First big multifamily

7 Replies

Hello all I will be starting with my first big multifamily unit this year. I am just looking for some feedback and information on purchasing and managing a 30 to 50 unit complex. Any and all info would be appreciated. Property will be located in Wisconsin with 20% down for purchase.

As long as you are okay with a full time job. Scale is usually achieved at 75 doors or more in size. This way you can bake in a full time repair person if the rents per door are decent.

400 rents per door for example is still really low total income to try and be more passive.

You could find a seller to carryback a 10% second allowing you to almost double your doors you might can purchase off of your down payment. For example instead of 30 to 50 with the carryback maybe 75 to 100 doors.  

50 doors at 50k for 2,500,000 with 20% down is 500k.

100 doors at 50k for 5,000,000 with 10% down is 500k and the seller holds a 500k second.

Current inventory :

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Mukwonago 40 doors largest property

Whitewater 22 doors largest property

Kenosha 28 doors largest property

Grafton 12 doors largest property

Burlington/Racine 20 doors largest property

Wautoma 32 doors

Forestville 20 doors

Kaukauna 24 doors

Madison 24 doors

Fitchburg 22 doors

Appleton 54 doors

Black River Falls 48 doors

Milw -> 94 doors in d area

         -> 74 doors in C+ to B area

Advice : 

Large properties best location in Minnesota, Florida and Texas communities.

@Joel Owens I have seen you make these comments multiple times. 

I'm also looking to purchase a 20-40 units to kind of "get my feet wet" with Multi Family. My goal is to get some experience under my belt, and then try and move up to 100 units a few years down the road. Is my thinking wrong? Should I shoot for 75+ units right away? My concern there is, I don't have the  $$$ to afford it and it would be too much of a jump, because I have no experience with that scale of investments and I doubt a bank can give me the money, given my lack of experience. Can you elaborate a little more?

HI Henri,

IF the property is local to you and very newly built with upscale tenants it could work.

Problems happen usually because new projects run into six figures per door in cost. So investors are pushed into older properties at 50k a door etc. to afford it. These older buildings are like older cars and require more constant maintenance. The tenants tend to at lower rents have more life issues and their cash situation can change from week to week.

Just do not give yourself the belief that you put a PM in and those types of properties just throw off cash flow with no issues. If all you can buy due to down payment is older C type buildings in C type areas then you might be better off just saving up more money to buy larger later. You could also partner with someone to get larger scale and better quality or you could invest in a syndicate passively for example.

So for instance you look around and with your 200k down payment do not find anything good. Instead you invest in a syndicate with a proven track record and you and 3 investors put in 200k each and the sponsor purchases a much larger property with better quality. You then get to see how the sponsor runs the investment and makes it go.

If your job keeps you busy you do not want to own smaller multifamily buildings especially older ones. You will not have the time to dedicate to such a venture. With small scale you cannot employ a full time handyman. In this situation to keep costs low repairs get delayed and tenants either leave or fight rent increases unhappy with the level of service going on. The other option is to use retail trades to fix everything fast but you will pay 2 to 3 times the rate to fix and sucks away about all of your cash flow profit. Third is you can do it yourself and provide the labor and pay for the parts. Congratulations you have just traded your time for a job.

In that situation if you make 100k a year at your job but you have to go over there constantly multiple times a week to do repairs yourself with your time to make NOI of 30k a year you are losing money.

Anything I do these days it has to be passive for me. I make the most transacting.