First Multifamily Investment

8 Replies

Hoping to buy a multifamily property in the $2m range in the next 6 months-year. I haven’t yet narrowed down on an area, but it will be one of these places:

Atlanta

Phoenix

Kansas City

Houston

Looking for a minimum 7% cap rate and 12-15% cash-on-cash returns. Any thoughts on which area may be most realistic to get such returns?

@Dan Krupa

Thanks Dan! People don't realize that a deal not a market is what gets you returns. I think they don't understand what cash on cash means either. I think the person posting may want a 12-15 ROI which is very possible. That target cash on cash return will take some serious rehab work. I get returns higher than that all day long but they are not passive!

@Lee Ripma couldn't agree more. The deals, at this phase of the market cycle, are in properties that need serious rehab. The days of cosmetic rehab only are coming back but that day isn't today. 

@Dan Krupa

Totally agree. You’ve got to take on major value add right now. I’m developing in LA-the ultimate rehab! My properties in KC are bought cheap and in poor shape. You want high returns you can’t just go buy a property that someone else fixed up. You’ll never get those returns. Solve the problems that no one else wants to solve and you’ll get returns that no one else gets. However, it’s work and risk to get high returns. Not for the faint or heart or the inexperienced. I really struggled on my first one (you remember) but I was determined to get through it.

@Jessica Martinez those on this post said it correctly. You may be able to get a 7% cap on a C-class property but you're not likely to get a 12% - 15% cash on cash return unless you add value through a rehab. Even though Kansas CIty is a great location for cash flowing properties, many people think that you can just buy a property off the MLS to recieve 10%+ return. That could have been the case a few years ago but now you definitely need to value add in order to get the returns you are looking for. If little to no work were needed to get 10%+ returns, everyone would be doing it. You have to be willing to put money in a rehab where it provides advantageous returns ie; painting, kitchen, bathrooms, putting up walls to add an extra bedroom, etc.

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