Developer · Hobart, IN · Member since 2014 · 773 posts · 225 votes
So I have mainly stayed in SFR arena but wanting to expand my knowledge base. Looking for a rundown on what factors you're running on your deals when analyzing them. Such as maintenance, utilities... Just some things that are different than single family. Thanks in advance for the input.
Investor · Dallas, TX · Member since 2016 · 32 posts · 29 votes
9y
Hi John, if you have access to Co-Star or ALN Research - they can help you TREMENDOUSLY - to estimate the 'AVERAGES' in the particular submarket for the expenses - Another great resource is property management companies - as they have experience in these areas and especially in the submarkets - Also - if you are ever considering a MF Complex you should also be able to ask the Selling Broker / or Seller for the T12 - Or Trailing 12 month financials - which should give you a history of the property itself - If you ever make it to Texas I have a great seminar to referr you too - - I hope you find this helpful - if so please VOTE - Good luck to you - MF is much better than SF - I've done both - Best to you!!
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y
Most issues are similar, except shared utilities. It's common to see shared water & trash, otherwise everything you look at for a SFR still applies for MFUs.
Developer · Hobart, IN · Member since 2014 · 773 posts · 225 votes
9y
@Jeff B. Awesome thank you. I'm curious as to what is typical to see with utilities on a multi family. Does the owner just pay the utilities or do they charge each tenant for their utilities or a divided portion?
Rental Property Investor · Orlando, FL · Member since 2016 · 463 posts · 220 votes
9y
As Jeff mentioned, water and sewer are commonly paid by owner; electricity and gas are usually paid by tenants as each unit has its own meter. Some landlords also sub-meter water so tenants pay their own water too.
Investor · Dallas, TX · Member since 2016 · 32 posts · 29 votes
9y
Hi John, if you have access to Co-Star or ALN Research - they can help you TREMENDOUSLY - to estimate the 'AVERAGES' in the particular submarket for the expenses - Another great resource is property management companies - as they have experience in these areas and especially in the submarkets - Also - if you are ever considering a MF Complex you should also be able to ask the Selling Broker / or Seller for the T12 - Or Trailing 12 month financials - which should give you a history of the property itself - If you ever make it to Texas I have a great seminar to referr you too - - I hope you find this helpful - if so please VOTE - Good luck to you - MF is much better than SF - I've done both - Best to you!!
Developer · Hobart, IN · Member since 2014 · 773 posts · 225 votes
9y
@Bonnie Staples ton of great info thank you so so much. I am in texas a few times ever year normally. What do you think is the biggest reason MF is so much better than SF ?
If you own 4 SF (which I do) for the same investment that I own 400 MF units ... well that's a pretty easy formula.
Next event is in March - it changed our lives - reach out should you want more info.
While INCREASING returns to scale is the microeconomic concept, this is a questionable comparison at best. Four SFH that equate to 400 MF units? Either the MF units are in Detroit or Memphis' worst ghetto or the houses are on the west coast in major cities like SF, LA, Seattle, etc. I would much rather own 4 SF units in SF than 400 units of MF in the ghetto. Four SFH in SF will out earn the 400 MF units in the ghetto just on appreciation alone.
If you own 4 SF (which I do) for the same investment that I own 400 MF units ... well that's a pretty easy formula.
Next event is in March - it changed our lives - reach out should you want more info.
While INCREASING returns to scale is the microeconomic concept, this is a questionable comparison at best. Four SFH that equate to 400 MF units? Either the MF units are in Detroit or Memphis' worst ghetto or the houses are on the west coast in major cities like SF, LA, Seattle, etc. I would much rather own 4 SF units in SF than 400 units of MF in the ghetto. Four SFH in SF will out earn the 400 MF units in the ghetto just on appreciation alone.
Rental Property Investor · USA / NZ · Member since 2016 · 1k+ posts · 812 votes
9y
@John Mathewson, At the moment im doing DD on 4plex and to be fair its not so different then what im used to in NZ. the tenant turnover in the US is much higher then where I invest in Auckland NZ.
It is depending on the location you buy and what condition are the units in., do they need any repairs which would allow you to increase the rent or are they maxed up in rent to market.
Vacancy rate could be anything from 6%-10%. depend on the property and location. I allow 8% for vacancy and 10% for maintenance, then 8% for capex.
