Looking to Invest in 6-10 unit Multifamily - Northeast US

5 Replies

Hello all, 

I want to take the plunge and enter the world of multifamily value-add investing. I am based in New York but will likely want to start out in a smaller, nearby MSA where price per unit is lower and I can lower my vacancy risk with more tenants (open to mix-use with the right commercial tenant as well).

The way I see it, we are at a stage in the cycle where areas like New York could see a significant correction, and at the price point I'm looking at, you can maybe find a 2-4 family value add in the Bronx or suburban Queens, or something similar with greater upside in Northern NJ. I don't want to have the double worry of missing a healthy DSCR by losing one tenant coupled with the concern of the property being underwater in the event of a correction. Which is why I would like to look a little further away (max. 3-4 hour drive from NYC that could be done in a day trip).

Does anyone know about other markets ie. Philadelphia, Baltimore, DC, Boston, along the Northeast Corridor which have strong fundamentals and would be an investor-friendly environment (are there any good buyer's markets out there right now?) where I can find a good, off-market deal with 6-10 units under $1,000,000?

Furthermore, in terms of how to structure the capital stack, I was looking at doing 75-80% LTV at a fixed-rate, along with a 90/10 or similar LP/GP equity split under which I would be the sponsor and set up promotes to align investor interest. Thoughts on how feasible that would be for this type of product and how it may differ from state to state?

Any feedback is much appreciated, and I am always open to jumping on the phone to speak in greater detail as well as underwriting deals since I am already in the industry. Thanks everyone and excited to be here!!

Hi @Pranay Advani,

Welcome to BP!

Small Balance Multi-Family (Under $1M) is a unique and fast pace market to keep up in so many markets addressed above. DD & Setting up the proper Power Team would take min 3-4 months of good research. Let's breakdown a few locations referenced.

All of NJ

* Pick up all the NJ Transits Stops Folders at Newark Penn Station and study the following

* Express Stops back to NYC from all routes

* Education for kids

* Community involvement

* Taxes

Greater Philadelphia Market including SJ Hub Camden, Burlington & Gloucester Counties

* What Neighborhoods in Philadelphia (55+ Designated Neighborhoods with a different renter in each)

* Repurpose, Turn Key or Develop?

* Who is your power team and how much do they really know.

* Bedroom Mix

* South Jersey Corridor

* Jobs

* Taxes

* Train Stops

* Education for kids

* Bedroom Mix

None of this includes what you can afford for down payment, reserves & etc.

Also, if you are going past 1 hour proximity to your current residence small balance multi family require good communication with your power team where there boots on the ground always.

Let me know if you have any questions.

Regards

Joe Scorese

Originally posted by @Pranay Advani :

Hello all, 

I want to take the plunge and enter the world of multifamily value-add investing. I am based in New York but will likely want to start out in a smaller, nearby MSA where price per unit is lower and I can lower my vacancy risk with more tenants (open to mix-use with the right commercial tenant as well).

The way I see it, we are at a stage in the cycle where areas like New York could see a significant correction, and at the price point I'm looking at, you can maybe find a 2-4 family value add in the Bronx or suburban Queens, or something similar with greater upside in Northern NJ. I don't want to have the double worry of missing a healthy DSCR by losing one tenant coupled with the concern of the property being underwater in the event of a correction. Which is why I would like to look a little further away (max. 3-4 hour drive from NYC that could be done in a day trip).

Does anyone know about other markets ie. Philadelphia, Baltimore, DC, Boston, along the Northeast Corridor which have strong fundamentals and would be an investor-friendly environment (are there any good buyer's markets out there right now?) where I can find a good, off-market deal with 6-10 units under $1,000,000?

Furthermore, in terms of how to structure the capital stack, I was looking at doing 75-80% LTV at a fixed-rate, along with a 90/10 or similar LP/GP equity split under which I would be the sponsor and set up promotes to align investor interest. Thoughts on how feasible that would be for this type of product and how it may differ from state to state?

Any feedback is much appreciated, and I am always open to jumping on the phone to speak in greater detail as well as underwriting deals since I am already in the industry. Thanks everyone and excited to be here!!

 Have you looked at the major Ohio markets? You can achieve what you are looking for a lot easier. You can get 10 units here for under $400k. 

Hey Pranay, I’ve been buying properties about 2 hours out of NYC in a value add market, are you looking for a 90% investor/s? You’re going to operate?
Do you have teams in place?
I have boots on the ground in my market, I am also live in NYC

Hi, @Pranay Advani , I'm in a very similar boat. I'm closing on my first investment property, a 4-unit mixed-use in Yonkers (1 grocery/deli/corner store and 3 residential). Yonkers is still years away from really turning around, but there are definitely signs there (money is pouring into the waterfront area, easy access to the city, etc.). Not the reason I'm buying this property (purely a cash-flow/value-add play....any appreciation would be gravy). 

One thing to consider when going with 6+ units in many areas of Westchester: Emergency Tenants Protection Act of 1974 (ETPA), more commonly thought of as rent control. Different localities have different rules on how many units a building needs to be governed by the ETPA. This page is helpful. 

I have been looking at this one. I do not have the appetite for it at the moment but Port Chester is a great market with very low vacancy and only a 25 minute express train ride from the city.  Also if you are raising money in a GP/LP structure do the LP's need to be accredited investors or not? if not do you just go to a lawyer and draw up the documents? Happy to talk more about port Chester if you are interested.

https://www.zillow.com/homes/for_sale/Port-Chester...