I'm looking to rapidly replace my w2 income with rental property income. The goal is to be fully retired within 9 years (May 2030 is my target date. Sooner would be excellent).
Weighing the pros/cons of owning multiple 3-4 unit dwellings v. small apartment buildings (10-20 units or so).
What are folks experience with commercial financing for the larger buildings?
What kind of cash flow can be expected with apartment building when managed properly?
What else should I be considering?
Any and all of your input will be greatly appreciated.
We help investors and invest ourselves in Multi-families from 2-20 units in MA and NH. The larger buildings, 10+ units, definitely scale better than the smaller 2-9 unit buildings but there aren't many of them kicking around and, even in markets 45 mins - 1 hour from Boston, they're very competitive right now. These larger properties rarely hit MLS and typically trade off market. There was a 20 unit kicking around Chelmsford (Lowell suburb) last month for $5M which was a 5.5 CAP. I had a client interested in it but the numbers didn't make a whole lot of sense at $5M. They ended up getting multiple over asking offers. The interesting thing is that financing over $3M is actually pretty abundant since you start to get access to the Agency financing markets where the bigger investors are play.
We typically find decent deals in the 5-8 unit range. These are small enough that the BIG guys don't bother chasing them but they're too big for your FHA househackers to take on with 3.5% down. There is nothing wrong with househackers, we help plenty of them, but they're able to pay more than the 25% down investors and still have decent cash on cash returns. We're actually closing on a 5 unit tomorrow for our personal portfolio and we were able to get it for the same price (maybe a little cheaper) than a comparable 4 unit, which is pretty typical. The nice thing about these types of properties is that the bank (or credit union) normally doesn't require a much experience and see these as entry level investments.
I hope this helps and let me know if you have any questions as you continue to figure out your strategy.