itching to get into multi’s so very informative and helpful. Webinar was great. Just curious if you ever looked into the zoning on it (as an earlier commentor asked)?

    • Brandon Turner

      Hey Jason – thanks! I did find out that it was zoned as a 4-plex – so I should be good with the refi and such now. After I refi it, I’ll be able to convert it to a 5th. Zoning isn’t a huge issue in my town (it’s a small area, so not as much red tape as some areas.)

      Thanks for reading!

      • Cool. Yeah, you didn’t seem too concerned about it.

        Another question for you – When the bank rejected your initial offer at 80K, why didn’t you go back and offer 90? Think you mentioned you thought it was a good deal at 90 or even 100k. Did life just get in the way before you made your decision and then next thing you know a week has passed and they came back with the counteroffer?

        I admire your restraint. I would’ve gotten emotional and really excited (too excited) about it, and countered immediately.

        • Brandon Turner

          Good question 🙂 I think you hit the nail on the head – life got in the way. I tried to keep it as non-emotional as possible, though that is tough! I really wanted it at $80k though, so I didn’t rush anything with it.

          Thanks Jason!

  15. Brandon, thank you so much for this post! You completely walked through the ENTIRE process in a very open and honest style. You didn’t leave one step out-thank you! I am new to BP, but after reding ths post I am even more encouraged to keep doing what I’m doing and keep digging for those deals.

    • Brandon Turner

      No problem, Shelby! I’m just glad you weren’t bored to death reading that super long post! I figure – I’d rather be too detailed than not detailed enough. I know that’s what I would have wanted when I started (and still do today.)

      Thanks for reading and commenting! Definitely jump into this community- it’s awesome. The forums especially are a really great way to meet other investors and learn. Check it out!

  16. Hey Brandon,

    Really great article. Thanks for taking the time to do this. Like a couple other posters I was wondering why you had to wait 6 months to refi out of your hard money loan. I work with a mortgage broker who writes all over the country (including Washington) and sells Notes directly to Fannie, so there are no overlays. On a multifamily you can refi at 70% LTV of the appraised value and start your refi as soon as the Deed gets recorded in your name. Not sure its kosher to just throw his contact info out in this forum, but ping me and I’ll give it to you if you like. He’s based in Seattle.

    • Brandon Turner

      Hey Jeff,

      Thanks for the message! Yeah, the main bank I’ve worked with in the past requires 6 months – but I’ll connect with you and see what I can get done through your guy. Obviously faster would be better!

      Thanks 🙂 I sure like BiggerPockets!

  17. Excellent insight. You mentioned you can refinance before 1 year as long as you are not pulling cash out – but how do you pay back the hard money loan if you don’t pull the cash out? I am looking for a rental property and have a partner willing to purchase with cash provided I can refinance in a decent amount of time to pay him back. This is the problem I am running into, finding a lender who can cash-out refi within 6 months.

    • Brandon Turner

      Thanks Brian! So, “pulling cash out” means extra cash above and beyond any loans on the property. The lender has a lein on the property, so he will be paid back by the refinance. I borrowed $90,000 from the lender, so when I go to get the refinance, I can get a $90,000 loan without “pulling cash out.” However, if I wanted to refinance it for $100,000 – and get the money I spent fixing it up back out – then it would be a “cash out refi” and I’d have to find a lender willing to do that.

      Hope that helps!

    • Hey Brian,

      Brandon’s description of “cash out” is dead on. In your all cash purchase example, you can immediately finance (delayed financing) based on the appraised value and pull out a sum of money up to the cash amount you put in for purchase (not rehab) and can also roll the closing costs of the new loan into the refi. Lets say you paid $90k cash, did $20k in rehab, have $5k in closing costs on the new loan, and the place appraised for $150k after rehab. At 70% LTV you could get a loan for $105k. However, since your purchase price was $90k and closing costs are $5k you can only get a loan for $95k. The other $10k would have to remain in the property as equity. But if you hold the property for 6 months and 1 day you can do cash out refi and pull that extra $10k out as well. It should be noted that the 70% LTV can actually be between 65% – 75% depending on how many loans you have (less than 4 or more than 4) and how many doors the property has (4 or less, vs more than 4)

      • So then my lender either doesn’t understand exactly what I am trying to do, or doesn’t know there is a difference. He referred to it as being the same as cash-out refi. Definitely need to find a new lender.

        Thanks for your responses, very helpful.

        • Originally you you referred to the money guy as a partner.
          If you are guys are doing some kind of equity split partnership then that could be the problem.
          Even if you guys are planning on being partners long-term there needs to be a recorded lien on the property that is being paid off or it will be considered a cash out refi.

          Lenders will vary on specifics but this the rule of thumb that I have been told by several brokers and direct lenders.

  18. Brandon,

    That was very informative and I hope that you continue to do more webinars in the future. I like the “awkward” rambling, because you are able to elaborate on every detail along the way, even if it doesn’t necessarily fit in with the main topic. I learned more by hearing you make those connections, then by reading an isolated blog post with a narrower scope.

    I just spent this week struggling to effectively analyze a couple of local 4-plexes for the first time, and that experience plus the content you just provided will make the next listings I come across way easier to sift through.

    • Brandon Turner

      Hey thanks Aaron, that makes me feel a little better! 🙂 I cut out the beginning 10 minutes when it was REALLY awkward!

      Keep in mind, always feel free to post the numbers to deals you find over in the forums. There are some really smart guys on there totally willing to help out and offer advice and analyze with you. You can even hide the address and such so no one sees it 🙂

      Keep in touch!

  19. Bravo! just got through it. I am looking at a property here in pasadena ca. wow, plugging even the best case numbers into your formulas, its embarrasing how our returns are from a cash flow stand point down here.

    This is why i started looking out of state. 50% rule and 2% rent to price ratios work in places like memphis. problem is that i do also believe in the idea of investing in things you have control over. there in lies my conundrum. invest where the numbers make sense and what i can control is what i want, but its difficult to find down here.

    • Brandon Turner

      Thanks Rich! Yeah, prices can be crazy elsewhere. Keep in mind, however, that I am buying this almost entirely for cash flow, and any “forced appreciation” I can get… but I don’t expect prices to rise here. We keep pretty steady. That said, I think multifamily will rise faster when my area becomes the only area to get cash flow in the country – so I’m hoping that might help!

      I also believe in investing where you have control, generally. However, if I were in your shoes, I’d probably sacrifice that as long as the numbers were solid.

    • Brandon Turner

      Thanks Eric! I think exit strategies are SUPER important – and I’ve learned from experience. When I first got started, I didn’t and it caused a lot of stress. I’m just hoping to help others avoid that! Thanks for reading and commenting!

  20. Great Article Brandon!!! I had already seen the video and believe me, it was both
    entertaining and informative. The Spreadsheet, wow!!! How can someone with little or no Excel experience get their hands on an exact copy of it? Other than the videos and the Heavenly Spreadheet, my other favorite part was the Quick recap in 7 easy steps, it really brought it home for me as a Real Estate Agent; I could do this!!! BIGGERPOCKETS should do one of these Case Studies for every scenario possible. I expect this one to recieve a lot more comments, it’s Sensational, Great Work!!! Thank You!!!

  21. This is a very well done article. I find it very good that the seller turned down your first offer. I think this is critical because now you know as an investor you are not paying to much for the property. If the seller says yes to your initial offer, would they have taken 5k or 10k less? It would make me wonder.

    Depending on what your goals are I believe you need to be small or large as an investor and try to get as many units under one roof as possible and no boiler system (boilers are cash flow eaters). Never in the middle. Depending what you pay per unit the middle is roughly (9-59 units). Example: say you have 20 units (5 quads) and we will say they are all located together. (If they are spread out all over the area now you have to consider more gas, wear and tear on your vehicle and travel time to your properties) say you are getting 100 dollars per unit and we will even say they are 100 percent occupied which multi’s rarely are. So you will cash 2000 dollars per month. Not bad but is it? You could try to run 20 units by yourself, but do you know what kind of headache that is, I sure do. Your renters complaining about water leaks, toliet issues, furnace not working, fighting with other renters, you name it. All your time will be sucked from investing in other properties to now the headaches of landlording for less than 2k per month. Still worth it? Not to me. Been there. So what do you do? You, in my opinion buy 60 or more units at a time as cheap as possible so you can afford to hire a full time manager and maintenance man. And you manage your help instead of trying to be an investor, the leasing agent, the maintenance man, etc. Cause as the above states at 2k per month left over or less or even a bit more, who are you gonna find to work for you and do a decent job at that price plus you the investor make enough per month to make it worth your time.

