Investor · Dallas TX · Member since 2017 · 135 posts · 9 votes
I am currently searching the multifamily market for deals comprising I've no less than 5 units and I would say no biger than 50 units. Depending on the market that I look at some of these properties can range from under a million dollars to the top for 5 million. I recently looked at a couple properties in Dallas where a multifamily with under 10 units is listed is listed from about 800,000 to 1.5 million.
Here are my thoughts :
If I had the money to purchase any one of those properties from 1 million to 2 million price range I would probably want to get something that is more than 10 units so that I could spread out the potential risks of vacancy and late payments and potential downsides that renting multi families comes with.
Now I know many people will say well the Dallas Market is a very strong market and there's a lot of appreciation, and fairly growth in a multitude of sectors . So here us the question:
Is my perspective on spreading that risk across a larger amount of units unrealistic or is that something I should consider but make it per Market bases?
Rental Property Investor · Fremont, CA · Member since 2017 · 125 posts · 75 votes
6y
Multifamily becomes more efficient the more units you have, so you really want to go larger if you can. The efficiency can be realized in the cost per unit payroll, materials, renovation cost, etc.
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
6y
@Tony Karns, both @Tony Lin and @Greg Dickerson make great points. Yes, Dallas is a strong market with outsized appreciation...which is why so many people are investing there. You're going to have a ton of competition. Competition with a lot more money and experience. Cap rates continue to compress and cost per door continues to rise. This won't last forever and you don't want to be the new kid on the block left holding the bag.
Take some time to explore secondary and tertiary markets where the numbers are more approachable and you have more cushion to absorb a mistake or bad market timing.
Specialist · Tampa, FL · Member since 2012 · 933 posts · 492 votes
6y
@Tony Karns you have the right thinking. The more units the less risk. Totally. I think before you invest in any market, is to understand the dynamics of that market. What's the overall economic outlook for that market in the 5-10yrs. Do you see growth there? Are jobs plentiful? Are jobs moving there? Are they being created?
Investor · FL · Member since 2017 · 247 posts · 245 votes
6y
@Tony Karns I agree with @Tony Lin. Because of this rule of thumb, I invested in 200-600 unit complexes in the Dallas/Fort Worth Markets via apartment syndications to minimize risk and improve efficiencies. Best of luck!
Apartment Syndicator · Charleston, SC · Member since 2016 · 973 posts · 728 votes
6y
@Tony Karns I also agree with @Tony Lin. If you want to spread risk of vacancy you need to go bigger. Maybe find a partner or two in your similar position then get a few investors so you can take down a 100+ unit deal. Owning and operating large multi family properties effectively takes good oversight and time. If you want something more passive you might consider passive investing in large syndication deals so you participate in the returns and have your free time to do what you love/want. Good luck!
Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
6y
It's about more NOI than units if I were going at it alone. But as others have mentioned, partnering with someone you know, like, and trust if you are locked in at a door amount.