Great Opportunity for 1st Multi Family Deal

Multi-Family and Apartment Investing
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Great Opportunity for 1st Multi Family Deal

Michael Dallas
New to Real Estate · Memphis, TN · Member since 2022 · 95 posts · 71 votes

Hey BP! I am a young investor that got the opportunity to make a big jump in my investing journey. Just a little background: I am still a senior in college, and I own a single family rental that I house-hacked last year. Through a lot of conversations and connections, someone has presented me with the opportunity to buy an 8-unit multifamily property. They are an older investor that bought the property for their son to run, but he decided he was done with it and moved back home. Obviously, a lot more due diligence will have to be done, but the basic numbers right now look incredible. $480,000 sales price, and all 8 units are rented out at $750 but could easily be raised to high 800's or even low 900's. While these numbers have gotten me interested in the property, I don't know what I don't know. The man selling said he knows he will lose money on the deal as the property already appraised for $560,000 but would love to get a young investor like myself into the game since his son did not end up sticking with it. He owns an incredible amount of real estate and is not worried about making a bunch of money on this. So I just wanted to put this out here to see what advice I could be given from everyone about investing in multifamily. He is a great guy, but I want to make sure everything checks out and not just take him at his word. What are some things I need to do to run all the right numbers to make sure this is a great deal? Thank you to everyone who responds! 

(Sorry I know this was a long post)

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Scott AllenBusiness Member
Real Estate Agent · Columbus, OH · Member since 2020 · 449 posts · 471 votes
1y

@Michael Dallas

Sounds like a really good deal. You might need to find a commercial lender since it's over four units which might have its own difficulties. Just make sure to have an inspection period to check out all the units, review leases, make sure tenants are paying (are leases month to month, when leases go through, everyone paying on time or are some behind, how long have they been living there/did they just moved in). Account for any maintenance and repairs that might need to be addressed sooner rather than later. If you're planning to raise rents over time - would be good to get a bid from a contractor to figure what it would cost to fully redo one of the units so you have a template of what it could cost to redo all of them. Also, try to find similar rental units in the same neighborhood to compare to so you have more of a rent range/conservative approach. 

Sounds like his son is a dweeb/lacks work ethic.

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  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    1y

    This is a great opportunity. Usually, I would say this is a lot to bite off, but you are young and already have a single family so you aren't a total noob. Opportunities like this don't come along often and can be the foundation for your future.

    You just need to know what repairs are going to come due and when, and start learning about how to be a landlord. You want to see all of the leases, if there are any, and when they end. You want to trust the seller and not insult him, but you want to make sure they are all paying on time.

    Have you gone to local real estate investing meetups in your area? Do you have friends or family local? Maybe a relative wants to JV this with you? A lot options. I would kick the tires because it seems like it could be great.

    [email protected]Podcast Guest on Show BiggerPockets Daily 667: 5 Amazing Benefits Multifamily Investments Offer (That Single Family Homes Don’t) by Gino Barbaro
    Zen and the Art of Real Estate Investing59 Reviews
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  • Robert Rixer
    Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes
    1y

    Based on the numbers alone, it seems like an incredible deal - even at $560k. So I would be suspiciously looking out for "what's the catch?"

    2Reply
  • Scott AllenBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2020 · 449 posts · 471 votes
    1y

    @Michael Dallas

    Sounds like a really good deal. You might need to find a commercial lender since it's over four units which might have its own difficulties. Just make sure to have an inspection period to check out all the units, review leases, make sure tenants are paying (are leases month to month, when leases go through, everyone paying on time or are some behind, how long have they been living there/did they just moved in). Account for any maintenance and repairs that might need to be addressed sooner rather than later. If you're planning to raise rents over time - would be good to get a bid from a contractor to figure what it would cost to fully redo one of the units so you have a template of what it could cost to redo all of them. Also, try to find similar rental units in the same neighborhood to compare to so you have more of a rent range/conservative approach. 

    Sounds like his son is a dweeb/lacks work ethic.

    [email protected]614-698-1227
    Reafco - Columbus, OH
    WebsiteView Page
    2Reply
  • Michael Dallas
    OP
    New to Real Estate · Memphis, TN · Member since 2022 · 95 posts · 71 votes
    1y
    Quote from @Jonathan Greene:

    This is a great opportunity. Usually, I would say this is a lot to bite off, but you are young and already have a single family so you aren't a total noob. Opportunities like this don't come along often and can be the foundation for your future.