  22. Great disarming video. You’re hilarious to watch too… in a great way. 🙂 Amazing video and wonderful display of your transparency and willingness to help others. Great deal and congratulations Brandon!

    John FEdro

  23. Great article. Love examples and real data. Thanks for sharing.
    So you recommend following the same guidelines when analyzing single family homes such as 50/50 rule and the property investment calculate spreadsheet you included? Or maybe a better question is what would you change in determining a good value for single family home vs multi-family? I have one home I rent out and I thought I got incredible income from it but when I take 50% of my mortgage pymt, I’m sitting at almost exactly 50% mortgage pymt = rental income. I get $2,600 in rental income and my mortgage pymt is roughly $1350 so using your analysis I’m not making enough for “cash flow”; perhaps I don’t understand the 50/50 rule well enough. Thoughts?


    • Brandon Turner

      Hey Lora,

      I’m not as big of a stickler on single family homes with the 50% rule as I am multifamily. I think a lot of that depends on the neighborhood (which affects vacancy) and how nice the house is (which affects repairs) so if you have a nice house in a good area with a good rental market -your costs are going to be waaay less than 50% – especially if the renter pays all the utilities. So when it comes to houses, yes – I’ll look at the 50% rule but I look more carefully at the actual spreadsheet numbers, and add monthly allowances for repairs/vacancies/etc

      Hope that helps!

  24. Hi Brandon,

    I’m a huge fan of the Bigger Pockets Blog – it’s hard to find decent real estate resources online, and your site is my go-to guide. In 2011, I made my first real estate investment in 2 SFRs in Las Vegas, and have done very well in terms of both rental yield and capital appreciation. However, now that they’ve doubled in value (and houses in Vegas have gotten to expensive to buy more), I’m considering selling them to get into multi-family.

    I’m comfortable with your how-to guide, and thanks so much for all that information!

    I just have a basic question – In your opinion, what are the best cities in the US for multi-family investment right now? I’m happy to look at the neighborhoods & numbers myself, but it would be great to get a starting point from you.

    Thanks so much!

    • Brandon Turner

      Hey Heather, thanks for the comment and glad you liked it! I’m not real great on where the best locations are – because I don’t think the multifamily world is the same as single family. I think there are good deals with multifamily anywhere, but probably outside major cities. That said, there was a post a few weeks ago about the top 20 Cities, and Memphis led the list – perhaps that’s a good place to look? Sorry – this isn’t probably a great answer, but hopefully it will at least help some!

      • Daniel B Bennett

        Hi Brandon. I live near Memphis and I used to dream about owning multifamily rentals there. When I had a real estate license there 30 years ago I could have found some good deals but my career went in a totally different direction. Now I am getting into rental properties very slowly and cautiously. I have always thought, like you, that multi-family residential like an apartment building would be the way to go but my lawyer/CPA/MBA adviser tells me to look at single family 3-bedroom/2-baths only and use a property manager who does background checks and drafts the rent straight from the tenant’s bank account on the 1st of the month. I like the property manager (he does everything) but I can’t understand what he has against apartments and multi-family properties. His parents owned about 50 rental properties so I assumed he knew what he was talking about. I would really like to buy a 4-to-10 unit building where my niece lives but it seems like a huge leap.

    • I would say the best market to start in is the one you know best; the one you live in and drive around every day. Good apartment investors (or good real estate investors in any sector) know their market block by block and they know the history of most of the properties in their market. How does someone from somewhere else compete successfully against this information dissymmetry?

      One of the things that Brandon mentioned in his piece is that he felt comfortable with the neighborhood because he owned a property down the street. I think that is a very important tip. He knows the neighborhood. If Brandon invested in CA or AZ would he have made the deal in WA? I won’t answer for Brandon but I wouldn’t have unless some one on my team had that block by block, property by property knowledge that I could rely on.

      Start with a neighborhood in your hometown that you feel comfortable with. Go to your Assessor’s website with the address of every apartment building in that neighborhood and look up the contact info for the property owners. Reach out to them and invite them to coffee. Tell them you are looking for an apartment and would like to get their take on the local market. Pick their brains while asking for their advice. Who knows, one of them may be ready to sell. In the process you’ll also learn about the good lenders, property managers and brokers in that market. Have coffee with the lenders and property managers too.

      While you’re at the Assessor’s site check the sales history of the properties, How often did they turn over? What have prices done? Are there certain names that pop up over and over? Track the per unit prices that buildings traded at over time. Try to correlate those prices by year of sale across the neighborhood to build an understanding of the market cycle. Having this knowledge when you sit down with an owner will help you fit their story to the larger history of the area and give you some perspective on how things have gone while they’ve owned the property.

      Once you’ve met a couple dozen of the owners, lenders and property managers in the neighborhood and looked at the history of the properties there you will begin to get a feel for what apartments there should sell for. With that knowledge you will be able to spot a good deal when it comes along and be able to act quickly on opportunities when they arise.

      This is the kind of knowledge good investors have and all it takes is shoe leather, as they say. You could jump on a plane and fly to another city to ride around in a bus looking at some gurus’ deals but how do you know if it’s the right neighborhood? How do you know what the issues are? How do you find out what all the local investors know?

  25. Brandon Levi on

    Hey Brandon thanks for sharing, i really enjoyed reading this post. Im currently studying real estate and hoping to make some good investments in the near future. Also any advice you can think of for a new investor would be greatly appreciated.

  26. It took me a while to finish the whole article (I read it in 3 days – in separate parts), but I did learn some new things. Too bad, you couldn’t somehow extend the closing to get the conventional financing from your local bank right away – that would make your return on investment better and you could try to get the fifth unit rented sooner.

    By the way – I own a multifamily property as well. Right now it has 5 units, but just 4 units are in rentable condition. I have sellers financing on it with balloon payment in the end of next year. So you are saying, that if I “decomission” the property to just 4-plex for a short term, I can go to the bank and tell them it’s residential? However in all the county documents, it is already described as commercial property.

    • Brandon Turner

      Thanks Jan – yeah, I tend to write long articles 🙂

      I agree- that would have been great to extend it – but I think the short close date was the reason I got the great deal. And I’m honestly not sure what makes a unit “decommissioned” but for this one, the sellers removed the front door, put locks on the other interior doors, and called it storage. It seems to work … but we’ll see I guess!

  27. Brandon Turner,

    Thanks for a awesome article. It came in handy since I found a 6 unit property that supposedly brings in $1,600.00/month rent and the sale price is below $50,000. I’ll be looking in it some more and run the numbers to see what pops up.

    Thanks again for a super article.

  28. Hi Brandon –

    I can’t thank you enough for this post and the videos. This was a great step-by-step guide for helping me to connect all the dots. I did have a few questions about your financing however. You mentioned that you received $90K private money to purchase the home. What kind of fee did J-Scott charge you to lend this, or is he making a percentage of your cash flow profits? Am I understanding correctly that you then used hard money to repay him the $90K and to fund your rehab expenses and closing costs ($12K)? Or did you have your own cash to cover the $12K. Sorry if you explained it somewhere and I missed it.

    • Brandon Turner

      Hey Austin, Thanks!

      So, J charged 1% fee, which I paid at closing (well… technically, the rent that came in during the month paid it at closing, because we were given the rent at closing but the first payment wasn’t until the following month. Does that make sense?)

      So, I’ll hold the loan with J until the property is refinanced. I plan on using my own funds to fix the place up – though I could use a credit card, line of credit, or just borrow a 2nd mortgage from a friend if I didn’t want to use my own cash.

      Hope that helps! Reach out anytime if you have any questions!

  29. Very cool Brandon, I’m jealous.

    There is a big message here that I hope is not missed by new investors. You didn’t “find” a 5 unit deal for 90K no money down. That isn’t what was listed. That was what you uncovered and negotiated.

      • Brandon Turner

        Ha Thanks Ned! And excellent point. This property was originally listed like $50,000 more than I got it for, plus I took the time to look and find out it was 5 units, not 4 which helps.

        And yeah, I now have a W-2 job, which made this possible (BiggerPockets!) If I didn’t, I would have sought out private lending to make it work, or partnered up and split it 50/50.

        Thanks Ned!

  30. David Wellington on

    My quick math using your assumptions provides an All Cash IRR of ~25% and a Leveraged IRR of ~133% for a 5-year hold to exit. I’m working in a pretty lively CBD market but an exit cap of 13.5% is pretty hard to imagine. Is that market norm for you there?

