2nd Multifamily Purchase Planning/Prep

10 Replies

Howdy Y'all,

I have purchased one small house converted into a small triplex in Conroe, TX. Currently out of need myself (wife and two kids), parents, and two of my special needs brothers are doing a light remodel to the house (mostly due to age or poor construction). We are doing this in order to be better off financially as a family and start an investment portfolio. Combining four incomes and several credit scores, all while house hacking our first multi-family. Eventually that house will be refinanced and become a rental property. My wife also used to work for a property management company as the account manager, father has a MBA, and I have experience as a mechanic and technician.

My parents will be selling their previous home next year with the intent to invest the equity. I will be reaching out to a Lawyer and CPA to best set things up as a protection for our family interests going forward to big goals.

I've been watching several markets in preparation for a purchase next year. I have started the conversation with locals I know in those cities to help me target good areas and avoid bad ones. The strategy I am considering is to search for a quad-plex no older than early eighties. Preferably within 150-300k depending on the location and potential cashflow. The plan is to search for one that needs some rehab or updating, but not a full gut and replace. We will attempt to purchase with as little money in the deal as possible in order to have 3-9months of expenses saved. I plan on looking into a line of credit (potentially) for remodel funds as we go through one unit at a time. 

I have been looking at several college town markets in Texas and one in Oklahoma. I have direct experience and family friends in all the markets I have been looking at. I am intending on getting a poorly managed quad-plex in the right area to redo and raise the rents a little if the market supports it. The exit strategies are a BRRRR after 1-3 years and then hold, or sell and take the earned equity to purchase an additional two quad-plexes and repeat. Long term goal is to get into large multi-family projects with time, capital, and experience.

Any recommendations on this plan?

I love it. It sounds like you have made a strong commitment to growing wealth and you'll be successful. Not many people are willing to delay gratitude but the ones who do, are the ones you hear on the podcast. 

Matt, I appreciate it brother. I am definitely wanting to end the day to day struggle. Hit my point of desperation over the past year. Hopefully with some hard work and careful planning I can be conservatively aggressive, as odd as that sounds.

Good luck finding quads in major cities. If you're open to tiny towns, I think you'll be okay. But finding tenants and buyers later will be harder.

Four plexes in dallas are at least $800k, 5,200 sq ft...

"to best set things up as a protection for our family interests going forward to big goals."

you mentioned on bold link above...

My recommendation to you is DO NOT INVEST with FAMILY!! You can borrow money from your parents (payback with interest as an HML). Then proceed portfolio with your wife ONLY! Hope this helps and Good Luck!

@George Mastrosavas we may do it that way in the end, however it will still be a family "business". They could be a private lender and we would be the real estate investment company. It may be the best way to create safety, however it will essentially be to the same end goal. I do hear what you are saying and recognize the experience.

we may do it that way in the end,

Key words in bold.

If I was in your shoes I would Do it now and do not wait in the end. I just do not want you to jeopardize your relationship with your Family. I understand the excitement but do not make emotional purchases. Its a business and has NO feelings. Hope this helps!

@Aaron Stoddard

Just in general, if you decide to create an entity with your family members as partners, you may be required to file a partnership return that is normally due March 15 of every year. There is a possibility to extend the return to September 15. 

The partnership return will need to be filed before the partners/members can file their individual tax return.