    You just need to know what repairs are going to come due and when, and start learning about how to be a landlord. You want to see all of the leases, if there are any, and when they end. You want to trust the seller and not insult him, but you want to make sure they are all paying on time.

    Have you gone to local real estate investing meetups in your area? Do you have friends or family local? Maybe a relative wants to JV this with you? A lot options. I would kick the tires because it seems like it could be great.

    Thank you so much for the response I agree with everything you said here. It definitely is a lot to bite off, but I think if I am very thorough with the numbers and due diligence, it takes some of the risk out. 

    So I have gotten slightly new information as well. There are 9 units total. Units 1-7 are rented out at $725 on 12-month leases (although I have not gotten the expiration dates on those yet), and Units 8-9 are not completed but are slightly larger townhomes than can be renovated and rented out for more along the lines of $850-900. When we get farther into this process, I will absolutely ask to see all the leases and proof of payment history for the current tenants. 

    Also, he offered to seller finance the deal for me. My down payment will be just as much as he still owes on the property, some small expenses, and maybe some prepaid taxes. He is working on getting this number for me, but they only expect it to be around 60-70k, which I most likely will get a private lender to come up with that money. (If there is a better idea there, please let me know.) I told them though I would be willing to put as much money down to make the deal work because I believe this is a once in a lifetime type of deal. 

    Again, I know I am information dumping on you, but I really do appreciate the feedback! I love learning about things that I do not yet have experience with. 
    0Reply
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    1y
    Quote from @Michael Dallas:
    Quote from @Jonathan Greene:

    This is a great opportunity. Usually, I would say this is a lot to bite off, but you are young and already have a single family so you aren't a total noob. Opportunities like this don't come along often and can be the foundation for your future.

    You just need to know what repairs are going to come due and when, and start learning about how to be a landlord. You want to see all of the leases, if there are any, and when they end. You want to trust the seller and not insult him, but you want to make sure they are all paying on time.

    Have you gone to local real estate investing meetups in your area? Do you have friends or family local? Maybe a relative wants to JV this with you? A lot options. I would kick the tires because it seems like it could be great.

    Thank you so much for the response I agree with everything you said here. It definitely is a lot to bite off, but I think if I am very thorough with the numbers and due diligence, it takes some of the risk out. 

    So I have gotten slightly new information as well. There are 9 units total. Units 1-7 are rented out at $725 on 12-month leases (although I have not gotten the expiration dates on those yet), and Units 8-9 are not completed but are slightly larger townhomes than can be renovated and rented out for more along the lines of $850-900. When we get farther into this process, I will absolutely ask to see all the leases and proof of payment history for the current tenants. 

    Also, he offered to seller finance the deal for me. My down payment will be just as much as he still owes on the property, some small expenses, and maybe some prepaid taxes. He is working on getting this number for me, but they only expect it to be around 60-70k, which I most likely will get a private lender to come up with that money. (If there is a better idea there, please let me know.) I told them though I would be willing to put as much money down to make the deal work because I believe this is a once in a lifetime type of deal. 

    Again, I know I am information dumping on you, but I really do appreciate the feedback! I love learning about things that I do not yet have experience with. 

    With seller finance this is a definite yes. This is literally the story, on a smaller scale, of how Brandon Turner got his first property. He fell into it by building good relationships. Remember that seller finance is a huge advantage to you. He gets his price and you get terms, but less than normal because it's such a win. I see almost no downsides here pending the condition and then still probably not, other than just learning how to manage or hiring that out. Does he have a property manager now?


    Those 8th and 9th units, are they separate from the other 7? If so, you may be able to condoize them to sell at a later date and make a windfall there. Happy to help.

    [email protected]Podcast Guest on Show BiggerPockets Daily 667: 5 Amazing Benefits Multifamily Investments Offer (That Single Family Homes Don’t) by Gino Barbaro
    Zen and the Art of Real Estate Investing59 Reviews
    WebsiteView Page
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  • Michael Dallas
    OP
    New to Real Estate · Memphis, TN · Member since 2022 · 95 posts · 71 votes
    1y
    Quote from @Robert Rixer:

    Based on the numbers alone, it seems like an incredible deal - even at $560k. So I would be suspiciously looking out for "what's the catch?"


