Purchasing Owner-Occupied Multi-Family Home Investment
Cameron, NC · Member since 2014 · 58 posts · 5 votes
When purchasing your first Multi-Family Home Investment as an Owner-Occupy, does the manufacture year of the home range apply? Example if its newer than 15 years or older than 35, would it be an initial bad investment, especially if you have to rehab the property? Has anyone experience with working with 203K's when purchasing Single Family or Multi-Family Homes? Also could anyone provide their experiences with investing in Multi-Family homes in general? For Instance: What worked for you, The mistakes you encountered, & What you found to be Successful? How to estimate Rent?
-Thanks Guys In Advanced
@Jeremy Sanders Use the stacking or "open house" model. Once you place your listing online and people start responding, tell everyone that showings are available between 12-2 this Saturday. Don't try to set up a private time for every person... you'll get burned out. Only half the people that say they are gonna come actually show up... or skip it and want to show up next week, etc. Also, when potential tenants are coming and going, they see each other and it creates excitement/demand. I call this phenomena "artificial demand" ... haha. I am tweaking the supply demand curve by making my property appear more desirable.
I've also learned to do online applications. They fill out the applications online and a third party runs the credit check and background check for me. Plus it makes tenants feel more secure(because they don't have to fill out a paper application). And it's delegating by building better processes so it is a win win win.
I just try to listen and be a strong communicator, that's really the key. My most recent showing had a horribly ugly outdated kitchen with wood-paneling. But my pitch was that that's why the rent is lower for this unit then my other units, it's not the cutest but it is functional. If you're okay with not having an updated kitchen/bathroom, but want more space, and an affordable rent, then this property could make sense for you. I just try to communicate the truth of the property/neighborhood.
@Jeremy Sanders typically the age of the property does not affect a loan approval or denial ... but it would influence your expenses. If the property is brand new you won't be spending very much on upkeep.
I don't have experience with the 203k loan, yet, but I have purchased an owner occupied duplex with a FHA loan. I've lived in two multi family properties so far.... so far the experience has been good. My second deal was a little bit better than my first, because it needed some work, was kind of ugly ... so a lot of buyers weren't interested. My first property was an OK purchase with great curb appeal, we sort of got lucky because we bought it in mid 2012 ... at the tail end of the real estate bottom. Even then, it turned out to be an OKAY deal regarding cashflow, but a pretty good deal because it appreciated pretty fast in three years (good curb appeal in growing area).
In terms of rent, that's a tough one unless you really have your finger on the pulse. If you're currently not a landlord, I have three recommendations. One - pretend you are interested in renting units and schedule showings with other landlords in your area. Two - look online at Zillow - although my experience is that market rental rates for Zillow are typically slightly lower than average (this is because the units that most people don't want to live in stick around longer than the more desirable ones, which rent at higher rates). Also I've learned that rent is also just as much dependent on sales and marketing skills as "what the market can bear". Three - ask realtor/property manager.
Typically what works for me is I try to get beat-up properties in 'b' areas or on the edge of 'a' areas. Or I try to find something that is in decent shape but because it is in a location straddling two different types of tenant profiles I can get a deal because it has the lower of the two tenant classes and ... I'll put in the young professionals, etc.
@Alex Brookbank. Thanks for the rapid response and all the vital knowledge when investing in Multi-family properties. If you don't mind me asking, how is or was your experience when renting out your units?
@Jeremy Sanders Use the stacking or "open house" model. Once you place your listing online and people start responding, tell everyone that showings are available between 12-2 this Saturday. Don't try to set up a private time for every person... you'll get burned out. Only half the people that say they are gonna come actually show up... or skip it and want to show up next week, etc. Also, when potential tenants are coming and going, they see each other and it creates excitement/demand. I call this phenomena "artificial demand" ... haha. I am tweaking the supply demand curve by making my property appear more desirable.
I've also learned to do online applications. They fill out the applications online and a third party runs the credit check and background check for me. Plus it makes tenants feel more secure(because they don't have to fill out a paper application). And it's delegating by building better processes so it is a win win win.
I just try to listen and be a strong communicator, that's really the key. My most recent showing had a horribly ugly outdated kitchen with wood-paneling. But my pitch was that that's why the rent is lower for this unit then my other units, it's not the cutest but it is functional. If you're okay with not having an updated kitchen/bathroom, but want more space, and an affordable rent, then this property could make sense for you. I just try to communicate the truth of the property/neighborhood.
I absolutely love the strategy. "Artificial Demand," the more traffic the higher the demand is.... When you mentioned When you set up or learned to do online applications was it fairly difficult? These applications are for tenants who are ready to move in right? If so, how does the initial steps usually go? Is it like, they say that they are interested, and you say ok well go home to fill out the online application...? Or you usually wrap everything via phone?
To set up the showings it's via text, email, or phone. Just depends how they reach out. During the showing I usually get a sense. Sometimes I'll just wait until they bring up filling out an application or "next steps". I tell them I use a third party website and I'll email them the application link. Before I send it I let them know it's $35.00 per person and it is a credit and background check.
I use cozy .co . They have an application link that you can just copy and paste. One downside I've noticed is that I don't get quite as many applicants ... probably because they are not filling out the application "in the moment" anymore. And going home give's them an "out". Some people just aren't comfortable with any type of confrontation (they will say they are interested when they are not, etc).
I email them the application when they are at the unit, and they fill it out later. If they are interested they basically do it within 12 hours. Once the application is done, it's typically a new tenant. They already know what the security deposit is, what the rent is, etc, cause this is in the listing and I talk about it when I'm showing the place. Filling out an application means they want the unit, and you have a high chance of actually closing and getting a lease signed.
There's definitely moving pieces - it's just something you have to figure out. They are ready to move in in usually in 30-60 days. Timing's gotta be right. Sometimes I'll sacrifice a month in rent just to lock up a new tenant. I'm super leery of anyone that can move in "tomorrow". Unless they are young and still living at home post college, etc.
Awesome Information. I have to ask, because you have noticed less application traffic from online, have you decided to keep applications on hand, handling your processes the old fashion way, or thought about calling them to see if they are having technical difficulties on their end? Looking on cozy.co under the Tenant Screening Background Check Tool, you basically collect their information then when you send the request the email address that you put in is theirs, then they pay and take care of everything from there?
I've thought about offering it both ways but I'll probably stick to one (online).
NO - I don't need any of their information, just their email address (to send them the application link). They fill out everything I need in the application @Jeremy Sanders . Regarding paying rent you can continue to use cozy for that or choose another method.