    • Brandon Turner

      Hey David,

      this was a REALLY good deal, so I wouldn’t say normal. However, this property was sitting on the MLS for 6 months before I got it, so it’s not unheard of here either. My market is pretty low income and I don’t plan on getting any natural appreciation other than maybe inflation.

      Thanks for reading!

  31. RB Blackshear on

    Great Article. I just found this site on a random google site as I want to get into real estate investing in the next few years. I am in Puyallup, and will most definately follow you more closely as I get in a better position to make this happen.


  32. First, great article for us beginners to really get a look at what can be expected! Thank you!
    Second, Ned touched on what I was going to ask, I’m a student and don’t have that established w-2 job required to refi these deals. So, are you saying that the private lenders are not necessarily looking at your ability to pay back this loan based on a 9-5 but rather just based off the numbers you put together on paper?
    And lastly, what are we looking for when searching for a good/legit private lender?


    • Brandon Turner

      Hey Wanda, thanks!

      Without the W-2 Income, yes – a bank won’t do the refi. So you’d have to have another backup plan. 1.) long-term private lenders (some people would be thrilled with 8-10% interest, secured by a mortgage, for 30 years.) 2.) Partner with someone who CAN get the loan.

      And I think my private lender lent based on my 5 different exit strategies and my history of successful investments. If my only plan was to refi it, and I wasn’t sure it would happen… he wouldn’t have lent the money.

      And when looking for a private lender – obviously you want someone with money. And I would look for someone with a LOT of money (Not Uncle Joe who has $50k in the bank and will lend his life savings to you.) Preferably someone with a lot more than they are lending you, and someone who isn’t going to micromanage.

      Hope that helps!

  33. Brandon, thank you so much for the amazing article and for sharing your spreadsheet – and knowledge! I plan to watch your video as well, and follow along on the spreadsheet.

    My husband and I own rental properties – SFRs in NJ, and condos in FL. The FL condos cash flow nicely and have appreciated quite a bit in the last year or two as the south FL market has done quite a turnaround.

    We’re now looking at a 3plex and your article was very helpful. Still trying to find a way to finance though, as we are tapped out on HELOCs and conventional financing per Fannie Mae. We found a private lender but of course the terms aren’t great – there is a minimum loan amount we must hit (~$150k), regardless of the purchase price of the property. The minimum down payment is 35%, so essentially their requirement is to pay about $231K for a property for them to finance it. And finding the 35% down, without using our own money, is the new challenge. Any insight you have would be greatly appreciated, thank you!

    • Brandon Turner

      Hey Aly, thanks for the comment! I bet if the deal you are looking at is great- you should be able to find private money with much easier terms. There are rich people everywhere (and not even rich – someone with a hundred grand or a HELOC of their own would do the trick) could easily finance this and get more interest than the stock market and with better security. Good luck and let us know how it goes! (P.S. You may wanna advertise for a lender in BiggerPockets Marketplace!)

  34. Hey Brandon, that was an awesome case study! For a newbie you gave me a very clear picture of the dynamics of a real deal from beginning, middle, end and on-wards. You make a great ambassador for BP. I think you should have more of these.

    Question though,
    1) why did you opt to keep it as a 4plex in the interim for loan purposes. Are there less restrictions as a SFH versus commercial? I heard it was the opposite. It was easier to get a commercial loan than a SFH loan. In fact that’s the reason I want to go multifamily like you because the rules are less rigid. Kindly clarify.
    2) should I focus first on finding a great deal or contacting HMLs, private lenders, etc. or both? I have been doing a lot of training, readings in the meantime.

    • Brandon Turner

      Hey JM, thanks so much! I’d love to do more of these. I’m working on a “duplex” one right now!

      1.) If I tried to refinance it as a commercial property, my interest rate would be higher, and typically a commercial loan has a balloon payment after 3-10 years. I don’t want that- I want 30 years, fixed payments. I think the “ease” of getting a commercial vs. residential depends on a persons situation and company – but I know that it costs a lot more to get commercial (appraisals = $5,000 vs. $500, and other charges) plus the worse terms were enough to make me wanna go residential for now.

      2.) I think I’d do both. Make connections with lenders and stuff, but the deal is the most important. I’d really focus on that 90% of the time.

      Hope that helps!

  35. Hi Brandon!

    I learned sooooo much with your video. I’m practicing by crunching number on my own, but don’t understand where the “Value based on cap rate” for $ 169846.15 came from. Please explain.

    Also why do you include the total purchase price as total investment when you only took only $ 24,000 out of your pocket when you got the property?

    Everything else was very clear to me.

    Thanks again Brandon for helping us and enlightening us!!!!!!

    • Brandon Turner

      Hello and thanks!

      So, with commercial property and larger multifamily, the value is based on a cap rate (Cause it’s too hard to compare apples to oranges when it comes to such diverse properties.) So instead, the return on investment is compared. The equation is:

      Value = Net Operating Income / Cap Rate

      So, with the above property, the NOI was $22,080 and the Cap Rate I used was 13% (this number differs by area and property, but generally lies between 5-13%). It’s basically a way of saying “if you were to pay all cash for a property, what would your cash on cash return on investment be.”

      So $22,080 / .13 = $169,846.15.

      Secondly, I didn’t know what else to call it, so I called it “Total Investment.” What that means, on the spreadsheet and in my head, is the total amount of money this property has into it.

      Hope that helps!

  36. Hi Brandon,

    Great read! My partner and I are just north of you in Tacoma and are actually working on a very similar deal. We are looking at a triplex in the area and our plan is to originally purchase the property with cash through a private lender and refinance with a traditional loan later on.

    I’m curious about the process when you go to refinance, I think I’m understanding your plan but correct me if I’m wrong. When you refinance, is your goal to have the property appraise for a high enough value ($120,000 or higher) so that you can qualify for a $90,000 loan and still achieve an LTV of 75%? That way there is still no cash out of your pocket in the form of a down payment correct? What if, even though this doesn’t sound like it will be the case, the property only appraised for $100,000, then would you be stuck having to cover the rest of the down payment?

    Again, awesome post and thanks for your help!

    • Brandon Turner

      Hey Rane, thanks for reading and the comment! Congrats on your upcoming purchase! We’ll have to get together someday and talk NW real estate 😉 Are you over on the forums? If so – be sure to have “Washington” set up as a keyword alert so you’ll be notified if we have another meetup soon.

      In answer to your question – yes, that’s exactly my plan – to hope it appraises for at least $120k – which I believe it easily should (since it had some stuff to fix on it). However, there is always the possibility that it won’t, and so I’ll just take what I can get and use my own cash (or a partner, if I decide to add one on) to cover that part.


  37. I’m new to the BP community, but I have from time to time stumbled upon some great articles. Since joining 2 days ago, i have read a ridiculous amount of great articles–this is one. and I’m surprised that the conversation is still going on, months later–but I’m sure that’s just how the BP community rolls.
    This article was great–and to be honest, i have to watch the videos next, but the words alone were very detailed and connected with me. It tells me I need to learn more because I don’t quite understand all the jargon yet like LTV. And I’m a person who always has questions–but once I watch the videos, i’ll write them down and post all my questions here. Until then, thank you Brandon for reaching out to the world. You’re just one person but have influenced many.

    • Brandon Turner

      Hey Iris, thanks so much for your awesome comment. I really appreciate the kind words. And yes- that’s just how this community rolls. BiggerPockets is amazing because of the many investors who get together to help each other succeed. It’s awesome. The jargon can be a little overwhelming, so just keep reading and learning. If you haven’t yet, I’d recommend reading through the “Ultimate Beginner’s Guide to Real Estate Investing” that we provide for free. (and Fyi – LTV is loan-to-value, which is a percentage that tells the bank how much loan they are giving out compared to how much the property is worth. So if they are loaning $70,000 on a $100,000 property – it’s a 70% LTV.)

      Definitely come join us over in the forums as well and start connecting there as well! Seeya around the site!

  38. Seriously? You pretty much wrote a book here! I’d bet this is something you probably could have charged good money for. You are the man for writing something like this and giving it out for free. Good vibes will return to you. It’s a law of the universe.

  39. Verni Franklin on

    Very good and clear. Could you send me a copy of your evaluation spread sheet software?
    Also include a copy of your private Lenders list. What part of the country is this deal in? I am California and that price for a 4 plex is found in dreams.

