What to look for when starting with Multi-Family units

1 Reply

Hi everyone,

I'm new to educating myself on MF investing and as I'm researching and running numbers for my 1st investment I have a few questions.

I'm in Houston, TX and looking for smaller units (2-4)- It's likely I'll live in the unit with my husband so we can do some repairs which will be needed to get something in our budget. 

First part of my question is.... After mortgage, insurance, everything is paid... How much are you putting away from emergency costs and repairs, and how much are you looking for in profit for these smaller units? Maybe I'm not looking for the best deals.. but when I run the numbers it seems most of the time only a few hundred dollars would be left over. If our goal is to eventually have this as a full income- it seems we would need A LOT of these smaller units to actually have a real income coming in. 

For those investing out of state- kind of the same question. How much put away for property manager, emergency funds, and what are you looking at for profit for door? It seems when adding in the property manager-- you would be basically breaking even? I know it all depends where you invest but we are looking around a $200,000 budget to start with.

It seems the cheaper properties equals cheaper rents so just trying to wrap my head around how to make this a positive cash flow without having to run numerous smaller units.



@Jennifer Bailey you just hit the nail on the head. 2-4 units can be profitable, but typically you have to self manage them in order to make the numbers work. I would personally focus only on 3 or 4 units as you can gain scale. The numbers you will see are very market specific, but I have clients that are clearing $750-1,000 in cash flow every month on 3 and 4 unit properties in the Chicago burbs. I personally have a 4 unit that cash flows in that range. 

If you want scale, you will eventually move into the larger units, but there is nothing wrong with getting started in the 2-4 unit space.