Anyone make any money/have experience with D class multis?

12 Replies

I live in the suburbs of Detroit. I own some multis about 20min from detroit in C areas.

There are 50-100 unit multis that pop up for sale in Detroit with awesome numbers. 15-20k per unit, 95% occupancy. $500 per month etc.

anyone have any success in rough areas?

I did a low income 26 unit complex in Birmingham a few years ago. Bought at $340k, put in another $320k, and netted about $3800 / month and finally sold for what I put in. Not totally horrible, but not really good. I shed some tears during my ownership. Live and learn.

I can't say I've had success with large low income multis in your area.  I can say I've struggled with a couple 4-6 unit multi's in Dtown, but have done well with singles.

There's a guy that is local here in Ut that claims to do a lot in Detroit.  Says he's flipping some of those large multis to California buyers, and is quick to tell us how he's killing it (so he says).  He's a huge BS'er, so who really knows, but when I ask to see a hud he's not so eager to show one.

15k / door for a $500 /month rent multi in the D sounds high to me, but I would actually like to see what the numbers really look like on a 50 unit building there.  

Blair Poelman, Broker in Utah (#9299425)

How many guns do you own?

Jeff Kehl

    I don't any Class D properties.  But I wouldn't be oppposed to it, either.  The "how many guns do you own" mindset is exactly why the asset class is attractive: images exist that deter people, and push down demand on an asset class.  This results in outsized profits.  

    If I were to buy a 50- or 100-unit complex in a Class D area, there is no way that I would be managing the property.  I'd have a PM, specialized in that asset class, be my onsite presence.  And once that is the case, it's irrelevant if I "own any guns".  

    So...I think this line of thinking is quite silly, and only provides thinking for others' with more sound logic.

    @Mike Wallace , I wouldn't say I own a D but, likely in a C/C- area.   Definitely know stories of a few friends that owned larger D properties.  Their story is similiar to Blair's.  Lots of headaches and grey hairs.  They cash flowed well but, definitely did not see a pop on the exit.  Make sure you buy RIGHT and stress test the deal.  Look at how it would perform with 20% vacancy as worst case example.  Personally, I'd stay away and if it is your first deal in the larger MF space I'd probably try to steer you towards a little higher quality.

    Best of luck.

    -Josh

    We have a few apartments in rough areas. I don't know if I would say they were D, but they're close. They were a mistake to buy and took a long time to turn around (and a good amount of money), but we finally did and now they are cash flowing really well. That being said, I wish we had put that money elsewhere. I would recommend investing in a D area, especially for a property of that size.

    Updated about 3 years ago

    *Correction: I would recommend NOT investing in D areas.

    i'd never buy there, but we go for areas like westland and livonia (only SFR's). one of my agents has a duplex (i believe) on the edge of detroit and redford and he has a big black guy collect the rent and manage everything. he is happy he got it because it's cash flowing like crazy. but he never sets foot there.

    if this city ever comes back we (the ones that dont want to touch it now) will look like fools.

    Originally posted by @George P. :

    i'd never buy there, but we go for areas like westland and livonia (only SFR's). one of my agents has a duplex (i believe) on the edge of detroit and redford and he has a big black guy collect the rent and manage everything. he is happy he got it because it's cash flowing like crazy. but he never sets foot there.

    if this city ever comes back we (the ones that dont want to touch it now) will look like fools.

     I can live with looking like a fool.  How long have we heard its coming back.  Not like we are not making money else where

    Similar to @Andrew Kniffin Syrios and @Josh E. I own a couple probably C/C- maybe D class in some people's minds. One of the properties has two great long term tenants - respect the property and pay their portion of bills on time. The other property is more of an albatross, not necessarily a result of the tenant just sometimes what you end up with is a mixed bag. What you think will return 20-35% cash on cash (or more) is not always the case. 

    Personally, my future investments will be focused on more developed and appreciating areas. Owning these was a low cost education and I'll continue holding as long as the numbers make sense, but I can't imagine the headaches that are compounded by owning multis or even complexes the size you're describing in that asset class. Agree with Andrew would only go in with property manager... but do you really want to invest in an asset where you're not comfortable stepping during the period between firing the PM and hiring the new one. 

    @Andrew Syrios When you said "I would recommend investing in a D area, especially for a property of that size" didn't you really mean to say "I would NOT recommend investing in a D area, especially for a property of that size" (based on the context of your post)? 

    A missing word can make all the difference to the meaning. Or, if you DO recommend it, could please provide a bit more explanation? Thanks...

    Yes - I wondered that same thing when I read it.  I'm sure that was his intent.  But we shall see!

    Originally posted by @Brent Coombs :

    @Andrew SyriosWhen you said "I would recommend investing in a D area, especially for a property of that size" didn't you really mean to say "I would NOT recommend investing in a D area, especially for a property of that size" (based on the context of your post)? 

    A missing word can make all the difference to the meaning. Or, if you DO recommend it, could please provide a bit more explanation? Thanks...

     Yes Brent, you are correct, I definitely missed an important word there. I would not recommend investing in D areas. I added an update to my original comment. Thank you

    The one potential of a class D property is if you know there is going to be a development to raise the area social-economically.  For instance: mass transit stop coming very close to the property, large business construction close by (stadium, office or business park, etc.), big corporation committing to the area (Zappos into old downtown Las Vegas, or multiple businesses moving in (see link about Detroit timeline of business activity and their locations)

    http://www.quickenloans.com/press-room/detroit-timeline/

    But all it takes is one bad crime to occur on your property and it can become a "worst case" scenario for the owner. 

    I have B and C type and would not consider D type.

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