How to land your first multi family

Question

Hello Everyone! I am super new and wanted to see if someone can provide a step by step guide (or can point me to one) on how to go about purchasing your first multi family (duplexes, three-plexes, and four-plexes). Then, how can you use that first purchase to then purchase another one? My main goal is to own multiple multi family properties so that I can maximize potential passive income. Any help would be greatly appreciated! Thanks BPers!!

Important: I do not own my own place right now (I rent) nor do I have lots of cash on hand. I am most likely looking at bank financing for my first purchase.

Location is Norristown, Philadelphia, King of Prussia, East Norriton, etc.

Important: I do not own my own place right now (I rent) nor do I have lots of cash on hand. I am most likely looking at bank financing for my first purchase.

Location is Norristown, Philadelphia, King of Prussia, East Norriton, etc.

Account Closed · Answer

@Mar Maldonado I'm an RE agent and work at a RE investment firm in the same market as you. The the dade market is more pricey but the rents are much higher which helps compensate the price. I look for these owner occupied multifamily deals all the time on different sources. I see a lot of duplexes sell for  200-220K these duplexes can cash flow negative -$200/m when occupied and +$800 after you move out.

Ned Carey · Answer

Your best bet is to buy a 2-4 unit property and occupy one of the units. You will be able to get owner occupied financing which means you can possibly do this with a low down payment.

What you want to do is possible to do with modest cash and I don't like to be negative. However I see so many come here expecting to start in multi-family when they don't have the resources to even start with a SFH home. Even if you could pull off a deal it sounds like you don't have much money for cash reserves if something goes wrong.

There is no clear step by step guide as everyone's path will be a little different but I give it a try

• Start saving cash. I you can't save cash when you have modest means you won't be able to when you have significant fiances either. You can ONLY build wealth by saving and investing.
• While you are saving learn the business. Learn the strategies and learn how to evaluate deals. You can do that here on BP
• Also wile saving start networking. Build the resources and contacts you will need to do this business.
• Learn your market. You do that by looking at lots of deals. You don't even know what a deal looks like at this point so you probably aren't ready even if you had a pile of cash and great income and credit.

Probably not what  you wanted to hear but that is the best advice I can give.

Account Closed · Answer

@Carlos Lugo There is a number of multi families in little Havana which is an up and coming neighborhood. West of Wynwood are some for cheap but that area is really sketchy. There are also a number of units in coral gables that are not legally multifamily but have more than one unit.

@Mar Maldonado My calculation of -$200 CF when occupied includes all expenses. Its really not that bad when you consider that your principle payment will also be around $200 monthly. Save yourself $1000 in rent per month and move out in a year. Hopefully you will have saved for a 20% down payment to buy another property or use other financing.

Jim Workman · Answer

@Dave Hemrick  It looks like you have gotten some really great feedback.  I can only add that you might get a good third-party appraisal so you know how much equity you will have.

Dave Hemrick · Answer

@Dean Klein It is a C to D area for sure. I know it will be 20 to 25 percent since I will not be living there. .2 x 40,000 is 8,000 and then 20,000 in repairs. So I am in the hole for 28,000 minimum right off the bat. I can come up with the 8,000. Do banks cover repair costs? If I go for this deal, can I use the equity in this property to purchase another one?

Mar Maldonado · Answer

@Neo Perrin

My preliminary research is showing similar results, which is somewhat discouraging. The areas these multi's are in are not desirable either. Still, if I can find a good deal I think it makes sense as a good way to start. I'm even contemplating a live/work space as an option as well.

Carlos Lugo · Answer

@noe perrin I'm new to the area and just getting to know the market. Im curious. I haven't seen many duplexes outside of North Miami and some over priced ones in West Miami just north of Coral Way. What areas are you refering to?

Dean Klein · Answer

If you don't want to owner occupy it, you will be looking at 20-25% down with a bank, it's worth living there for a year and then move out. Sounds like this one could be good, depends on the area, for $40,000? Sounds like a D neighborhood at best.

Dave Hemrick · Answer

Thank you so much to everyone for providing your insights and being upfront with some not so fun moments when it comes to investing in real estate. My plan is to just own the property. I do not want to live there. I found a duplex for 40,000. Both parts are vacant and currently do not have any tenants. The seller said it can cost 20,000 to 25,000 in repair costs. The rent is 1,300 total. I am also looking into using a property manager. Anyone have any thoughts on that property?

Mar Maldonado · Answer

I'm glad you made this post. I'm also new to real estate investing and currently rent as well. I was also thinking my first purchase would be a multifamily unit to both live in and have it as cash flow, then invest in other properties from there. Only difference is I'm on the Miami / South Florida market. Real estate is very expensive here. Anyone have any experience with multifamily units in this market?

How to land your first multi family

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