KEYS TO ATTRACTIVE MULTI-FAMILY APARTMENT INVESTING

7 Replies

Just wanted to get some feedback from everyone on the key points that attract you to multi-family & apartment investing? Is it cash flow per square footage, Net Operating Income potential and Cap Rate? And where do you look to find these properties? Is it better to research yourself or to enlist the help of someone else more knowledgeable in the market? Would like to hear from investors who have had experience with this type of investment. Thank you.....Gary

Multifamily rentals attract me because my market is very risky to invest with SFR because of high taxes and expensive property. MFR's are way better because it will allow for cash flow along with appreciation in my market. When searching for MFR transit lines are key. You want to find properties that are convenient for people. Direct line trains to NYC are what will make or break a deal. Next step is to make the unit better then the other units in your area and rent it for slightly cheaper. This will make your MFR a hot commodity with low vacancy.

Why thanks for the quick reply Shawn. It sounds like you have a great feel for your market area. I especially like your last line the best. More attractive unit, than others surrounding, for slightly cheaper rent to make it a HOT commodity. Thanks again. 

Gary are you trying to buy a 4 unit property or 100?? Very different animals in analysis and due diligence.

Hi Joel, yes I am very aware of the differences and keeping my options open. Just getting some ideas on methodology. Thank you for your response.

I have been focusing on 2-4 unit homes in my area for the past few years.

What attracts me specifically to these is the owner occupied financing I can get from them. With the income from my w-2s, just about every bank I walk into was willing to loan to me for 2-4 units with 20-25% down. I could also go FHA and get a 4plex for 3% down! (Unfortunately I did FHA on a single family home a few years ago so this wasn't an option on my recent buy)

I'm in the Pacific NW where your median 3bd/2bth home is around 300K and rents around 1600/month (estimates, point is it's expensive here and the returns are nothing to drool over) . Your low end 4plexs here start around 300K and hopefully brings in 3000/month in rent. Most on this site will laugh at these ratios. I am purchasing because I'm able to get the loan and cash flow from day one. Also, I need a place to live and don't really like paying mortgages ;)

To sum it up, what attracts me to a multi is that I can live in and rent it out without sharing a room. Lenders also love lending to these scenarios. It is really the only way for me to buy and hold in my area since coming up with the cash to buy a property seems ridiculous with such a small yearly return compared to price.

Eventually I would like to try owning larger units (50+ units). Most investors that stay away from multis say its a different animal than SFH and just more inconvenient and problematic overall. The returns are very impressive compared to SFH so I want to try a 4plex to see if wall sharing tenants are for me.

@gary 

@Gary Swank  I look for at least an 8 cap with a value-add component so I can force appreciation through certain tactics. It could be expense saving, raising rents after putting some cash into it, better mgmt, etc. I always want the area to be trending upwards - I won't invest in an area that is a war zone - not my thing. 

Thank you so much everyone for providing me with some very valuable information to go on. This helps greatly and I appreciate your feedback.

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