Average return of a Multiunit?

5 Replies

Hello Everyone,

In the past 3 years I have been doing Brrrr investments on individual residential properties and bought 10+ rental properties. My cash return is 20-40%. BTW I didn't know "Brrrr method" until recently I found Brandon has already theorized and exposed my secret. :)

While I am happy with my return rate, the process of Brrrr-ing individual house is time consuming, thus I can only help a couple of "repeat" investor friends, and I have to say no to other investor friends. And buying larger individual residential rental doesn't seem generate same return rate (If anyone think I am wrong, please chime in). This makes me to think about apartments. For those who have experiences of renovating and refinancing an apartment, what are your return rate?

Thanks,

Jason

It will be quite similar, and depends on the market, assuming you aren't selling, because the appraiser is essentially the one who holds your returns in their hands.

I purchased my first 4 Plex apartment recently. There are some pros and cons, but as long as you incorporate all of your planned expenditures into the front end of the deal, you'll be fine. I'm doing some deferred maintenance on the building itself now. I will then begin rehabbing the interiors as tenants cycle out beginning in January. I'm budgeting $40K for all rehab costs and looking at a 57% CoC once its all said and done (I'm 100% LTV) so if I had a downpayment that would be around 20+% CoC. I'm looking to refi and HELOC into another MFH deal by early June 2019.

Kevin,

Your return rate is really high. I briefly looked at 4-plex in my area but couldn't find anything with high return.  

Not sure about your property value, my problem right now is that I want to buy properties more expensive yet keep CoC 20%. I want properties at least $750K and can be refinanced with commercial loan. Perhaps apartment complex is my only solution?

Thanks,

Jason

Jay,

It's tough to buy A+ properties and still get a CoC. Typically A+ properties are A+ because they are new construction or because another investor has put the capital into transforming them. In rare cases, I suppose a vast shift in the market like a substantial "pathway to progress" or neighborhood development could greatly improve a property's status.

Regardless, my suggestion is to look for value-add opportunities. My Quad is a C property in a B- neighborhood. The backyard was literally a swamp - now its a parking lot for tenants. I plan to invest about 40K into the property over the next 3 years while simultaneously doubling the rents to market value. Once I stabilize the rents, I'm going to refinance out of my VA entitlement into either a commercial loan or perhaps a conventional option. I expect a much higher appraisal considering the initial appraisal at its current state before closing was $45K higher than the contracted selling price. So once, I fix it up, I should be setting myself up for a large HELOC to purchase another deal.

The deals are out there, they just might not be as pretty as you'd like.  I do a lot of driving for dollars and cold calling homeowners (I'm headed out to lunch with a prospective seller here shortly).  If I see a C in a B then I'll make the call.  Plenty of people have hung up on me and cursed me out, but it's all good.  Wouldn't be the first time and won't be the last :) 

Hope this helps!