Going from residential to commercial multi family

[Kamil Kaczmarczyk]

Hi,

I want to get into the bigger multi families. I am located in northwest Chicago.  I currently own a single family. Was planning to get a 2-4 unit to ease into it but if I see a good deal on a 5+. I want to be prepared.   Any tips on buying my first 5+ property.

thanks 

[Mark Ainley]

@Kamil Kaczmarczyk Financing is definitely different.  DM me if you want an introduction to a solid commercial guy right here in Chicago.  Management is a little different, so be ready for that, but you can always reach out to people like me along the way if you plan to do self-management.  

[Matt Head]

Hi. It depends on your budget when you afford a bigger house for your family. So buy without any hesitation.

[Evan Polaski]

@Kamil Kaczmarczyk, obviously, 5+ could mean a lot, as others have noted.  Buying a 6 unit, even 10, isn't dramatically different than buying a single family or duplex.  But there are some big things, I have noted:

lending over 4 units is one the commercial side of banks, so requirements will be different.  Fairly easy to understand with a few phone calls

Understand who is responsible for what: older multi's in Cincinnati often have separate electric, common gas and water.  There is likely a house meter on electric that LL is paying.  Versus Single Family, where tenant pays all utilities.  In multi's LL often maintains lawn/snow vs singles where tenant cuts grass and shovels snow.

And as John mentioned, you need to know your tax rates and insurance rates.  You will likely start hitting commercial coverage, which will likely be much higher than standard residential.

Then it is property specific: are you buying so big that you need to maintain a dumpster and commercial trash, or is the city still providing trash cans and curbside pickup.

[John Warren]

@Kamil Kaczmarczyk I think a few things most owners don't think about when they make the jump would be utilities, pest control and nuisance garbage/pest waste. On a single family, or even a small multi, you rarely are responsible for picking up dog poop or killing **** roaches a tenant brought in. Once you are in the commercial space, this comes with the territory. 

[Kamil Kaczmarczyk]

@Evan Polaski thank you so much for the insight. Appreciate the info. Definitely gave me some points to think about 

thank you

[Jonathan Klemm]

Hey there @Kamil Kaczmarczyk - Things really changed for me when I figured out how to use the help of other people and not try to do everything on my own.

I highly suggest partnering with a more experienced Chicago investor.  They will be able to help with your network of commercial brokers, lenders, and have the experience needed to qualify for the loan.