    Absolutely, that's what I am thinking as well. I think the money just does not mean that much to the seller, and he would rather allow a young investor like myself to get some solid footing. Obviously, I am going to be very, very diligent about getting all the documents necessary and looking over the area as we get farther into the process. 

    1Reply
  • Michael Dallas
    OP
    New to Real Estate · Memphis, TN · Member since 2022 · 95 posts · 71 votes
    1y
    Quote from @Scott Allen:

    @Michael Dallas

    This is amazing advice I definitely plan to do all of this! There is so much that goes into it, and I am excited for the work that needs to be done to get this deal done! Also, yes, son definitely sounds like a dweeb lol.

    1Reply
  • Michael Dallas
    OP
    New to Real Estate · Memphis, TN · Member since 2022 · 95 posts · 71 votes
    1y
    Quote from @Jonathan Greene:
    Quote from @Michael Dallas:
    Quote from @Jonathan Greene:

    I agree the seller financing piece was huge to me when I heard that. I really think he just wants to put a young investor like myself on a good track for success (like he tried to do with his son.) And I do not know if he currently has a property manager, but it will definitely be something that gets brought up.

    I am not 100% yet, but I think there are 3 separate buildings. One has units 1-4, the next 5-7, and then the last has 8-9 that are not finished. So making them condos would be a realistic possibility if I wanted to go that route, I think. As this process continues, I will have more accurate information, but these are all amazing things to think about.

    1Reply
  • Chris Grenzig
    Property Manager · Orlando, FL · Member since 2016 · 479 posts · 277 votes
    1y
    Quote from @Michael Dallas:
    Quote from @Jonathan Greene:

    This is a great opportunity. Usually, I would say this is a lot to bite off, but you are young and already have a single family so you aren't a total noob. Opportunities like this don't come along often and can be the foundation for your future.

    You just need to know what repairs are going to come due and when, and start learning about how to be a landlord. You want to see all of the leases, if there are any, and when they end. You want to trust the seller and not insult him, but you want to make sure they are all paying on time.

    Have you gone to local real estate investing meetups in your area? Do you have friends or family local? Maybe a relative wants to JV this with you? A lot options. I would kick the tires because it seems like it could be great.

    Thank you so much for the response I agree with everything you said here. It definitely is a lot to bite off, but I think if I am very thorough with the numbers and due diligence, it takes some of the risk out. 

    So I have gotten slightly new information as well. There are 9 units total. Units 1-7 are rented out at $725 on 12-month leases (although I have not gotten the expiration dates on those yet), and Units 8-9 are not completed but are slightly larger townhomes than can be renovated and rented out for more along the lines of $850-900. When we get farther into this process, I will absolutely ask to see all the leases and proof of payment history for the current tenants. 

    Also, he offered to seller finance the deal for me. My down payment will be just as much as he still owes on the property, some small expenses, and maybe some prepaid taxes. He is working on getting this number for me, but they only expect it to be around 60-70k, which I most likely will get a private lender to come up with that money. (If there is a better idea there, please let me know.) I told them though I would be willing to put as much money down to make the deal work because I believe this is a once in a lifetime type of deal. 

    Again, I know I am information dumping on you, but I really do appreciate the feedback! I love learning about things that I do not yet have experience with. 

     @Michael Dallas this sounds like it could either be a great deal or a suckers bet, and unfortunately, it's impossible for any of us to tell. The renovation could cost tens of thousands of dollars or maybe there is a foundation issue they're not telling you about. Or they could be being 100% honest with you and they just want to see someone young and hungry do well. 

    My recommendation would be to put the deal under contract, then during your inspection period talk to everyone and anyone that is local that buys properties like this and ask them if they know the property or anything about it and ask them if they think it's a good deal. There are plenty of deals I know about that have been sent around off-market or were previously listed and never sold and it's because there's some issue with the property that you might not know about. 

    However, I also got one of my best deals ever off-market as a double wholesale because rents were $700 and I knew they could be $1200 with a little bit of work. I jumped on it very quickly and was incredible for me and a family member who partnered with me. So it's definitely possible, but I have seen the other side of the coin too often. 