  40. Brandon
    I’m sure this has come up before, but would it be possible to get a copy of the excel sheet you use to analyze properties in this video.
    Awesome stuff by the way, am new to the site just recently

  41. Thanks for this post. Interesting stuff. I wish I could find quads with hidden apartments in them here for 90K. Apartments here are going for around 100K per unit. My personal philosopy, though, is to buy buildings that are younger than I am. I am trying to get my family to exchange out of their stuff that was built between the World Wars, let alone before the first one. I wonder if “updated” electrical systems and plumbing systems have been updated enough, and by someone who knew what they were doing. Will your 10% savings be enough to keep this building in shape?

    Finally, my little nugget would be this. A bank’s rigid rules would not be spelled ridged. Just BTdubs. 🙂

    Thanks for the post.

    • Brandon Turner

      Hey Adam, thanks for the comment! Yeah, prices sure differ quite a bit -though I’ve found that even in expensive cities, there are cheaper price pockets within a few hours drive. For example, I’m only 1.5 hours from Seattle, where prices are ridiculous.

      As for the 10% savings – I hope so! That’s always a concern with these older buildings, but from what I could tell, everything looked good. Obviously, things will come up – but ironically – in the past six months of owning this thing… I haven’t had a single maintenance problem yet. It’s odd.

      And Rigid … Ridged… 🙂 Oops!

  42. Great stuff as usual Brandon! Learned a lot about how you spell it out simply and conservatively..Hopefully will jump into the game soon as I have been tip toeing for too long now, thanks for the insights!

  43. I always read about buying income property with little or no money down. If a property sells for $100,000 and I have the money from a previous sale, is it a good idea to just pay the whole amount in cash and have no mortgage thus a higher cash flow?

  44. Awesome post Brandon! Case studies like these are great for new investors as well as for investors interested in another niche in REI. I hate I’m just reading 4 months after its been posted. The prices and rents in your area are not much different from mine, and I’m intrigued by your investing style as I also want to build my portfolio with small multifamilies as you are. Great analysis as well! Thanks for sharing!

  45. Brandon,

    Great post! Really informative for a newbie like myself. I know I may be a little away from making my first deal but I’m definitely learning more and more each day. Thanks again!

  46. Great article. I love all the details. The opportunity to follow your thought and research process is so helpful. This is the kind of case study I always wish I would find in books and never do. I am so glad I found Bigger Pockets! I know I have at least 6 months before I can really get started on investing so I have plenty of reading to do now.

  47. Hi Brandon.
    While not a total novice to investing, I am new to BP and wanting to move from SF to MF properties. I found this article very interesting and useful. Can you identify what you include in your ‘holding costs’ for me? I’m not getting the W/S/G/PUD/etc. I apologize in advance if you answered this already as I didn’t read all the comments posted … a lot, but not all. 🙂

    • Brandon Turner

      Hey Wendy, thanks for the question! So, the typical holding costs are:

      Water, Sewer, Garbage, Electricity (PUD) are the main ones for me, which is why I included them, but really anything else that might be a typical cost for that property. Every property is unique, with different expenses. Some areas have Home Owner Association fees, others have natural gas or street assessments. It’s really any of those things! Hope that helps!

  48. Thanks Brandon for this article and videos ….I was so lost in it that I neglected my kids (they are ok though) 😉 and thanks for sharing your spreadsheet. I’m trying to get a multi Unit too….so I’m bookmarking your article for future ref!

  49. Hi Brandon,

    Awesome blog article, I thoroughly enjoyed it and it benefited me a lot. I have a question for you about the quick “5-minute” analysis. I was wondering along with the 2%-50% rule are there any other analysis can we do. Do we need to do it? I was reading Larry Loftis’s book on residential multi families and he seems to be in favor of GRMs. Your thoughts?


    • Brandon Turner

      Thanks Abdul,

      Honestly, I’m not a huge fan of the GRM (I’m not really sure why – I just think it’s too simple with too many variables.) Other than the 50% and 2% – I just run all the numbers in a nice spreadsheet. I try to cover every single possible scenario. Hope that helps!

  50. Hi Brandon,

    Thanks so much for this post. I just read it and re-read it to make sure I completely understand. In my area (North Bay of SF) there is some great money to be made in multi-family investments, but it’s a really tight market with very little inventory. So many properties are transacted purely behind closed doors. What advice might you have for a new investor in this area on how to get behind those closed doors? Or, alternatively, are there other ways to handle this situation besides just moving on? Thanks for any help!


    • Brandon Turner

      Hey Jen, thanks! The best advice I have is to start building relationships with those in the business. People love to talk about themselves – so ask a lot of questions and you’ll get behind those doors in a heartbeat! Attending Real estate clubs and engaging on BP are great ways to get to meet investors also!

  51. Awesome awesome awesome read and video. i’ve been searching for someone to just break things down and finally found it here! It was very easy to understand. Many thanks for taking the time out to share with all of us.

  52. Looks like the question Wendy asked above didn’t get answered –
    I’m not getting the W/S/G/PUD/etc
    So I’ll take a stab at it 🙂 I think it’s for Water/Sewer/Gas/ ?? and maybe public utilities ???

    Thanks for the article it was very informative.

    • Brandon Turner

      Ah Bruce- looks like I missed some questions here! 🙂 And it’s water, sewer, garbage 🙂 Though in a lot of parts of the country, Gas would be included also. And we call our electric company the PUD – so you are correct! Thanks for jumping in!

  53. A. Darnell Marion on

    Hi Brandon,

    This was just want I needed to read. So much so that I read it twice. Some 14+ years ago, I purchased my first property. A side by side 3br 1.5 bathroom townhouse. It was supposed to be an investment property. But I put my mom in the other unit due to a death in the family. And other things in life derailing my goals and dreams. Well that property is finally being used as a total rental. With positive cash flow of $500 a month (thank God). My goal is in Multi family properties. I will would like to follow you and learn more from you. And every successful MF investor on BP. Thanks in advance:)


  54. Great details! I currently work for a national leading REIT (8 yrs) and for years wanted to get started in investing. My credit is ok due to a recent hit and i have no money but my parents are very interested in being silent partners. I’m looking for suggestions to get educated. Will definitely join your commits and read the book suggested above.

  55. Aloha BT,
    I’m glad I came across your blog and video. I have been a site manager at HUD and Tax-Credit properties for years and am also a general contractor so I’ve got the landlord and property maintenance side down, but want to start investing for myself.
    I have a question regarding purchasing a multifamily property with no money down from a bank. Is it conceivable that if a seller wanted no less than 100k for their real estate, and the bank is willing to loan up to 70% LTV, that the buyer could negotiate with the seller to move into second position behind the bank for the remaining 30k to be paid at some specified future point in time? Is this something that underwriters will typically allow or not? The assumption is that the property is going to be a good investment meeting the criteria you have already stated.

    • Adam, while in the past and possibly again in the future it was/might be possible to do 100% financed deals with a bank lender the financial meltdown made them much more conservative (once again). Today most banks want you to have skin in the game and even if you can get a seller to take back a 2nd, the bank will include that in their LTV underwriting at least for apartments which is what we focus on.

      I would say that when banks become willing to do 100% financed deals again it will be a sign that the market is nearing a top… or in another bubble.

      Good hunting-

  56. All this looks really good and I have 2 questions

    1) Is it bad to just want to fix and sell the property after a year or so to get the 30 or 40k? Or are you just saying you don’t do that because you enjoy the more passive income?

    2) I’m so confused about Partnerships and Lenders. How much are they making off deals like this? What’s the benefit? The guy who gave the $90k…what does he get? Monthly payments on the deal? How much interest?

    3) Sorry I added another. The 12k…so you have to pay your contractor all at once? No monthly payments?

    • Brandon Turner

      Hey Kendra,

      1.) Not bad at all! I could do this, and have thought about it a lot. However, I would be able to make about $30,000 – which sounds great, but I’d rather have the money coming in each month. I would probably spend the $30,000 on a new car, and then be broke again. However, if I keep the property, I’ll have income for the rest of my life. $800 per month is almost $10,000 per year in profit. Over the next 40 years, that’s going to be $400,000 in profit. So which is better: $30,000 now or $400,000 spread out? This is a personal choice, but for me, it’s going to be holding onto it.

      2.) The lender in this deal (which is different than the other one) is getting 12% interest, but no equity. (The other deal I talked about is an equity partnership. This one is just lending.) So each month, I send a check for $900 to my lender. That’s what he gets. He also received a $900 one time fee at the beginning.

