First Small Apartmnet

8 Replies

So, my dad emailed me a link to a Craigslist ad for a local multifamily for sale. We live in a small town of 12k people. All this said, I don't know how serious he thought I'd take it, but it has got me thinking. We own a SFH about 100 miles away where we used to live in a college town. It rents for 1300 and we pay 620 for PITI, and we pay a company to manage it. It's a good little investment (we don't really plan on being "big time" investors, but I'd rather do real estate than stocks/etc).

So, what he sent me was a 10 unit small apartment complex. Some single bed some studio. There is also a 1500sqft SFH on the property.They say that the property pulls in 5500 a month. They are asking $350k. Now, I'd have amazing credit, but only about 20k in the bank. We owe 80k on our rental we currently own, but Zillow estimates it is worth 195k. Anyway, I was just curious on your guys thoughts. I looked around Google, but "buying 10 unit apartment complexes for $350k" is not a popular discussion. MOst things I see are huge complexes worth 1M or more. I'm not even sure how financing works. I mean, this place is not all that much more expensive than the home I live in... (250k). We also make about $95k per year and have no debts aside from the who homes.

I appreciate your guys' help. I used to frequent the forums more and read up on real estate investing, but lately life has had me focusing on the here and now. Again, thanks ahead of time.

I know that there are MANY more variables to consider here, but would I be crazy to consider making an offer contingent on the sale of my other property? It is FSBo, but he will not carry the contract, or so the ad says.

If the property has a good 3 year track record of financials,  low vacancy,  and not too much work it sounds like a good deal. 

Obviously the financials will paint the picture. Since it is in small town I would do 3 years taxes just to be sure vacancy isn't an issue. 

I have a very similar situation to yours, @Joe Edwards-Hoff . Just slightly different in terms of numbers.

We have one rental, and we are living in our current home which will become a rental soon. I have property managers in place for when we move out. I've realized after being a landlord for this rental, I definitely don't want to manage 20+ SFRs/condos, etc. I am trying to figure out if I should sell the rental for better opportunities.

Ironically, I am also evaluating a 10 unit as my first multi-family. (Don't worry, not the same building!)

Regarding financing, my first was to discuss with the seller to consider seller financing at first, but it sounds like that is out in your case.

Beyond that, and I guess as a first step for you, I would just start calling the local banks/credit unions to see what they can do in your situation. If you have an established relationship they may be willing to work with you. You seem to be in good shape financially.

Maybe you can snag a 85/15/5 or something of that sort?

@Joe Edwards-Hoff As was mentioned, when it comes to so many units, you need to treat it as a business and analyze it appropriately. Then you need to match it with your goals. 

You always have to have your goals (your family goals) in mind. If you really know your short term/long term goals, then it is easier to provide direction. Simply buying because you want to own one ... is not always the best thing to do. Because you might end up hating it. 

Also, simply looking at raw numbers only tells part of the story. The biggest thing is the value that can be unlocked from these numbers. Hope it makes sense.

In terms of finding money ... I'm sure there are plenty of people here who can help with that, if there is value to be unlocked. There are tons of ways to finance deals.

well, I will say that long term owning enough real estate to have a humble retirement is my goal. 

I currently teach high school, but I am also a pastor. Some day I will need to step out of public schools (I teach shop, so I like hands on work) and I'd love to have real estate supplement my income. 

I've made some inquiries. I think this could be a good deal. 

Well @Joe Edwards-Hoff , if you think this is something you wish to pursue, look into a Line of Credit on the rental home (and possibly your primary home as well). LOC's can be great ways to do the down payment on a property while keeping your 20k cash liquid to cover repairs etc. If you think the rental is worth 195k and you only owe 80k, you can probably get 70-75k on a LOC from a credit union or local bank. 25% down is pretty common for commercial loans, so at 350k you'd need about 85k. I'd do the LOC for 75k, ask the seller to carry back 10k on a 1 year note, or negotiate down the price if possible. Hope this works out for you.

Originally posted by @Matt Popilek :

If the property has a good 3 year track record of financials,  low vacancy,  and not too much work it sounds like a good deal. 

Obviously the financials will paint the picture. Since it is in small town I would do 3 years taxes just to be sure vacancy isn't an issue. 

 Yes, If it is having a good record of finance, low vacancy and in good condition it sounds a very good deal.

So the banking swung by offered to give me two home equity loans, one on my primary residence and another on my rental, to cover the 70k. They'd give me a 10yr loan amatorized at 25yrs with a balloon at the end... is that a decent deal? Apr+2%.

It was a local bank. I can always look around if serious, but at this point I figure I should talk to the seller. I am pretty sure that they stay full. Our town is DRY for rentals. We have friends wanting to rent a SFR and they've waited months to find one.

Any key questions I should ask?

Updated 4 months ago

Bank I swung by...

Originally posted by @Joe Edwards-Hoff :

So the banking swung by offered to give me two home equity loans, one on my primary residence and another on my rental, to cover the 70k. They'd give me a 10yr loan amatorized at 25yrs with a balloon at the end... is that a decent deal? Apr+2%.

It was a local bank. I can always look around if serious, but at this point I figure I should talk to the seller. I am pretty sure that they stay full. Our town is DRY for rentals. We have friends wanting to rent a SFR and they've waited months to find one.

Any key questions I should ask?

 I would continue to shop around, but that looks like pretty good terms. And if it gives you what you need to do the deal then that's great. Let us know how it goes if you end up going under contract or closing. 

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