Need advice about buying a Multi family

20 Replies

Need advice please

My Goal

I want to buy a multi family property where I can live in one of the units and I will manage the other unit or units. My goal is to have the rental income be enough to cover the PITI and maintenance and utilities so that I can live there for free.

I am working part time right ( semi-retired ) now but would like to quit working and move to an area where real estate is cheaper than California.

I currently live in the San Francisco Bay area and I am renting a condo on month to month basis.

I have experience working as a Property Manager and a Leasing Agent.

I am familiar with lease and rental agreements, disclosures and addendums

The number of units should be a duplex up to 8 units

The location should be in an area where it is possible to get a good positive cash flow like certain parts of Florida, Georgia, Nevada, Arizona, Washington, Ohio and Pennsylvania and open to other areas as well. I can relocate and move.

The barrier I have is not being able to qualify for FHA or a low down payment loan because I do not have 2 years of steady income from a job and I also have some debt that I owe on.

I can put 10 to 20 % cash down payment into the deal depending on the price.

Purchase price should be between $50k ( duplex ) up to $200k ( (8 units ) but can be flexible.

I am thinking about looking for a Finance Partner to come up with part of down payment and to get FHA or low down payment loan in their name or both our names.

OR

Look for a Private Lender that will loan money to me to buy the property with cash.

OR

look for an Experience Investor that would like to partner with an onsite Resident Manager

Do you have any advice or tips on how to reach this goal ?

Thank you for your help.

@Joe Gilroy I understand what you're looking to accomplish. Even though real estate is much cheaper in the Southeast, than in other parts of the country, not sure if 50K for a duplex is doable. Not in primary markets in decent/good areas at least here in Florida. Not even in the hood. More like 65/70+ a door. You really have to find a smoking deal. Persistence and consistency of how you're sourcing the deals will determine the quality of deal you take down. Off market opportunities direct to seller tend to be more fruitful.

The house hacking idea is great! Teaming up with a finance partner is another great idea! Go for it! One thing tho ... make sure you understand the dynamics of the market before settling in with a new move

Originally posted by @Joe Gilroy :

Need advice please

My Goal

I want to buy a multi family property where I can live in one of the units and I will manage the other unit or units. My goal is to have the rental income be enough to cover the PITI and maintenance and utilities so that I can live there for free.

I am working part time right ( semi-retired ) now but would like to quit working and move to an area where real estate is cheaper than California.

I currently live in the San Francisco Bay area and I am renting a condo on month to month basis.

I have experience working as a Property Manager and a Leasing Agent.

I am familiar with lease and rental agreements, disclosures and addendums

The number of units should be a duplex up to 8 units

The location should be in an area where it is possible to get a good positive cash flow like certain parts of Florida, Georgia, Nevada, Arizona, Washington, Ohio and Pennsylvania and open to other areas as well. I can relocate and move.

The barrier I have is not being able to qualify for FHA or a low down payment loan because I do not have 2 years of steady income from a job and I also have some debt that I owe on.

I can put 10 to 20 % cash down payment into the deal depending on the price.

Purchase price should be between $50k ( duplex ) up to $200k ( (8 units ) but can be flexible.

I am thinking about looking for a Finance Partner to come up with part of down payment and to get FHA or low down payment loan in their name or both our names.

OR

Look for a Private Lender that will loan money to me to buy the property with cash.

OR

look for an Experience Investor that would like to partner with an onsite Resident Manager

Do you have any advice or tips on how to reach this goal ?

Thank you for your help.

 As TJ said $50K for a duplex and $200K for an 8-unit is wayyyyy low for Texas.

In fact, it's low even for good parts of Ohio. In Cincinnati, people are paying 6-7% caps for "B" areas and 7-8% cap for "C" areas.

For instance, I sold my 41-unit for $2.1M or $51,219/door and that's in a B-/C+ neighborhood and I sold it at a 7% cap.

Granted, the property is financially performing, 95%+ occupied with minimal deferred maintenance.

So, you can probably pay $30,000/door for properties that are non performing or properties in the D and F areas. So my suggestion is you budget for $240K for an 8-unit building but be ready to have extra cash (maybe $100K) to turn the building around or extra cash in operating and capital reserves (in case you buy in a D or F area).

@Joe Gilroy there are some great markets in Ohio. Parts of Cleveland, Cincinnati, and Dayton have some untapped potential. Columbus is pretty hot at the moment where even local investors are unable to get a small multifamily in a good price range.