      3.) And when you pay a contractor, nope- you cant usually make monthly payments. However, you can do just small tasks each month, and pay for just a little bit at a time, which is what I did.


      • When hiring a contractor the payment terms are stipulated in the contract as to how much and when they get paid for the job. There is always an initial payment that amount can very and is usually placed in an escrow account to cover initials material costs and labor.

  57. Jonathan Scott on

    Thanks @Brandon Turner for sending the link – there is so much valuable information.

    Can you explain (or provide a link that describes) how you came up with a minimum of the $200 per unit per month rule? Does the rule exclusively apply to UNDER four unit deals?

    If so (i.e. it’s only a rule for under four units), I can understand the logic that it might not be worth your time to make less than $10K per year on a property, even if it’s a great cash-on-cash return. But, if it’s more than four units and also a great cash-on-cash return, what’s the rationale to exclude it from your portfolio?


    • Brandon Turner

      Hey Jonathan, no problem. So, the $200 I kinda made up. 🙂 Honestly, I looked at my area, what I could get, what would be an AMAZING deal, and defined $200 as that amount. If I were investing in areas like Manhattan, $200 per unit would be pretty crappy, for the amount of money I had to put down. In reality, Return on Investment is really the only number that matters, but the $200 per month guarantees a great ROI for me, without having to do that calculation.

      And I’m not dead set on $200. If I can only get $100, that’s not aweful, but I’d like more. A lot of that depends on the financing. If I can get $100 per unit, per month, for having $0 into the deal, then great! But if I’m putting in 20% down, I’m going to want more like $200.

      And it doesn’t really apply to just small multis – I value apartment complexes the exact same way.

      Hope that helps some! Thoughts?

  58. Great article. I have read it several times. Decided to put forth a serious effort in 2014 to invest in multi-units after having been talking about it for the past 10 years. When I make my first purchase, should I purchase the property and transfer it over to an LLC or should I create the LLC first? Should I create a separate LLC for each property that I purchase?

    • Brandon Turner

      Thats a tough question Wave, cause it totally depends on your situation and what your tax people advise. For me, though, I did the property first and transfer it in after (carefully, with my CPA and lawyers help.) It’s tough to buy property in an LLC – they only want to lend to a person, not a company. Hope that helps!

      • The interesting thing is that with 5+ units most lenders will require you to have a stand alone LLC (or other entity) to hold the property in. That’s S.O.P. with us but it was interesting that the lender on our last deal made it a requirement so we used it as a negotiating point… even though we were going to do it anyway.

        Good hunting-

  59. I thought this was very helpful. I like the multiple exit strategies. The breakdown of the numbers gave me a general understanding of what costs go into purchasing a property like this one.
    Thanks again.

  60. Winston Risser on

    Thanks for sharing. I don’t know if other people do this ,but i know different ways that are possible to get a property and sometimes it is hard to know which step to take first. So that being said the way you wrote this post is clear and informative.
    I know what i want to do it is just getting specific and repeating the process that is challenging for me. Your success is encouraging!

  61. A fantastic and very informative article Brandon. More than anything for me it highlighted the importance of hunting out that deal and not just settling on the list price and having pre finance prepared and ready to go.
    Im interested to know how its all going several months down the track

  62. Brandon,
    Great write-up. Thank you.
    I’m going to pass it on to one of my foreign investors in order to reinforce things I have already tried to explain – sometimes language is a barrier to understanding, so I’m hoping he understands the written word a bit better. Our customs are sometimes hard for him to fathom, also!
    This really is a fantastic article. You follow the process, you offer subsequent informational links…you really seem to know your stuff! Again, congrats and thank you.
    I’m currently not doing any investing but rather working on building a cadre of investors I can help build their portfolios – after one recent and very painful tenant eviction experience, the boss lady has said enough ’till we’re in a better position (and then, this past year+ I’ve been out of commission – literally, cause of double back surgeries).
    I’m signing up for your up-dates. Keep it goin’ and thanks for the encouragement!

  63. Deblin McKnight on

    Thanks for the great article. My fiancee and I are currently purchasing our first home (single family residential) and are looking to buy a multifamily rental unit shortly afterwards. We are very excited and these articles have been very helpful, especially this one. Wish we could get those numbers here in Portland, Oregon!

    • Brandon Turner

      Hey Michael,

      I also am facing that when going to a traditional bank, but I have been using a portfolio lender lately which has worked fine, as they don’t have the 4-property (or 10 property) max. I haven’t had too much of a problem with my portfolio lender. Also, on some of my properties, I use a partner to get the loan in their name but keep title in both names – which gets around the limit issue as well. Hope that helps!

  64. brand new to investing and still reading everything, thank you for this detailed look at the thought process, it is very informative. Now on to read the other linked article.

    Thanks, ME

  65. Quincy Fellows on

    Wow I just want to thank you for clarifying a whole bunch of strategies for me that I didn’t understand at first glance. The time you took to write this out shows me as a newbie on this site and in investing how dedicated you really are. I myself am a young adult (20 years) and want to move out into the real world and start out with a multifamily residence. so this was perfect for me on many different levels. My only question is in the finance section you have a bullet about $1000 earnest money and I don’t think you mention it again can you please clarify. Thanks a bunch Brandon.

  66. Great article brandon,so great that i would love to have the spreadsheet of your property invest calc so that i can see better how you get the numbers and apply it to my multi unit research.
    Thank you

  67. That was a great webinar and article i really learned alot about what goes into buying a multifamily home. I really would love to have a greater insight into the real estate market situation in my area, and how to go about learning more.

  68. Thank You for taking the time to put this all together. I am new to real estate investing and looking to buy my first property. This article was perfect for me……’s almost a mirror image of a property I am eyeing now. I’m in the process of researching as much information as I can before I make the commitment and this really helped.

  69. This is a great article,thank you so much! I do have a question,if I plan to occupy 1 of the unit of the multi-home and previous tenants already have an month to month lease, is it fair game to ask them to renew their lease to one year?

  70. Hi Brandon
    I recently came across duplex and confused by realtor response being a “minimum wage” real estate investment. Could you shed some insight
    asking price $105000 (planning to put 20% down payment)
    2 units: 1 bed 1 bath- $700 2 bed 1 bath- $850
    Total income-$18600
    However financial info from realtor site states:
    Gross Annual income-$15600
    Total annual expense-$4594
    Net Operating income- $11,006
    property tax $4686
    GRM- 6.73
    Cap rate-10.48

    Cash on cash return of 12% was my calculation,I’m confused why he think its minimum wage real estate investment? Am i doing something wrong in my calculations

    • I’m sorry Brandon,I think I know where I went wrong!
      Annual income-$18,600
      50% maintenance and expense rule- $9300 +$4686(property taxes)=$13986
      mortgage $6000/yr results in negative ROI!

      However I would like to clarify in your 50% of annual income goes to maintenance and expense excludes property taxes and insurances,right? I think that’s where I went wrong initially.

  71. I’m new to BP and an starting out on my real estate investment career. I have been reading all the info. and posts on the site. Although I have found all to be interesting and educational, this one is great! I tend to be someone who works best with examples and this was Great. Exactly what I was looking for. The detail and steps you went through were great. Thank you.

  72. Brandon, Not sure if you have any other site where you can respond because the last time this thread was posted, while ago.
    I don’t understand when you said you are at $100,000 with nothing down, but then you are putting 20k down though. Also how did you determine the CF, and how is that different than net cash? A friend of mine asked me to look into “Dubai Properties” where the real estate market is booming, all year 100% occupancy due to expats working in Dubai, EXPO 2020 announced, and of course NO TAXES. Any thoughts? I live in Orange County, you cannot find anything for 100 or 200K, may I ask, in what city I are you buying or any advise will be greatly appreciated.

  73. Brandon,

    Thank you so much for sharing your deal in such detail. Can you please point me to your favorite place that discusses the challenges of buying an old building such as how to handle things like lead based paint, galvanized plumping, old wiring and asbestos? I am new to BiggerPockets.


  74. Enjoyed the post, thank you. Can you elaborate on the very end of your post…The part where you mention you intend to get a residential loan (as owner/occupant, 2nd home, ?), and as such need to keep the 5th unit “decommissioned” – I’m interested in knowing the potential pitfalls of having a residential loan on a property with more than 4 units. Yes, at the time you financed, it was 4 family, but afterwards you make it 5 units, and are still financed the same way…There are no problems with that?

