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Multi-Family and Apartment Investing
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Andrew Bosco
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Convince me why NOT to invest in Multis

Andrew Bosco
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Posted Oct 17 2023, 06:04

I wanna hear your reasoning. Why would I NOT want to invest in either small 2-4 unit multi family properties or larger 5+ unit properties. Let me hear it. 

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Replied Oct 17 2023, 06:13

One big disadvantage in my area is owners pay w/s/g on multi's.  Houses are tenant-paid.

I also do yard maintenance and snow removal on anything larger than a duplex. 

The other big disadvantage is at sale / exit time.  Your buyers will be other investors vs excited homeowners @Andrew Bosco

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Replied Oct 17 2023, 06:54

You avoid the 5+ because you can’t get residential financing, and you will eventually be selling to an investor who will only buy a good cash flowing deal. This limits yoru buyer pool and hurts your appreciation. 

You avoid the 2-4 unit for all the same reasons except the commercial lending requirement.

Ps. You introduce tenant in tenant complaints that you don't have in SFR. You get shorter term stays as tenant's life improves and their families expand, as their lives get better they move to houses. People who rent houses tend to have more stuff and moving is a bigger PITA.

Most of your wealth will be made by appreciation. Cash flow is just supposed to help you hold on until then. But if you NEED the cash flow real estate probably isn’t ideal for you. Imagine a long eviction, vacancy,or major repair. 

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Replied Oct 17 2023, 08:21

Huge small multi-family fan here, so following this thread to see what the BP community has to say!

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Replied Oct 17 2023, 10:16

Overall this a proven and valuable investment class. However, with higher list prices comes more risk that some people are not properly taking into account. You can't compromise on your numbers in this investment class.

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Replied Oct 17 2023, 10:46

@Andrew Bosco

So your profile shows that you have some property management experience, in your househack and the other STR/MTR duplex you manage for your family, but not a lot. I see nothing in your profile about practical maintenance and renovation experience, nor do I get a sense that you have a burning desire in your REI to do a lot of either.

The 5+ will require a commercial loan. The underwriters of those loans are going to be looking for experience running rentals that you don't have yet.

Everyone and his brother, at least in my area, is looking for an affordable 2-4 unit property in good shape and with good tenants in place that they can get very generous residential financing for and househack in. It doesn't take a real estate genius to figure out that living free or near-free is a wonderful thing. So there is no such thing as an affordable 2-4 unit in a good location, in good shape, and with good tenants in place that is for sale. You simply need to take that as a given when you go hunting for these properties. Either they're selling it because they want A LOT OF MONEY, or it's in the high hood, or because it's a crapshack of a money pit with a ton of deferred maintenance, or because they have more trouble with the tenants in place than they want to deal with.

However, I have no interest in convincing you not to do, well, anything. I don't know you. You may just be the perfect guy to invest in small multifamily with residential financing.

I just felt this was a good place to point out some of the problem points of investing in 2-4 unit properties, as well as mentioning the experience issue on a commercial loan.

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Andrew Bosco
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Replied Oct 17 2023, 15:47
Quote from @Jim K.:

@Andrew Bosco

So your profile shows that you have some property management experience, in your househack and the other STR/MTR duplex you manage for your family, but not a lot. I see nothing in your profile about practical maintenance and renovation experience, nor do I get a sense that you have a burning desire in your REI to do a lot of either.

The 5+ will require a commercial loan. The underwriters of those loans are going to be looking for experience running rentals that you don't have yet.

Everyone and his brother, at least in my area, is looking for an affordable 2-4 unit property in good shape and with good tenants in place that they can get very generous residential financing for and househack in. It doesn't take a real estate genius to figure out that living free or near-free is a wonderful thing. So there is no such thing as an affordable 2-4 unit in a good location, in good shape, and with good tenants in place that is for sale. You simply need to take that as a given when you go hunting for these properties. Either they're selling it because they want A LOT OF MONEY, or it's in the high hood, or because it's a crapshack of a money pit with a ton of deferred maintenance, or because they have more trouble with the tenants in place than they want to deal with.

However, I have no interest in convincing you not to do, well, anything. I don't know you. You may just be the perfect guy to invest in small multifamily with residential financing.

I just felt this was a good place to point out some of the problem points of investing in 2-4 unit properties, as well as mentioning the experience issue on a commercial loan.


 Love the response! I'm a scientist by trade and when I am "all in" on a category, then I play the "10th vote", which a rule that if 9 team members out of 10 agree something is a good idea, then find the wrong idea. So it's interesting to hear the feedback of the con's when so many give the pro's. 

I am going to (one day) invest in large commercial projects/properties of my own. Starting small and will eventually make my way to the bigger commercial projects. I just happen to try everything :) 

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Replied Oct 18 2023, 03:50

Wow, I love the provocative question!! I own 2 duplexes so I can't really argue against it but one of the things that makes me nervous as a landlord is potential conflicts between tenants. The first duplex has very thin walls and could definitely be an issue someday. Luckily for now both tenants are very quiet. Similarly to what someone else said I am responsible for landscaping, which is annoying but luckily the yards at both are small. 

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Replied Oct 18 2023, 05:07
I am a huge fan of Duplexes. My tenants average 10 year stays and pay market rent. I would love to find more in good locations but that takes time. Many of them are owned by small mom and pop owners but they will want to retire someday. Identify 10-20 that you like and stay in touch with them so they think of you when they want to sell.
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Replied Oct 18 2023, 05:10

I was half way around the world in Buenes Aires (for work), phsically and mentally exhausted from a tough week, when a tenant in my duplex texted me that the other tenant didn't cut the grass and the city sent a notice. That was the day when I decided to focus on singe family homes. 15 years and a lot of acquisitions later I am glad I did. And I also got over the idea that I'd have to "graduate" into something bigger, we just keep buying SFs.

SF are the most passive way to invest in residential rentals. They are self contained, tenant is responsible for everything, grass, snow, utilities etc. And there are no issues from people interacting with each other. The equity side works a bit better, even though cash flow is less. 

I think the worst sizes are 5-8 units, you deal with all the downsides of MF like commercial financing, fire inspections, parking lot management etc, but they are too small to reap most of the synergies.

Milwaukee has a lot of duplxes and for first time investors that's a great place to start and expand your income with cash flow. But they will also take slightly more effort to manage, turn over a bit more and you have more tenants to manage for the same revenue.

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Replied Oct 18 2023, 05:37

Hi there, solid question. I own two duplexes and a triplex. The downsides are you usually have to pay the water as it is a shared meter, maintain the outside (lawn, trash), and occasional disputes between 2-3 neighbors in the building. Right now, in Fort Lauderdale and Florida in general, these small MFs on the market are way over the top expensive vs the rent so they don't even come close to cashflowing. All that being said, I love having my MFs but I bought them when prices were reasonable and they cashflowed from day one.

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Replied Oct 18 2023, 08:26
Quote from @Andrew Bosco:

I wanna hear your reasoning. Why would I NOT want to invest in either small 2-4 unit multi family properties or larger 5+ unit properties. Let me hear it. 


 SF tend to have better appreciation, good location and has less tenant issue. This is comes from real experience. I would not buy even duplex LOL