Looking For Advice on Finding First Multi-Family Property

[Kevin Smith]

Hello fellow BiggerPockets Investors,

My wife and I have invested in single family rental properties for the past 9 years and we're now looking to 'graduate' into multi-family. I have decent equity in our 7 current single family properties, and I'm looking for the best way to tap that equity for a down payment on a multi-family property. Commercial loan, cash-out refinances, HELOC? What do you think?

Also, I'm trying to find a good market for multi-family properties. I currently have 3 rentals in the metro Phoenix area, 2 in Orlando, 2 in Tampa and my personal residence in Austin. What locations are you guys currently buying multi-family in? 

Thanks in advance for your help!

Kevin Smith

[Alex Olmo]

You can do 1 commercial loan on all 7 properties. Or 1031 exchange most sizable equity into commercial investment down pay.

[Todd Dexheimer]

Personally I would either sell and 1031 exchange or refinance the properties and pull out equity or just raise private money for the deal. 

For markets, I like Orlando and Phoenix area. Other markets I like are Dallas, San Antonio, Jacksonville, Savannah, Columbia, SC, Indianapolis, Louisville, Cincinnati, Columbus, Oklahoma City, Tulsa. 

The other option is to wait a month or 2 and start looking for flooded properties in the hurricane zone. 

[Dave Foster]

@Todd Dexheimer, you'd better be knocking on wood when you say that:)

I just did some cross sectioned analysis for a client based on income and appraisal taxation coupled with growth patterns.  The results are uncannily close to your conclusions.  The Sun belt seems to be gaining momentum with TX and FL leading the way.  The Key of course is picking the sub markets - @Kevin Smith you're experiencing that first hand with your hand in both the Austin, TPA,  and the Orlando market and the differences tween them in terms of where they are in the cyclical curve..

[Raymond Mazzie]

Tallahassee! And if you want boot son the ground I am your guy. I am in my final year of a JD/MBA program here at fsu and have been renting for 7 years. I know he area well, I'm driven, and eager to help. Let me know if this sounds interesting to you.

[Kevin Smith]

@Alex Olmo thanks for your response. I am a rookie when it comes to commercial financing. Could you point me in the direction of any commercial lenders that I could talk with to get a better understanding? 

[Kevin Smith]

@Todd Dexheimer thank you for the list of markets you like for multi family. With a 20% down requirement, I am looking to buy in the $500k price range, so likely a small multifamily. Would you recommend looking for less units with a higher rent per unit, or more units at a very cheap rent? Based on my experience in single family, I'm thinking the tenant class for those very cheap properties could be very challenging.

[Scott R.]

@Todd Dexheimer Hey Todd, I'm looking in the FL/GA markets for MFH, if you're looking and finding 25% down 5+ unit deals let me know maybe there's a potential for collaborating.

[Todd Dexheimer]

Originally posted by @Kevin Smith:

@Todd Dexheimer thank you for the list of markets you like for multi family. With a 20% down requirement, I am looking to buy in the $500k price range, so likely a small multifamily. Would you recommend looking for less units with a higher rent per unit, or more units at a very cheap rent? Based on my experience in single family, I'm thinking the tenant class for those very cheap properties could be very challenging.

 That all depends on what your appetite is. If you're going to go with C class building just make sure that you are rewarded for that and also plan for higher vacancy, turn over costs etc. You can stand to make the most amount of money on C class or D class, but also can loose the most amount.