  75. Enjoyed the article…..finding it about a year late I guess, but just getting into this rental property thing. I’m headed to watch your webcast, but wanted to know your thoughts on using a home equity loan to finance a 6-plex. Since it’s a 6 unit building, it made it commercial… I am looking at taking the equity out of my home to get started in the rental business. This property is listed for $100,000….and my hope is to spend no more than $80,000 so I have enough money to update the hvac system as oil heat and window ac doesn’t interest me because currently it would be me paying for the oil heat in the winter….and the replacement of the HVAC would pay for itself relatively quickly.

    My next question… did you get the insurance so inexpensive? Since there are 6 units….it made it commercial, so they only want to insure for the total replacement cost. I haven’t checked out an independent agency yet however.

  76. Lorcan MacGrath on


    Thank you for sharing this amazing post. It is exactly the type of information I am looking for and even though you posted this a while ago it is still relevant and extremely helpful. I particularly like that you let us into your head and bring us along with you as you analyze and process each step.

    Thanks for creating this site too …


  77. Patricia Hinojos on

    I am OD’ing on Bigger Pockets as a new member. My dog is LOVING the log walks as I listen to the podcasts, too 🙂
    Great post, as I’m working with a team to find some mid sized multi-family. I think the “rules” for a quick evaluation will help greatly in simplifying the hunt.
    It was interesting to learn the 4-5 unit that crosses residential to commercial.

  78. Well played Mr. Turner,
    Your step by step process is informative and refreshing at the same time. Your post fills in the “blanks” of a fascinating investment strategy. Thanks again.


  79. Great article. Thanks for the info, you made it easy to understand. On the other note, if you need a blank tax, HUD or rental agreement forms, check this site PDFfiller which allows you to fill out your form easily. It works for me and you might find it useful for you i buying property. Here is the link to the list of forms you may need

  80. Hi Brandon,
    I am new to BP and really found the informative. Just bought my first triplex, although not at such a great deal as yours. I believe I needed to get in, on real estate investing and am pretty okay knowing I might have paid a little too much. Too me, is cost of learning. I have learnt so much in my one month of knowing BP and sure believe I will put most of what is learnt, to use come my next buy. Thanks for sharing this.

  81. I have been a full time residential real estate agent in Minnesota since 1985. I found your article so helpful. And it was easy to understand. I am trying to determine the value of a 4 plex in St. Paul MN as I friend wants me to sell it if the numbers make sense. But there are no comparable sales within 5 miles and going back even 5 years. I dont want to just test the market with a made up number because if it sells some appraiser will get stuck with the same problem – NO COMPS. any thoughts?

    I suppose the seller could just offer Terms of CASH only or Contract for deed.

  82. Dustin Palmer

    I am brand new to Real Estate Investing. I just signed up with BP a few days ago, so I have a lot of reading material to go through.

    After reading this and watching the videos, you have done a great job of explaining every step in it’s simplest forms. Thank you. In just about every book I’ve read, they explain everything you just did. But, my “Ah hah!” moment was watching it in person and crunching your same numbers on my notepad and calculator, step by step. Thank you again. And I look forward to reading/watching more, thank you to BiggerPockets.

  83. Marjorie D.

    Great post. It was REALLY helpful to have you spell out all the creative alternatives to financing the deal!

    Quick question: Why would you prefer the $800/mo cashflow vs $30-40K that you would get if you flipped it? Is it because of the capital gains you’d have to pay on the flip or because you have (obviously) plenty of ways of financing these properties with no or little money down (of your own) and plan to hold it for 10+ yrs? The profits from the flip could be reinvested in larger properties and get larger gains (faster). Just curious…

  84. I just dont see how people are finding cheap multifamily properties. The best I have found was a duplex for $120k. Most of the properties ive looked at, from tiny towns to large cities, seem to average around $75k per unit.

    • David, To get ‘great deals’ on multifamily properties you essentially have to be willing to buy really old properties (possibly close to 100 years old) in depressed or low income areas. I visited the actual property in this article and the house was very old, in a shabby neighborhood with its back to a dike, on the coast, dangerously below sea level in a town with extremely high unemployment. Can you make money on something like this? Sure, I suppose. Was it any surprise that it was so inexpensive? No. You’re not going to find a ‘normal’ duplex for 40K or whatever. But you can find an ancient house that has been converted into a duplex of sorts in a low income area. Don’t get me wrong. I’m not saying I disagree with Brandon’s choice. I’m just illustrating the reality of the situation.

  85. John Nguyen

    Can someone please explain to me how to get ROI based on 6 month flip?? I know that ROI is cash flow / investment, which is 13786.30/12000=114.89%, but how did Brandon get a figure exactly twice that… 229.77%? Does it have something to do with “based on a 6 month flip”?? What does that mean exactly?? Thanks for any help!

  86. Guy Perrow

    Brandon, outstanding breakdown, thanks for putting this out for the masses. Am I the only one who doesn’t understand the concept behind the “50% rule”? Under “Step One” above, it’s mentioned, but not explained why you only factor 50% of income for expenses. Can someone help me with this 🙂 The other 50% is never factored as profit??

    One other question: If I secure a private lender for the short term (one year or less), does this make refinancing with a bank easier than getting the inital loan?

    Many thanks!

  87. Jordan Burke

    This is SO cool. I am new to this world and absolutely love these encouraging videos. I know its a lot of work, but I am so excited to take these steps and jump in. I’m in a cool position to be able to put a good down payment down… I’m just trying to figure out how to get the loan going. I am working part time while in school — not having a large steady income so it’s hard to go through a bank. I would love to see a video about going through the ‘Applying for a Loan”. You guys probably have one done already. Anyway, you’re great, and way cool to get this going. If you ever want to venture out to Utah let me know I’d love to put together a ski day with ya!!

  88. Ryan McElroy

    Hey guys, quick question!

    How would this plan work substituting the first property (requiring 20% downpayment) with an FHA 203K loan (requiring a 3.5% downpayment) and living in one out of the four units rent free?

    I want to use the FHA 203K loan as a stepping stone into real estate investing. At the same time, i love Brandons 7 year plan and feel using the FHA concurrently with this plan can only increase time and profits. Would this work?

    thanks, Ryan!

    • Eric Diem

      I think that’s a great question Ryan, here is what I see.

      Overall you would not have been able to meet the first deadline (Closing in 2 weeks) as I am sure it would take time with the appraisals and everything else required to secure FHA Financing. Every story I have heard FHA takes forever. Assuming that hurdle could be jumped another way and the bank waited for FHA you would have to deduct at least $5400 from your annual gross rent. (The cost of your unit assuming it was a 1 bedroom). You would have an annual cash flow just under 11K assuming you kept an immaculate unit or didn’t include your unit in your numbers.

      Also you would have more cash out of pocket because you would’ve added the 3,150 down bringing you closer to 15K OOP. Still decent and doable in my opinion although I didn’t redo all of the calculations just the few mentioned.

      Good question though.

      Eric D.

  89. Hello all. Great article. Want to getting to investing in small multifamily property. Looking at a 3 unit REO property in probably what would be considered a C class neighborhood. One property is rented. Any ideas of what I should look for as far as financing, possible rehabbing, etc…? Asking price is about 60 thou.

  90. Kimi Nord

    I found this article incredibly inspiring! I currently only own my personal residence, but am looking at getting into the real estate investing scene by house hacking with a duplex. Thanks for the additional inspiration for finding the right property to add to my portfolio!

  91. suzgo phiri

    Yet another excellent post Brandon! I only have one question which my or may not have already been asked. Too many comments to go through but why would you refi as a residential instead of fixing up the 5 apartment and going for the commercial ? wouldn’t you have better cash flow, better cap rat, higher property value etc thus possibly a better rate as well from the bank ? interested in yours as well as others thoughts on the subject.


  92. Matthew Jones

    An oldie, but a goodie- great article! I appreciate how much time you spend working to educate us here on BP, you are an incredible help. I’m going to buy your book for two reasons: 1) Most importantly, because coming from you I know it will be outstanding , and 2) just to throw a little change your way as a tip for all the invaluable advice I have received from you and the entire BP community.


  93. Tyler E.

    Awesome article for a newbie to get a grasp on analizing a property. I had been just looking at purchase price and rent. Now that I know some more quick things to check for it’s really helped me out. Are there any specific statistics that will make a good deal? Like you said you shoot for $100 per unit. At what point does the cash flow become too low?