The property that im considering have separate utilities including waters so tenants pay for all of these. I own few MF and always buy when the Electric is separate, the water can be sub metered and its not so expensive to do in the long run. the point is to have the tenants reimbursement you the cost periodically if you dont separate the water. or you can add this to the rent. ie. 500pm rent + $20 for water. = $525
Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes
9y
Sfh and multi units are quite similar. Scale is more importnt than asset class.
I recommend calling the utilities directly to determine the average usage of the property. If it is one meter I would use the trailing 12months and divide by units.
The actual Maintenance cost is anyone's guess.
Any deferred maintenance? Age of roof, AC / Heat
What is the age Age of building
Is the neighborhood an A, B, C. will drive costs and occupancy.
Always validate the numbers a seller gives you. The value of the property is dependent on those numbers. I have seen sellers leave out maintenance and trash costs since they were a shared expense between properties and the cost was shifted to a property that is not for sale.
If you own 4 SF (which I do) for the same investment that I own 400 MF units ... well that's a pretty easy formula.
Next event is in March - it changed our lives - reach out should you want more info.
While INCREASING returns to scale is the microeconomic concept, this is a questionable comparison at best. Four SFH that equate to 400 MF units? Either the MF units are in Detroit or Memphis' worst ghetto or the houses are on the west coast in major cities like SF, LA, Seattle, etc. I would much rather own 4 SF units in SF than 400 units of MF in the ghetto. Four SFH in SF will out earn the 400 MF units in the ghetto just on appreciation alone.
syndication jack...OPM on steroids
That's not what he said though, he said that if he owns four SFH for the same investment as 400 MF units. Syndication can work on SFH too, no?
Hi Chibuzor each out to me personally and I will be glad to share BP seems to not like us to post info - but I'm glad to share reach out personally
Not exactly sure what you're referring to here Bonnie - there are many regular contributors to BP who have done thousands or tens of thousands of deals who will post their strategy, approach, analysis, and budgets down to the very last penny. (Brian Burke, Serge Shukhat, J Scott, Chris Clothier, Michael Quarles, etc.)
What BP definitely does not like is folks who come on just trying to pull people into private discussions in order to sell them a course/mentorship. Many times sellers want to have these conversations privately because they know a public discussion on a forum like this will get them "outed" as a guru, rather than a real investor. I'm not saying that's the case here....but it sure has the appearance of that: you're a newer member, you're pitching a "life-changing" seminar, and throwing out some claims that probably seem really exciting to newer folks "4 SFRs that equate to 400 MF units" (which probably translates to you selling a syndication seminar.)
If I'm wrong, I'm wrong, and I apologize - but if your posts keep looking like this, I won't be the last person to make these assumptions on BP.
Chibuzor - I would be very, very cautious about spending any money on training, seminars, coaching, mentorship, or education of any kind before you have a couple of deals under your belt. If you are already a successful investor and make the decision that this is the best way to learn a new approach, that's one thing. But there is way too much great information available for free here on BiggerPockets, or at your local library for you to be spending money on anything else yet.
If you absolutely have to get help/education on your first deal, find a good local investor (tons of them in Texas) and start bringing them deals with the understanding that they'll walk side by side with you through the whole thing. Give them half the profit (or whatever you work out) and you'll get a better education than some seminar and you'll get paid to do it.
Good luck!
@John Matthewson - To answer your original question, check out a book called "What Every Real Estate Investor Needs to Know About Cashflow...and 36 Other Key Financial Measures" but keep in mind the (arguably) most important factor in MF investing right now is the market you're buying in.
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
9y
@Jack B. Hey Jack. Bonnie is likely taking the same funds (or $0) that she would use to buy 4 homes and using it to purchase 400 apartment units and getting a large chunk of the equity in those apartment units (along with getting other compensation/fees).
Yes, you can use private money to purchase 400 SFRs as well. She is suggesting that it is significantly more efficient to do that with an apartment complex or two rather than 400 separate properties.
Bonnie is likely being conscientious of BP protocol in not replying with information that would appear to advocate her business or violate capital raising rules. Syndicators/sponsors add to their private investor network through many channels, one of which is networking on BP. Passive investors also use BP to find and vet deal syndicators/sponsors.