200 for 8 units? ...perhaps in buffalo or Detroit (free properties). Use Loopnet for stale deals that wont move and motivated sellers that will carry back. Fla GA, Ohio/PA you can find it but it will be need work. Don't look at the deal as much as the upside. Why get stuck in a property you cant flip eventually. You will eventually find it but be careful what you consider a deal. Find what you like and do LOI after LOI to include carry backs.

Originally posted by @Matt Engle :

@Joe Gilroy there are some great markets in Ohio. Parts of Cleveland, Cincinnati, and Dayton have some untapped potential. Columbus is pretty hot at the moment where even local investors are unable to get a small multifamily in a good price range.

 Joe if you are looking into Cleveland you'll want to start with The Ultimate Guide to Grading Cleveland Neighborhoods. Tons of educational info in there to give you a nice overview of what you're looking at risk vs reward wise.

Thank you James - alot of good information in your guide to Cleveland !    Do you know of any good Lenders or Banks that do loans on a duplex in the Cleveland area ?     

Originally posted by @Joe Gilroy :

Thank you James - alot of good information in your guide to Cleveland !    Do you know of any good Lenders or Banks that do loans on a duplex in the Cleveland area ?     

 Yea I've got a large Rolodex of them. However it's important to note that residential lenders at the big firms loan nationwide so the lender doesn't need to be local to Cleveland. So if you bank with a national branch you can probably use them or some other well known names like Wells Fargo are also good options. 

Also, keep in mind, while house hacking is a great way to get started, when you buy a duplex you are more often than not buying it at retail pricing because you are competing with others looking to do exactly what you're doing.  They don't care if it cashflows, they just want to have the rent help cover their mortgage.  Because of that they are willing to overpay on a duplex as an investment.  The further you move up in units (5+), the more likely you are to find a "deal" because now you're ONLY competing with investors... and investors won't (or shouldn't) overpay.  They are buying it solely as an investment.  And you can't get residential financing on 5+ units... so the commercial financing further winnows the pool of buyers.  The smaller the pool of buyers on a property the better chance you have of getting a discount.

@Joe Gilroy Put it out there among your friends and family. You may be able to offer equity in trade for someone to commit their credit to the endeavor.

And, always sign contracts or even better enter into an official partnership, if you do deals like that.

Best of luck to you!

Matthew Meikle

Originally posted by @Joe Gilroy :

Need advice please

My Goal

I want to buy a multi family property where I can live in one of the units and I will manage the other unit or units. My goal is to have the rental income be enough to cover the PITI and maintenance and utilities so that I can live there for free.

I am working part time right ( semi-retired ) now but would like to quit working and move to an area where real estate is cheaper than California.

I currently live in the San Francisco Bay area and I am renting a condo on month to month basis.

I have experience working as a Property Manager and a Leasing Agent.

I am familiar with lease and rental agreements, disclosures and addendums

The number of units should be a duplex up to 8 units

The location should be in an area where it is possible to get a good positive cash flow like certain parts of Florida, Georgia, Nevada, Arizona, Washington, Ohio and Pennsylvania and open to other areas as well. I can relocate and move.

The barrier I have is not being able to qualify for FHA or a low down payment loan because I do not have 2 years of steady income from a job and I also have some debt that I owe on.

I can put 10 to 20 % cash down payment into the deal depending on the price.

Purchase price should be between $50k ( duplex ) up to $200k ( (8 units ) but can be flexible.

I am thinking about looking for a Finance Partner to come up with part of down payment and to get FHA or low down payment loan in their name or both our names.

OR

Look for a Private Lender that will loan money to me to buy the property with cash.

OR

look for an Experience Investor that would like to partner with an onsite Resident Manager

Do you have any advice or tips on how to reach this goal ?

Thank you for your help.

 Joe, I would highly recommend looking into Apartment syndication. You can passively invest in a large apartment complex. You can receive a monthly or quarterly return on your investment depending on the syndicator you invest in. That would allow you to be able to grow your money quicker than looking for a smaller complex in my opinion. Let me know if you have any more questions. Feel free to message me. 

Looking forward to your success in the future. 

Those purchase price expectations are also unrealistic for metro Atlanta. With enough efford though, you could find Duplexes in rural areas far from the city in the $50,000-$100,000 price range. Over the last few years most duplexes within about 50miles of metro Atlanta are selling for a minimum of 180K. More than double and triple that for more desirable parts of town.