  94. Jibreel Hameed

    This is a great article. I’m looking to get into multi-family investments in the near future so I definitely benefited from reading this. However, I’m a new investor so I’m a little confused about the idea of refinancing the house. I assume you used this new loan to pay the private lender back but:

    1) Will the new loan amount be the new value of the home or just the initial loan value of the private lender?
    2) If you take the loan out for the full value of the house and pay the lender his 90k back, what happens to the excess money from the loan?

    Sorry if someone already asked this question but if this concept could be quickly explained I’d greatly appreciate it.


  95. Kevin Lang

    Hello All,

    And, for my first post ever… Brandon mentioned that most listings (on RedFin,, etc.) give the monthly or yearly gross income for an investment property, however I’m not able to find this information for the multi family properties I’ve reviewed. This is important for a quick analysis using the 2% and 50% rules. Can someone let me know where to find this info on a listing?

    Many thanks!

  96. Brandon,
    awesome article, I came across this article as I am looking into buying my first multifamily home. it is a 4 unit. I wanted to know the do and don’ts and this article help a lot.

    quick question, what are a,b and c tenants? what the the differences?

  97. Bradley Cordell

    I know this is an older article… but it is a gem. Thanks for all the tips, suggestions and step by step instructions. I don’t have any multi-family properties but I hope to buy some one day and this article is a great resource. I love the videos too!

  98. Max Pickus

    Hi Brandon,

    Been studying and reading for a good six months now. I am looking to purchase a multifamily in a pretty hot market (Colorado). This will be my first real estate purchase and I am somewhat paralyzed in the research phase. I am also at a lost of what to prepare, how to prepare it, etc to take the next step. I feel like an FHA loan is my only option as I do not have 20% down for a conventional loan – I could possibly get the 20-30% down from a private lender whom is well off as you mentioned in a comment above.

    I guess what I am asking is just a bit more guidance on how to get out of this paralysis and continue to move forward. Is opening a bank account with at least 3.5% of my ideal loan amount the first step? Analyze lots of deals first? Keep learning?

    Thanks for any input.

  99. Luka Milicevic

    I’m new to BP so I just read this now. Great post.

    Where you said an ugly property from the outside is a good thing because it scares away the competition; so true, this property would scare me away. I’m making an effort to look at the numbers and the not the actual property. Something that is not always easy.

    The links in the article were great, I’m going to go read through all the related articles.


  100. Pete Krentz

    Great article! A note on the submitting a letter/photo with the offer. As a Realtor I often have my clients compose a brief letter about why they want the house and include a picture as well. I have had sellers accept our deal for less money because of that letter more often than not because of the personal factor. A letter that takes a few minutes to write could potentially save you thousands of dollars? I think YES

  101. Edward Goodhue

    Wonderful article. There are lots of people selling this information for thousands of dollars, and here you are doing it for free.

    Real numbers on real deals is the most effective learning method, other than first-hand experience. So thank you!!!

  102. Gary Kuang

    Thank you for this awesome article. In the article you mentioned that you knew the area the property was located in, that was why you put in your own rent numbers when doing calculations. For a beginner would it be ok to use the rent numbers that are listed on the property listing for calculations?

  103. Thanks for the great info. My son turned me on to your site.
    Could you explain further the 50% rule?
    It seems like you reserve the first 50% for the pay down of the mortgage.

  104. Andrew Large

    I’m a total novice, just beginning to explore this. And my question will prove it.

    The suggested method of analyzing opportunities presumes that I’ve got some offers to analyze. Where do I go to actually find listings for multifamily properties? I’m not finding a whole lot.

  105. chris jackson

    Thank you so much for taking the time to write this article and contribute to our community! I am a new investor and have found a duplex that the owner would like to sell, but it’s off the market. I am trying to figure out what my best strategies are for getting in and out. Both sides together are making $1500/mo. The seller wants to do this privately, which I also do. He has $90K left on the mortgage and is hoping I will be able to pay that off and make him some money also. I am hoping NOT to get a mortgage or conventional funding if possible – but I’m not sure if I’ll be able to do that since he wants money. He is NOT desperate to sell because he’s cash flowing on this property and has already been offended by other investors’ low-ball offers. I am thinking some sort of a lease-option with a 5-year balloon payment/option to buy? I haven’t really crunched numbers on this besides the rent and his mortgage. I know that $750/side seems to be pretty right-on for this area of Chambersburg PA though. I don’t think I’d be able to do much in the way of improvements/raising rents.
    What are your thoughts or concerns? Certainly isn’t as awesome of a deal as you’ve found – but if it’s safe(ish) and I’d like to pull the trigger and make my first deal! Just to start the snowball…

  106. I’m grateful for you posting this, as I’m just learning about the real estate world and intend on buying my first property as a live in landlord in a multi family dwelling. This gave me a lot of great info and resources, although I admit I have more to learn than I already know. Do you have any other posts or resources that might be helpful to me in this topic? Thank you!

  107. Thanks Brandon for this! I stuck through your akwardly long post and videos!! (Haha)

    Just wondering how this property is cashflowing at the moment? And what exit strategy worked after the 6 months??

  108. Kevin Leonce

    Thanks Brandon!! Read the entire post and I’ve learnt about financing methods with no/limited cash and to definitely have an exit strategy. I’m investing remotely and definitely have challenges and these posts really help with figuring out investing strategies.

  109. Great article, I’m planning on doing the same except I want to live in one of the units. One question tho, why do the hard one year loan? why not do the 30 year mortgage from the beginning? Thanks!

  110. Mike Goikhberg

    This is one of the most helpful posts on multi family investing I’ve read. probably the most! It really helps us n00bs who haven’t done a single deal when you really explain the nitty gritty steps. Question though – Why are there holding costs in the buy and hold for rental spreadsheets? wouldn’t holding costs just be the operating costs …and they’re ongoing? Also, did you choose to make the cap rate 13%? is that a common rate? I’m hearing 8-10 all the time now.

  111. This was a great read! I skipped the videos because it wasn’t quite the topic I needed details in but it was definitely helpful. I’m actually moving to the Virgin Islands and with the cost of homes there I’m considering getting a home white a few studios and or apartments attached to it to help out but I’m having a hard time finding out how mortgages work in that application. You’ve definitely given me a lot to think about!

  112. Mark Daubenschmidt

    This is probably the most helpful standalone article I’ve come across. Most of the books I’ve read cover the same or similar process, but the way they described the actionable steps still left a bit of a disconnect for me. This, however, broke it down so even an average Joe like me could understand!

    Thanks Brandon!

  113. Great article! Took a lot away. However, I find my situation to be a little different situation in that I am a first time prospective buyer and I would like to invest in an area that is more popular (more competition). It seems like the deal you received really made the investment for you.

    Do you have any advice on how to enter a more competitive market with presumably bigger banks (or just private sellers)?

  114. Kishore P.

    Hey Brandon: Long time listener of your Weekly Podcast with Josh. I’m looking to pick up my first Small Multifamily. I live in the Detroit Metro Area and I know you and Josh are not great fans of Detroit. 🙁 However, the Detroit Metro area do not have very many inventory of Small Multi’s (Duplex, Quads, and 5 Plexes) ? I looking outside the Detroit Metro Area for Multi’s, and open to outside the State of Michigan as well.
    Question 1: Would BRRRR calculator work with Multifamilies?
    Question 2: If a Small Multi is zoned for Commercial how? do you get a COMPS to compute $’s per SFTf, What strategy would you recommend to undertake to get that information? It will not be practical to reach out to the Commercial Real Estate for that information to do the analysis.
    Question 3: Do you counsel working with local commercial broker in the targeted city to get the connections for General Contractor and Property Manager?
    Keep up the good work on podcasts and Biggerpocekts, FYI, Detroiters are tough we can take shots and last but not least forgive !

  115. Marites Ritchie


    Thank you for all your posts and webinars. I know this post was awhile back but can you tell us how you were able to come up with the estimated ARV amount? And how important is this number and its accuracy?

    Thank You in advance.

  116. My wife and I have been looking at property for sale as an investment, and I think we’d like to do the fix and flip option you talked about. If we could get a relatively quick payout of $30,000-$40,000 like you said by finding the right property for sale, I think we’d be doing pretty good. I’d really like to find some good property for sale on a consistent basis, and use that money as supplemental income to build a good base to where that could be how I make money during retirement! Thanks for talking about it a little bit, and maybe I can get to the point where I could make money renting and flipping!

