Residential to Multifamily

[Jacob Laird]

Hello everyone! I've been investing SFH and townhomes in North Carolina for a little while now and would like to take the dive into multifamily. Specifically looking at small apartment complexes (8-14 units).

For those of you that have experience in the multifamily realm, what would you wish you would have known before getting started? What are some tips you have for someone looking to do the same?

Thanks!

[Will Fraser]

Hi @Jacob Laird, the thing that I've recently learned that has made much better sense to me is this: in many markets (like mine) these small multi-family properties are a fool's errand. They are a linear step up from a SFR, then Duplex, then Quad, then 8 and so on, but the thing that constrains the small multi class is that they struggle to qualify for any kind of advantageous financing (like a FHA loan on a 4-plex or a Fannie Mac or Freddie Mac small balance loan on a more valuable property), they don't have any sort of scale to allow much efficiency of management, and they typically experience a downgrade in tenant class.

As a result of ^^ they can trade more slowly and perform less optimally.  They are less scary than jumping up to a more valuable property, but the gains to be made by qualifying for a Small Balance Loan or something similar is such a needle-mover than it may prove worth waiting for, while building highly-liquid equity in single family.