    1Reply
  • Audrey Scott
    Flipper/Rehabber · Member since 2024 · 27 posts · 12 votes
    1y

    That's a great opportunity! Prioritize due diligence, including a thorough property inspection, financial analysis, and legal review. Consider your financing options, property management strategy, and potential risks. Good luck.

    1Reply
  • Michael Dallas
    OP
    New to Real Estate · Memphis, TN · Member since 2022 · 95 posts · 71 votes
    1y
    Quote from @Chris Grenzig:
    Quote from @Michael Dallas:

    I appreciate the response. I think we think very similarly on this deal. I am talking to the seller tomorrow, and then I am going with him to look at the property on Sunday. I will find out very quickly if this is a killer deal and he really is trying to help me out or he is trying to offload a problem property that he does not want to deal with. I keep coming back to the fact that he is willing to seller finance the deal. If he knew the property was bad and wanted to get out of it, why would he keep that risk and finance the deal? Either way, I will be very specific and intentional with vetting the property and numbers before I go through with the sale. Thanks again for the help!

    0Reply
  • Isadore Nelson
    Member since 2024 · 98 posts · 23 votes
    1y
    Quote from @Michael Dallas:
    Quote from @Robert Rixer:

    Based on the numbers alone, it seems like an incredible deal - even at $560k. So I would be suspiciously looking out for "what's the catch?"


    Absolutely, that's what I am thinking as well. I think the money just does not mean that much to the seller, and he would rather allow a young investor like myself to get some solid footing. Obviously, I am going to be very, very diligent about getting all the documents necessary and looking over the area as we get farther into the process. 

    Where are you/the property located?

    0Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    1y

    @Michael Dallas see if seller will do seller-financing with you.

    Or, find a more knowledgeable partner to help you.

    [email protected]248-209-6824
    Logical Property Management4.9460 Reviews
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  • Robert EllisBusiness Member
    Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
    1y
    Quote from @Michael Dallas:

    Hey BP! I am a young investor that got the opportunity to make a big jump in my investing journey. Just a little background: I am still a senior in college, and I own a single family rental that I house-hacked last year. Through a lot of conversations and connections, someone has presented me with the opportunity to buy an 8-unit multifamily property. They are an older investor that bought the property for their son to run, but he decided he was done with it and moved back home. Obviously, a lot more due diligence will have to be done, but the basic numbers right now look incredible. $480,000 sales price, and all 8 units are rented out at $750 but could easily be raised to high 800's or even low 900's. While these numbers have gotten me interested in the property, I don't know what I don't know. The man selling said he knows he will lose money on the deal as the property already appraised for $560,000 but would love to get a young investor like myself into the game since his son did not end up sticking with it. He owns an incredible amount of real estate and is not worried about making a bunch of money on this. So I just wanted to put this out here to see what advice I could be given from everyone about investing in multifamily. He is a great guy, but I want to make sure everything checks out and not just take him at his word. What are some things I need to do to run all the right numbers to make sure this is a great deal? Thank you to everyone who responds! 

    (Sorry I know this was a long post)

    Ever thought about diving into real estate investing while still in high school? A viewer asked about buying an 8-unit property in Memphis, Tennessee, priced at $560,000, with rents estimated at $6,400 a month. It sounds like a solid deal, but there’s much more to consider before taking on significant debt.

    Here’s my advice for anyone new to real estate investing, especially young investors:

    1. Properly Vet the Deal: Ensure the numbers are accurate. Verify the purchase price, potential rental income, and operating costs to determine whether it’s truly profitable.
    2. Understand Debt: Taking on $500,000+ in debt is a serious commitment. Make sure you’re clear on how financing works and what your monthly payments will look like.
    3. Property Condition: Assess the age of the property, maintenance history, and any potential repairs or upgrades that might be needed.
    4. Due Diligence: Work with professionals, like a home inspector and a trusted real estate agent, to ensure the property is sound and fits your investment goals.
    5. Analyze the Neighborhood: The location can make or break your investment. Look into property values, vacancy rates, and the overall rental market in the area.

    Real estate can be a powerful way to build wealth, but it’s essential to start with the right tools and knowledge. Whether you’re a high school student or a seasoned investor, understanding the fundamentals is key.


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