Going from Single Family Homes to Multi-Family Homes

Investor · Decatur, GA · Member since 2014 · 56 posts · 16 votes

I am working on buying my 8th buy and hold SFH. I like them and they all are rented and doing ok. I'm good at the management part of it. But I'm feeling like I need to think bigger. I have people who I think I can get to invest in a bigger deal. So, I'm thinking about looking for a multi-family, commercial-loan deal.

The rub is that I'm not sure how to find a good multi-family deal. I've read a lot on BP about how to analyze the deal, but just don't know how to get started. Any suggestions?

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Douglass Benson

Investor · Mason, MI · Member since 2014 · 151 posts · 152 votes

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Originally posted by @David Cohen:

@Douglass Benson And how do you find your MF deals?

This is a long post so beware -

No two findings are alike, but they share something in common. Bad landlords have bad tenants and it drives them out of their minds and out of the business. I LOVE bad tenants, until I own the place then I do not tolerate them and they ALWAYS leave because they cannot survive in a building that is run correctly.

Our first building came from a referral from my brother in law who said the owner was sick of being a land lord because of his crappy tenants. Our second building was due to a cold call that I put into the owner. I liked the building, I went to the court house to figure out who owned it and I called him. We are now business partners. Our third building was a court bankruptcy. The listing agent refused to show it to us because she said there were too many showings and she already had an offer so we gave up on it. A week later we discovered it was still on the market, the first offer fell through so we offered and got it. Our fourth building was due to a guy who knew we did multi-family and said he was SICK of multi-family because of all his crappy tenants. He carried paper back on a no down payment land contract JUST to get out from underneath the building. Our fifth building was a referral from a listing agent, the seller didn't like the apartment business because he was scared of his own tenants and my sixth building, the listing agent knew I was in the business and called me before he listed the property.

Just put the word out there that you are in the business and deals will come to you. Trust me.

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Adam BartomeoBusiness Member
Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
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Good for you! I am working towards the same goal. I had a few generous individuals on BP reach out to me to help guide me. I am still in the research mode but at least I know I have a couple of people to bounce idea off of.
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Jean BolgerPro Member
Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
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Many people become quite rich specializing in SFRs, so don't feel you "need to" do anything different. And if you are looking at a long term hold, I personally think properties that you can own as an individual are a better bet than those you need to partner up for. Partnerships for a flip or a property reposition are great. But it's hard to keep all the investors' needs and goals in unison with a long term hold.

That said, if you want to look in to multifamily, you should definitely check out the books “Insider Secrets to Financing Your Real Estate Investments” and "What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures” by Frank Gallinelli. (the second on focuses more on analyzing properties, but they are both great)
The multifamily market is pretty inflated in most areas right now, so be careful.
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John Cohen
Rental Property Investor · Mineola, NY · Member since 2014 · 838 posts · 212 votes
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@David Cohen Thinking bigger is definitely the way to go. Keep doing the single family deals while they present themselve, but 1st piece of advise would be to find a market that you want to invest in. After that become an EXPERT in that market.
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Micki M.
Flipper/Rehabber · York, UK · Member since 2013 · 895 posts · 453 votes
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@David Cohen I'm in the same position (except I don't have 8 sfr's!) Learning about multifamily markets and analyzing deals is a bit overwhelming. @Ben Leybovich has some great info on his site. Areas in GA are on the short list of multifamily markets I'm looking at since we'll be coming out there to look at flip opportunities this month. I'll gladly share anything I learn.
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Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
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I would talk to some PMs in the area. You can have a conversation maybe as a prospective client (not being dishonest or trying to trick them of course) for the future and just ask if they know of any tired owners looking to unload to let you know.
I have both single and multi-family. Pluses and minuses to both, but I do like the economies of scale the multi space offers. Good question @David Cohen!
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Ben Leybovich
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
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@David Cohen - thinking bigger cuts both ways. You need to think "big enough" to make the most $$. Bigger, as a blanket statement, is not the way to think :)
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David Cohen
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Investor · Decatur, GA · Member since 2014 · 56 posts · 16 votes
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@Micki M. Thanks for your comments. I'd love to learn more and will definitely look up the articles mentioned.
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Jonathan Twombly
Rental Property Investor · Brooklyn, NY · Member since 2014 · 722 posts · 1k+ votes
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Originally posted by @David Cohen:

I am working on buying my 8th buy and hold SFH. I like them and they all are rented and doing ok. I'm good at the management part of it. But I'm feeling like I need to think bigger. I have people who I think I can get to invest in a bigger deal. So, I'm thinking about looking for a multi-family, commercial-loan deal.
The rub is that I'm not sure how to find a good multi-family deal. I've read a lot on BP about how to analyze the deal, but just don't know how to get started. Any suggestions?
One advantage to MFRE is scalability. It is easier to reach a critical mass where you can start getting better bids on services, and if you want to start turning management to a professional manager so that you can concentrate on getting more deals, you will get better pricing there, too. There is absolutely nothing wrong with SFRs and a lot of people do very well with them. But at some point you may hit a manageability problem because it's hard to scale them as easily as MFRE. My two cents.
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David Cohen
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Investor · Decatur, GA · Member since 2014 · 56 posts · 16 votes
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@Jonathan Twombly That's exactly why I'm interested in doing MFRE. That and the ability to get a commercial loan. It's more a matter of finding the right property here in Northern Georgia/Atlanta. Thanks for the help.
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Marc Dupuis
Rental Property Investor · Ottawa, Ontario · Member since 2015 · 42 posts · 9 votes
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David
I completely agree with what Jonathan is saying, and your right MFs allow you to scale more easily and if you have a large enough complex the management fees can be quite reasonable. Also when it comes to sell it's really quite non-emotional buyers in that space are looking for cash flow, so it's just a formula really what is your NOI divided by the area CAP rate and that gives you the value of your building, so it's quite easy to figure out what to do to your building to affect the NOI, which in turns increases it's value.
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Douglass Benson
Investor · Mason, MI · Member since 2014 · 151 posts · 152 votes
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I have actually NEVER done a single family rental. My first rental purchase was a four-plex, my second was a 16 unit. We are now at 64 units with another under contract to get us to 81. My point is that I have little to offer regarding the movement from single to multi, but I will say this...I LOVE multi's. We flip houses and rent apartments and that seems to work really well. You are going to be very happy running apartments. I have been doing so for 12 years.
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David Cohen
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Investor · Decatur, GA · Member since 2014 · 56 posts · 16 votes
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@Douglass Benson And how do you find your MF deals?
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Douglass Benson
Investor · Mason, MI · Member since 2014 · 151 posts · 152 votes
11y
Originally posted by @David Cohen:

@Douglass Benson And how do you find your MF deals?
This is a long post so beware -
No two findings are alike, but they share something in common. Bad landlords have bad tenants and it drives them out of their minds and out of the business. I LOVE bad tenants, until I own the place then I do not tolerate them and they ALWAYS leave because they cannot survive in a building that is run correctly.
Our first building came from a referral from my brother in law who said the owner was sick of being a land lord because of his crappy tenants. Our second building was due to a cold call that I put into the owner. I liked the building, I went to the court house to figure out who owned it and I called him. We are now business partners. Our third building was a court bankruptcy. The listing agent refused to show it to us because she said there were too many showings and she already had an offer so we gave up on it. A week later we discovered it was still on the market, the first offer fell through so we offered and got it. Our fourth building was due to a guy who knew we did multi-family and said he was SICK of multi-family because of all his crappy tenants. He carried paper back on a no down payment land contract JUST to get out from underneath the building. Our fifth building was a referral from a listing agent, the seller didn't like the apartment business because he was scared of his own tenants and my sixth building, the listing agent knew I was in the business and called me before he listed the property.
Just put the word out there that you are in the business and deals will come to you. Trust me.
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