Diving into 15 unit complex from SFH rentals

6 Replies

I’ve only ever owned a few newer single family home rentals in master planned communities that were low maintenance and easy to rent. I’ve now found a 15 unit complex in my neighborhood that I love. I’ve read enough posts and blogs to feel fairly familiar with acquiring a loan, and feel confident in managing the property. My question is, do I evaluate the deal the same way I would a single family home rental? What are some of the big differences? The unit generates 140,000/year in rental income, but is listed at 1.8 million. The unit is over 50 years old and I’m planning on having quite a bit more maintenance than I’m used to and having to do quite a bit of remodeling while i have vacancies, as there is good potential for increasing rents. Thanks for tips and advice!
@Melanie Siegel I think it’s great that you have found a large multi that you can invest in. The “love” word makes me a bit nervous reading about it. The real question is do the numbers shake out? From my recent research, evaluating a larger multi is similar, except the amounts needed for down payment and other costs can be increased. There are some potential cost savings that can be duplicated across multiple properties, but it’s important to understand what the rental history is and has been before making any offers or signing letters of intent. Just my two cents, but I hope the numbers shake out for you.
@Melanie Siegel . If listed in the MLS it should give you details on expenses and RTV. Definitely not the same as a single family. There are really good online calculators that I usually run the numbers with. The more units the potential but the more risk too. Best of luck.

Simple answer to this question is NO, there aren't many similarities between multifamily and single family calculations

Ask the broker for the last 12 months of profit and loss statements along with the current rent roll.  If you can acquire that and block out the property address, you can post on here and we can take a look at it for you. 

I suggest you get your hands on a calculator that will help you out with this.  I use the Jake and Gino calculator. It has a tutorial that walks you through exactly how to use it, which is foolproof. There are other calculators out there, but this is the only one I use. 

https://jakeandgino.mykajabi.com/store/zdt9X8o2

I'm not sure what market you're in, but you're looking at a 15 unit for 120k/door.  The rental income isn't the important number, it's the net operating income that you're looking for.

Come back and post the numbers here, I'd be happy to take a look as I'm sure others will too. 

Dillon McGough

Hi Melanie based on those numbers you are looking at a 50 year old building with 15 units and average monthly rent of 675 per unit. The asking price of 1.8 is way out of line, and won’t make you happy. The numbers in listings are usually incomplete or wrong, so get financial statements and rent rolls from the owners. In some markets you may need to sign an offer to get those. I do that contingent upon inspection of premises and financials so there is always an out. All the best!

@Bjorn Ahlblad thanks for this info! I’ll try to get the info and post so I can get some insight from this community. My ideal purchase price is no higher than 1.5, but even that makes me uncomfortable since I’ve only dealt with single family homes and this is new to me. I’m currently also evaluating another deal that is 8 units, but it’s two 4-plexes and could be purchased separately and therefore wouldn’t need a commercial loan. I’ll go through everyone’s advice here and check out some of the calculators people mentioned.