@Jeff B. Awesome thank you. I'm curious as to what is typical to see with utilities on a multi family. Does the owner just pay the utilities or do they charge each tenant for their utilities or a divided portion?
Well, I pay water+trash and tenants pay electric, gas & telephone.
Multifamily Investor · Dallas, TX · Member since 2016 · 67 posts · 92 votes
9y
@Jason V. Thanks for the advice, I'm definitely immersing myself in knowledge and studying real estate investing. I'm moving back to Dallas in 3 or so months and that's when I plan on taking massive actions to get my first deal done and then so on and so forth. Being that I just started learning this stuff a month ago I think if I can just study for 3 months and then move, that would be the best time to get started.
@Jack B. Hey Jack. Bonnie is likely taking the same funds (or $0) that she would use to buy 4 homes and using it to purchase 400 apartment units and getting a large chunk of the equity in those apartment units (along with getting other compensation/fees).
Yes, you can use private money to purchase 400 SFRs as well. She is suggesting that it is significantly more efficient to do that with an apartment complex or two rather than 400 separate properties.
Bonnie is likely being conscientious of BP protocol in not replying with information that would appear to advocate her business or violate capital raising rules. Syndicators/sponsors add to their private investor network through many channels, one of which is networking on BP. Passive investors also use BP to find and vet deal syndicators/sponsors.
So I got a little curious, and decided to look around a little bit. Right on Bonnie's website, they state that they are Paid Students of Brad Sumrok Professional Mentoring. Like I said, there's nothing wrong with someone wanting to drop $25,000 or more to get an education from someone, but if you look around on BP a little bit, you'll see pretty quickly that Mr. Sumrok is a successful syndicator in the DFW area, and hosts seminars a couple of times a year which his members do get referral fees for getting people to attend. (Again, I'm not saying there's anything wrong with any of this - but I tend to get suspicious when I find these things out on my own, rather than being told by the person involved.)
It looks like his program is pretty well reviewed, but there's one thing I really, really don't like about it: they charge a $5,000 membership fee to anyone who wants to invest with them, even passively. I'm obviously not an expert on this particular program, and many people probably fee this money is well spent, but again - I don't like having to find out these things on my own.
From the posts I was reading, they have investment minimums around $100,00 as well (again, not uncommon at all.)
More to your point: I would never, in a bajillion years, invest in a deal the syndicator didn't have their own money in. I also wouldn't invest with someone who had to borrow the money to do the groundwork on a syndication deal (i.e. a brand new person with no money of their own. I actually can't think of anyone I would want to invest with less than that.) Even if you can do an entire MF deal with OPM (and I hate that term) you'll still need to cover the hard costs to put the deal together, which might push six figures depending on the deal.
There's no BP "protocol" against pitching seminars, gurus, networks, or anything else - I think she just knows how gurus and seminars are viewed around here, and hiding those associations just makes people even more wary. Maybe I'm just paranoid, but the fact that her BP profile says nothing about her association with Mr. Sumrok, along with her apparent reluctance to disclose what seminar she wants to refer people to, combined with (in my experience) the practice of charging people an access fee to be considered as passive investors for syndicated deals....I'd advise anyone getting involved with this to evaluate other options as well.
But for all I know, Mr. Sumrok's organization is top-notch, and I'm an idiot for not investing with them right now. I could also be completely misunderstanding the BP posts/comments I've read from other Brad Sumrok Investors and Students, so feel free to correct me if that's the case. I'm just trying to make the newer folks (of whom there are quite a few right now) aware of the risks associated with paid mentorship/group programs. I obviously just feel as if people should invest on a small scale on their own (or with a partner for a deal or two) before getting involved in large MF syndication. To each their own.
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
9y
Hey @Jason V. I am not a fan of pitches in posts as well. I will stick to the economies of scale portion of the post and leave the rest to the poster to address.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
As Bonnie Staples mentioned, the T12s are key. It's even better if there's an external property management company that's been documenting vacancies, repairs, their fees, etc. The more units there are the greater the likelihood of history repeating itself. Having a multifamily also lets me ask myself "will it still cash-flow if" style questions. Odds are you won't be 100% vacant (like will happen with an SFR if there's turnover) for a month and 100% of your refrigerators won't break in a given month. Consequently it's easier to run stress-tests to ensure I don't have cash-flow negative months (save potentially for the month I pay annual property taxes...). Hope that helps.