Multi Family Investing

6 Replies

Hello Guys, 

Looking to purchase my first multi family I currently own 5 single family and I"m seeking better returns. My budget for a multi family is 1M-1.5 M I'm looking to purchase in Dallas or Florida. 

I keep hearing from podcast Loop net is where deals go to die and after combing through them Im starting to believe that does anyone dabble in Multi Family in Texas or Florida that can suggest a broker to help out with this ? The reason in these states is because of market growth but I know mid-west has higher caps and lower arv's. 

Whats your typical down on a multi One Million Prop ? Which I have ready just wondering what you folks find. 

DO you ask for the last three years rent rolls or would twelve months suffice? 

Thanks in Advance for you answers just a Man here in Los Angeles area trying to take over the world a unit at a time :) 

Reccomend brokers that would be great. 

Hi @Alexander Parada ,

You won't get a very large property in those two areas with that budget. Buying a smaller property out of state is riskier so just keep that in mind.

You should expect at least a 25% down payment for a property of that size.

You'll get 12 months of P&L but not 12 months of rent roll. Generally you'll just care about the most recent months of rent roll anyway.

@Alexander Parada Figure $75K-$150K per unit in those markets, so roughly 15 unit building. 25-30% down, 5-7 year term. Figure you need $300K down + reserves + closing costs + repairs = approximately $400K cash for a $1MM building, depending on the building and being conservative. 

For that size property, pre-LOI, my experience has been that take what you can get and underwrite conservatively.

@Alexander Parada I don't know the Dallas market well but getting a commercial multifamily in Dallas for $1M or even $1.5M might be a tough ask. I'm just assuming commercial multifamily because you said LoopNet. I know there are non-commercial multifamilies but you'll see a lot more of them just cruising the apps that pull from the MLS. Anyway, I'm sure there are places in Florida where that's extremely reasonable. I'm also assuming (yeah, not too smart of me) that you'd want to be in a decent part of Dallas since you're out-of-state and not seeking the roughest areas.

And unless you're looking for a fixer the "lower ARV" doesn't really come into play. And if you want your first out-of-state venture to be: 1.) first time with commercial, 2.) first time investing out of state, 3.) first time in multiunit, etc. you could be in for a lil bit o' pain. You might be better served by seeking out a yield play even if the projected returns are a little lower.

As for your questions, I'd say...

1.) Typical down: 25% with 9 months PITI for reserves, 5-7 year fixed-rate with a 20-25 balloon. You can do better, you can do worse, but that's probably a decent middle ground. Points, fees, etc. vary with lenders but appraisals aren't cheap :-)

2.) Ask for:  Ask for whatever the broker, agent, seller, etc. can provide.  The last time I asked for a T-12 I received 3 years of financials, a list of "improvements" with costs, etc.  The improvements are in quotes for a reason but that's another story.  The bottom line is that (at first) ask an opened ended question and see what gets sent to you.

Side note, my (limited) experience has told me that banks like 3rd party property managers.  They like to be able to get the T-12s and rent rolls from them.  They like when one is managing the property post-purchase.  It just helps, for them (I think), to de-risk the deal.  It helps even more (since it's likely a community/regional/local bank you'll be talking to) if they know the property manager.  Depending on the size of city (likely not with an ecosystem the size of Dallas) it's not crazy to think they all run into each other from time to time.

Anyway, as a Cali out-of-state investors, I think this is all a moot point.  The first priority has to be picking your Top 2 cities.  Maybe it's Dallas + 1 in Florida.  Maybe it's both in Florida.  Just narrow it down based on your criteria and start to get more granular.  I have my doubts that the same investor is going to be stoked about both Dallas and Destin.  They're just two incredibly different markets.

@Andrew Johnson Thanks for the informative reply. Could careless what city as long as the cash on cash makes sense. Yes after looking  at Texas and Florida major cities specially Houston where I own a contruction business you only get so far with 1.5 Million. 

I see you invest in other states what did your deals look like i.e purchase price and current cash flow? Is it possible to invest my $ better in that state your at? 

PS

Longest response I have ever received you are the real MVP! 

@Alexander Parada You don't want to invest where I invest :-)  Not because it's "bad" it's just that I had a distant family connection there, visited 20+ times growing up, etc.  I mean I don't think Arkansas is a "bad" place to invest but I wouldn't make Central Arkansas my first choice.  I think Northwest Arkansas (NWA for short) actually has better growth prospects if you look at it over the next decade.  Now it's also super landlord friendly, low property taxes, low dirt-value (so depreciation as a percent of purchase price is nice), but I have a real hard time saying that someone should randomly jump into that market.  I have a few cards stacked in my deck when it comes to Arkansas just like you have a few out-of-state cards stacked in your deck when it comes to Houston (with your construction business).  Any kind of "home field advantage" you have in a certain market over all of us random Cali folks looking to invest in fly-over county is (in my opinion) something you need to take advantage of.  Not that I want to discourage you from taking a peak at Arkansas, I just want to be transparent that are spreadsheet and non-spreadsheet reasons that I chose the market that I did.

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