  117. Julie Shaffer on

    You are in my neighborhood and I am a newbie buying a multifamily out in Neilton.
    I have made my offer, been accepted, paid earnest money and am now entering the inspection period.
    I have another 18 days left to inspect.
    Would you turn me on to your property inspector?
    I would also like to be present for the inspection?
    I have not yet done a walk-through but am familiar with the property.
    Julie Shaffer

  118. Omar Morales

    One of the most useful posts I’ve read on BP! Thank you for taking the time to break down all the actionable advice.
    I am currently looking to personally fund my first deal this year and you better believe I will be referring back to this post often to make sure I go about this the right way.

    Thanks again!

  119. Anthony Robles

    Brandon, You may read this reply. BUT WOW!!!!!

    This is by far the most informative advise I have come across. Its like a receipt. I do understand there are always risks, but man The way you do it almost takes risk out of it.

    I am so excited , I will mirror this “template” ( I do know I have to adjust to my Market)

    Thank you for sharing

    “If you don’t stand for something , you’ll fall for anything”

    God Bless
    Anthony Robles

  120. Kody Veit

    Thank you for this very insightful article! I had a question about your method of using a private investor. Since he provided the generous $90,000 to essentially allow you to buy the property out right with cash, you mentioned you made a deal to pay him back after one year. I feel that would be a difficult deal to make good considering you mentioned breaking even for the first six months since you left the 5th unit vacant for the purpose of effective refinancing. How did you manage to do this? Did you end up refinancing, did that allow you to pay him back? What all did refinancing get you assuming you were able to refinance? Thanks very much in advance!!

  121. Thank you for the information!!

    I have always been interested in real estate investing. I am scared and nervous, but willing to try. Thank you for the information, and book info.

    I also looked at list of hard money lenders (wow!!)

    I wish you had sometime of AFFORDABLE mentor program, where you take student by the hand step by step, from, beginning to end in buying their first multifamily property.

    Again thank you

  122. Papa A. Diop

    Hey Brandon, thank you for this article
    Question: you said about financing your deal that you could find a friend to put $12,000 for a part of your deal?
    what exactly would you offer him to get him him to bring $12,000 on the table ?

  123. Justin Barney

    Wow! this was a very good read and opened my mind up to the possibilities. My concern on a lot of real estate is I am a nurse. I make decent money but I have few contacts outside of healthcare. I have some physicians that might (under the perfect circumstances) provide the money up front. So, resources is a big concern but understanding the math of real estate is confusing. I have actually taken Calculus and physics and don’t know how you figure some of the items in your spreadsheet or even what the spreadsheet means. Where can I go to figure that portion out? I am going to need to prove to my wife and other investors that the money is there but how can I do that without understanding where the numbers come from?

  124. Norbert Powell

    Hey Brandon great post man, thanks for spending the time creating those videos! I am currently looking for my first multifamily, which I plan on doing a house hack with. I plan on using semi traditional financing with (NACA). I have i few questions regarding the purchase of a multifamily.
    1) Many of the listings I see show only the details of one unit while being listed as “multi family”. Is the listing showing the price for the one unit or for the entire property?
    2) In the event of finding an empty property , let’s say a duplex, when in the purchase process would you begin the steps to fill the vacant unit (since I will be living in the other one)? And what would those steps be?

    Thanks in advance for your time!

  125. Cory Raizor

    Hey Brandon,

    This is an awesome article full of really good content! Thanks for the share. I’m a bit stuck on one part however, that may have been explained somewhere. I’m also very green at REI… forewarning.. When J lent you the 90K as a 1 year note, was this amortized over year? Or did he set it up as a fixed payment/month with a 1 year balloon? I kept trying to calculate how your monthly payments to J weren’t closer to $8400/month during your seasoning period

  126. Greg Parker

    Very interesting and informative. I also use a 5 minute (or less) evaluation:
    Rental income.
    That will usually weed out 99.8% of the available properties. If I like the numbers and location is OK, I dig a little deeper and look up tax info, owner, days on market, sale history, talk to the neighbors(and/or tenants), and then I have my CFO (chief female officer/Wife) do the critical intuition/mind-reading/gut feeling evaluation.

  127. Anand Narayanan

    Great post. I have a question, is the hard money loan of 90k for 1 year due at the end of the year? Or, did you agree for a monthly or quarterly p+i payout? If it is the former, then it makes sense to prepare for another long term lender or sell the property. If it were a monthly or quarter p+i payout, you have to foot in more skin (money) into the game.

  128. Franky Davis

    Awesome awesome post Brandon. I’m new to the forum and have been feeding on the podcasts daily. I’m 47 episodes in. Still peripherally learning about investing until I have enough cash to put skin in the game. One question about this process…you said you desired to refinance as residential. Why is that? I figured you would want to refinance commercial after you had shown a track record of renting the 5th unit (higher NOI w/ higher equity value). What are the benefits to refinancing residential.


  129. Hannah Rubin

    Brandon I have been trying to use the 5 minute analysis on multi families in South Florida (specifically Broward county) and I continue to find there are absolutely no multi families that even come near to cash flowing. At least none that are not burnt down and need full rehab, which is more than I am willing to take on for my first house hack. Should I expect buildings in my area to just not have any cash flow and only appreciation opportunities? It seems the market rents (or what I am seeing as market rents for these listings) do not support a cash flowing multi family building. I am correct or am I just not working with the right people to find good deals to analyze?

    • Mike Peterson

      Hello Hannah, I have been investing in the Fort Myers, FL area for about 20 years. I think the reason you are not finding positive cash flow properties is the market is so tight and favors sellers. They are able to ask more for the property than what it is worth (or what we veteran investors would like to see). I am seeing a lot of first-time investors jumping into the market now and purchasing break-even properties with low-money down. That is what happened in 2008 here and led to the crash and foreclose crises. Personally, I am finding a few sparse deals. But they are not coming through the MLS or Zillow. They are coming through drive-bys, world of mouth, relationships, and other non-conventional ways. My wife and I are actively pursuing the purchase of an apartment building. But our search is tough here in Fort Myers. Not very many 5-20 unit buildings outside of the “war zones.” We may start looking elsewhere. Or just be patient and wait for another market correction. BTW, thanks Brandon for the 5-minute multi-unit evaluation. And the other nuggets like letting your emotions get involved, dropping it and being patient, driving by the property, looking at one unit, not offering full-price, having funding in place, having multiple exit strategies.

      • Hannah Rubin

        Thanks Mike, I really appreciate the perspective of someone with experience. I can take solace in the fact that I am thinking correctly in avoiding jumping into one of the available properties merely because this is what is available at the moment. I often fear I am suffering for analysis paralysis, but the fact that not one of these properties even come close to passing the 5 minute evaluation is a good sign that theyre not worth my time for the moment. I agree with you on the driving around and walk bys. Will probably try some direct mailing in desirable areas on spots that could use rehab.

  130. John E Sweeney

    Great post Brandon. We are just getting into the real estate investing world and we would like to start with a multi family home. One challenge we have is we expect to move about every 3-6 years due to a job. What would you recommend on location? I see two options buy where we live, after we get to know the area or look for good markets regardless of where we live and invest long distance. Thank you for your help.

  131. Torin Denniston

    New to investing as well, but 5 years later this is still a great reference. I had one question about the private lender – as someone looking to purchase with no money down, aren’t you technically still borrowing the money from that person and putting it down?

  132. Mike Peterson


    I have heard from veteran investors that they evaluate 100 properties (with the 5 minute evaluation), seriously evaluate 10, put offers on 5 and close on 1. That is a lot of time and effort. But in the end it will net you a fabulous deal that will with change your life. BTW, Brandon said this property failed the 5 minute evaluation, but after more information turned into a winner. Which means it pays to dig deeper, look again, re-evaluate.

    • Hannah Rubin

      I totally agree with all that. But his property was also showing some amount of cash flow. Every property i have reviewed has negative cash flow, and not just a little negative, like hundreds negative. I think I would have more luck with other areas unfortunately.

  133. Joshua Gutierrez

    HI Brandon,

    I am attempting to copy your search on, however, when I go to the site it does not appear on my laptop as it does on your video. I don’t see an “advance search” or any option to be able to search “multifamily.” Hoping to get some help. Thanks for the video. Great info.


  134. Scott Walker

    Brandon thanks for sharing. It was most helpful a very good learning experience. I see where I need to improve with my own property. I was trying to keep it afloat, but now the neighborhood is slowly moving forward and I need to make some adjustments. Thanks again

  135. Mandar Ambre

    So may great tips on how to analyze a deal, run the numbers, finance and make an offer. As always your post is insightful. I am happy to tell you that few months back I bought your book on real estate investing and then I went on to buy my first rental investment property. Thanks for everything you do.

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