Prospect, KY · Member since 2013 · 5 posts · 1 vote
The investment materials I've read so far have given me a good handle on the key criteria to use for single family investment purchases (e.g. 3brdm, 2bath, place for storage/growth, etc.), but they don't do so well with multi-family. What are the key checklist items for purchasing 4-8plex properties? For example, should each unit have a minimum of 2bdrm or do such things not universally apply to all units or the building in general?
There is no rule of thumb for unit mix. Each area is different and so is each investor. Some will be fine with studios, while others will want 1 bedroom or more. It can be said that it is a mix of personal preference and the local market.best rules of thumb for multis are the 50% rule and the 2% rule.
Most importantly, know your operating expenses and other costs associated with such an investment like capital expenses and vacancy expenses.
See what the market occupancy is with the unit type. When I was looking at a property with 30 1 bedrooms, I interviewed a PM and she was all excited about the all 1 bed. She stated that she needed more 1 bd, that they were hard to find in the market.
For me the biggest thing is who pays utilities. There are multifamily deals that I literally would not take for free and those are the ones where owner pays for water/trash/sewer AND anything else. If you have to pay for all utilities there is not a very good likelihood that you will make money. You will always be chasing your tail trying to keep costs down and it will be a losing battle.
Age of building and tenant class is another one for me although that is more personal preferance.
I also dislike All bills paid as the tenant abuse the use of utilities if they do not have to pay them. See what is happening in the market. We are in the process of buying a All bills paid building where this building is one of three out of 40 properties surveyed that are All Bills Paid. The PM's we talked to have no issues with implementing RUBBS.
I am just now (literally yesterday) starting to market my first Investment Property, and 2 unit duplex that is a 100 year old over under type of unit. Very nice and spacious, bright and sunny etc..... New furnaces, roof, windows etc all in the last 5 or so years.
I partially, well mostly bought this because I was ready to start and it was the best deal around at the time. We paid 78K at an estate auction, it is appraised at about 125K, and should bring in about $1400 month. So a pretty good rent to purchase ratio in my opinion.
In our same relatively small town (15K) newer 20 year old side by side duplexes in similar areas run about 135K - 150K and only bring in about $1600 month. So to me, the older units, IF in good shape, are a better investment.
Both of these types of units have a pretty low vacancy.....usually less than 5% I would say.
The 4-8 units for the most part are price well at around 40K - 50K a unit, but tend to be in less desirable areas, no descript dingier properties, and have what see,s like a much higher vacancy rate.
To me, a big part of it comes down to looking at long term return on investment.