About to Close on Multi-fam, what next?

8 Replies

My wife and I are about to close on a three family in Massachusetts, we are going to be renovating two of the floors for a higher rental, what do we do next, we we don't have much cash now that it is in the house or in renovations, what can we be doing to get into our next deal?
Originally posted by @Zachary Watson :
My wife and I are about to close on a three family in Massachusetts, we are going to be renovating two of the floors for a higher rental, what do we do next, we we don't have much cash now that it is in the house or in renovations, what can we be doing to get into our next deal?

Find other people's money to make your next deal happen. You can consider a form of JV. Hard money if you can find a distressed property and HML lender to work with.. Alternatively, you can defer some of the upgrades, or do them in small phases so as not to hamper your liquidity. Or maybe finance the upgrades and carry some debt. If the upgrades would increase the value of the property, you can consider a cash out refi.

Plenty of things you can do.  There is an old saying in RE. If you find a deal, the money will find you. 

Good luck and congrats on closing. 

@Zachary Watson My two cents: do NOTHING.  Go through the first rehab you have planned.  Get tenants in and see how it goes.  You'll make mistakes along the way no matter how many books you read.  Mistakes with two units is far less costly than mistakes with two units + your next deal.  At the very least you need to gauge if your rehab estimates match up with reality (they could be better or worse) and if what you think your can get for rent matches up with post-rehab reality (again, it could be better or worse).  

@Zachary Watson
Resist the urge to overimprove. Replace countertop and paint existing cabinets, replace light fixtures. Avoid unnecessary plumbing and electrical work. Single pane windows are ok if have storm windows. White appliances look nice with painted cabinets. Think I covered most of the big money wasters. I usually spend 3-5k when I first turn a unit and after that it's good for many tenants.

Originally posted by @Thomas Hickey :

Zachary Watson
Resist the urge to overimprove. Replace countertop and paint existing cabinets, replace light fixtures. Avoid unnecessary plumbing and electrical work. Single pane windows are ok if have storm windows. White appliances look nice with painted cabinets. Think I covered most of the big money wasters. I usually spend 3-5k when I first turn a unit and after that it's good for many tenants.

In fact, I have noticed that Sec 8 in many cases provide higher than market rates for rents, and they care more about safety issues than cosmetics. Definitely a good piece of advice not to spend thousands of more dollars on making it like your primary residence just to chase additional $50/month in rent. 

I am not implying that OP do Sec 8, unless he wants to. Just stating from my personal observation and experience. 

@Chinmay J.

I have been guilty of over-improving, only because the space was unfinished and new premium materials are not much more than economy.

Originally posted by @Thomas Hickey :

Zachary Watson
Resist the urge to overimprove. Replace countertop and paint existing cabinets, replace light fixtures. Avoid unnecessary plumbing and electrical work. Single pane windows are ok if have storm windows. White appliances look nice with painted cabinets. Think I covered most of the big money wasters. I usually spend 3-5k when I first turn a unit and after that it's good for many tenants.

 Thank you for this as I am realizing we just sized up some pretty aggressive renovations that may cause some over spending. We will definitely keep these ideas in mind!

@Zachary Watson

Any chance of raising the value by raising rents to refinance out some of the proceeds?

Get some experience under your belt, and start looking to network with investors and possibly a partner to help with down payments.

Gino

Are any of the units rented? Keep the tenants and do them one at a time as they open up. Good luck!

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