Looking for a book that dives deep into a small MF due diligence

Multi-Family and Apartment Investing
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Looking for a book that dives deep into a small MF due diligence

Ryan Moore
Rental Property Investor · Phoenix, AZ · Member since 2015 · 224 posts · 50 votes

Is there a recommended book out there that does a good deep dive into proper due diligence and other important items like determining reserves?  I've closed on a 4-unit before and I just got under contract for a 5 unit.  My first go-around w/ the 4 unit involved a very primitive understanding of due diligence and not really calculating any specific reserves.

I know I own and have listened to several books that touch upon it (HOLD, ABCs of Real Estate Investing) but having them in just audio format has make it a bit more difficult to find the right information if they are in there.

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Dan HandfordPro Member
Investor · Lexington, SC · Member since 2018 · 779 posts · 501 votes
7y

@Ryan Moore My recommendation here would be a book by @Jake Stenziano and @Gino Barbaro called "Wheelbarrow Profits" and it can be found on Amazon. Great book for what you are looking for and it's also a great resource to have available on your bookshelf.

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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    The only one that comes to mind is Crushing It by Brian Murray. It's really about larger commercial properties but I think a lot of it applies to smaller multi-family. He's also on Podcast #128

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  • Dan HandfordPro Member
    Investor · Lexington, SC · Member since 2018 · 779 posts · 501 votes
    7y

    @Ryan Moore My recommendation here would be a book by @Jake Stenziano and @Gino Barbaro called "Wheelbarrow Profits" and it can be found on Amazon. Great book for what you are looking for and it's also a great resource to have available on your bookshelf.

    3Reply
  • Omar Khan
    Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    @Ryan Moore My vote would be for the The Due Diligence Handbook by Brian Hennessey. It's mostly for commercial real estate but provides ample checklists and guides you through the whole process. There isn't much of a list for smaller properties. Your PM and / or contractor should be your best bet. 

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  • Ryan Moore
    OP
    Rental Property Investor · Phoenix, AZ · Member since 2015 · 224 posts · 50 votes
    7y
    Originally posted by @Nathan Gesner:

    The only one that comes to mind is Crushing It by Brian Murray. It's really about larger commercial properties but I think a lot of it applies to smaller multi-family. He's also on Podcast #128

     Thanks, yeah I have that book too on audiobook.  I listened to it on a trip once while driving but clearly didn't retain anything to memory.  I think I need to steer away from audio books when it comes to things I'm trying to learn and will need to reference again.

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  • Omar Khan
    Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    @Ryan Moore IMO, audio books are great for general topics where one doesn't have to remember specifics. Anytime I need to deeply understand a topic I know I have read and re-read a book - no other way around it. 

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  • Theo Hicks
    Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
    7y

    Hi Ryan,

    Here is how I calculate the reserves for these smaller multifamily deals (I own three 4plexes):

    Essentially, I determine the remaining life of the major items, like HVAC, water heaters, roofs, siding, etc. Then, I determine the cost to replace each of these items. I divide the cost by the remaining years to determine how much money I will need to save. For example, if the roof has 10 years of useful life remaining and the cost to replace is $10,000, then I will save $1000 per year. Repeat that for all big ticket items to determine an ongoing reserves budget. For larger projects, I usually set a $ per unit per year based on the asset class (i.e., $250 per unit per year for B class apartments). I will also create an upfront operating account fund to cover any unexpected issues that occur before I build an adequately sized reserves account from the ongoing savings. 

    If the deal has other deferred maintenance or if I plan on doing renovations (interior renovations or replacing a big ticket item within the first 24 month), I account for that in my down payment when underwriting.

    Also, I agree with Omar when it comes to audiobooks. Listening to an audiobook is better than no reading a book at all. But they are better suited for fiction books or more inspirational, high-level non-fiction or business books.

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  • Gino BarbaroPro Member
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    7y

    @Dan Handford

    thanks for the kind words. To be able to write a book, I read tons of books on real estate myself. I would recommend Dave Lindahl Multifamily Millions, a great book, and anything that @j scott  writes.  @Michael Blank also has a great book out!

    good luck with the deal

    all the best

    Gino

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