Buying my first multi family

Multi-Family and Apartment Investing
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Buying my first multi family

Sara Aviv Berger
Flipper/Rehabber · Pittsburgh, PA · Member since 2019 · 52 posts · 22 votes

Hey everyone,

I'm a RE investor buying SFH so far and I'm ready to buy my first multi family property, up to 10-12 units, depending on the market.

I’m trying to find out which markets can offer me multi family with a cap rate of 10% and more? Is that even exist in today’s market?

Tell me, where do you invest to get these numbers?

Thanks!!

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Arn CenedellaPro Member
Rental Property Investor · Greenville, SC · Member since 2008 · 786 posts · 1k+ votes
5y

@Sara Aviv Berger

A true cap rate of 10% does not exist in any kind of growth market in the USA.

I was on a call with Neal Bawa earlier this week and he said AVERAGE CAP RATE IN THE US is now 5.2%.

Cap rates in the top markets like Phoenix Dallas Atlanta Charlotte are in the 3s to low 4s at best.

Every investor out there will jump for joy with a true 6% cap rate in a growth market.

At the present time, if I can find an asset with a true 5%+ entry cap, I give it strong consideration.

I believe a reconsideration of your investment criteria may be warranted. 😀

[email protected]650-575-6114
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  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    5y

    @Sara Aviv Berger a cap rate of 10 is very risky in my opinion. I shoot for 7.5 coming in and then improve the property to raise rents and a better caprate. I think you can find great buys in Middle America.

    2Reply
  • Lavi Halutzy
    Investor · Los Angeles · Member since 2018 · 2 posts · 1 vote
    5y

    Sara check out Jacksonville Florida, or almost anywhere in Indianapolis are great for cash flow but slow to appreciate 

    1Reply
  • Sara Aviv Berger
    OP
    Flipper/Rehabber · Pittsburgh, PA · Member since 2019 · 52 posts · 22 votes
    5y

    @Bjorn Ahlblad thank you! I can’t agree more, I also think it’s risky but I’m getting a hard time to find a better cap rate. Can you give me an example for mid America market you think I can find these numbers?

    0Reply
  • Arn CenedellaPro Member
    Rental Property Investor · Greenville, SC · Member since 2008 · 786 posts · 1k+ votes
    5y

    @Sara Aviv Berger

    A true cap rate of 10% does not exist in any kind of growth market in the USA.

    I was on a call with Neal Bawa earlier this week and he said AVERAGE CAP RATE IN THE US is now 5.2%.

    Cap rates in the top markets like Phoenix Dallas Atlanta Charlotte are in the 3s to low 4s at best.

    Every investor out there will jump for joy with a true 6% cap rate in a growth market.

    At the present time, if I can find an asset with a true 5%+ entry cap, I give it strong consideration.

    I believe a reconsideration of your investment criteria may be warranted. 😀

    [email protected]650-575-6114
    7Reply
  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    5y

    @Sara Aviv Berger i have to agree with @Arn Cenedella, there are really no 10 cap out there right now. I sell in Florida, and our csp rates are 4-6% right now, with value add deals with rehabs in or out and rent increases. I will say that people really shouldn’t focus on cap rates right now, but focus on appreciation. Multi Family typically sells for twice what you purchased in 2-5 years. 

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  • Jamie Grubb
    Lender · Houston · Member since 2018 · 18 posts · 18 votes
    5y

    @Sara Aviv Berger - You should form relationships with brokers in the markets that you like. They can offer rough numbers and direct you to areas the better fit your investment criteria.  You may need to spend some time writing down exactly what you/your investors are looking for in an investment property - Major city vs small town, cash flow vs appreciation, heavy-lift vs new property? 

    As @Lavi Halutzy mentioned, there are markets that are geared more toward cash flow and some that are more for appreciation.  Which do you/your investors want?

    Cap rates are only one metric to consider.  And, I wouldn't consider that to be the main criteria in a search.

    2Reply
  • Peter Nikic
    Investor · New York & TN · Member since 2019 · 325 posts · 219 votes
    5y

    From reading all the comments above, I agree with most things. 

    Look for strong markets and if you find 5-6% cap rate, that'll be your best bet. I own in NY and have now started to buy in TN. Just bought my 1st multi (9 units) at 7% cap rate in TN but I think I just got lucky. 

    The luck on our side with properties of this size are that they're too big for the average person and too small for the bigger investors.

    Good luck, connect to talk.

    1Reply
  • Nick GiulioniPro Member
    Rental Property Investor · Carmel, IN · Member since 2016 · 1k+ posts · 615 votes
    5y

    Hi Sara, welcome to RE industry. 10% is actually not possible. I started y RE journey here in Indy and now I have more than 60 units. Would love to share my knowledge and help you.  Excited to chat with you if you're interested.

    1Reply
  • E. C. "Stony" Stonebraker
    Rental Property Investor · Coral Gables, FL · Member since 2016 · 199 posts · 266 votes
    5y

    @Sara Aviv Berger I agree with several comments here.  Cap rate is frequently over emphasized and sometimes misleading.  Even if available, a true 10 cap property is going to require lots of on site management, significant capital upgrades and tenant turnover.  You might want to find local partners to invest with in secondary or tertiary markets.  Even there, many new investors in multifamily real estate over the last decade are pushing values to historic highs.  Chattanooga, Huntsville, and Jacksonville, FL are three strong growth markets you might look into.

    2Reply
  • Sara Aviv Berger
    OP
    Flipper/Rehabber · Pittsburgh, PA · Member since 2019 · 52 posts · 22 votes
    5y

    @Nick Giulioni thank you! I’d love to connect :)

    0Reply
  • Sara Aviv Berger
    OP
    Flipper/Rehabber · Pittsburgh, PA · Member since 2019 · 52 posts · 22 votes
    5y

    @Peter Nikic thank you for your response. I guess I got lucky too since I also have a rental that does 8% but has changed 

    1Reply
  • Sara Aviv Berger
    OP
    Flipper/Rehabber · Pittsburgh, PA · Member since 2019 · 52 posts · 22 votes
    5y

    @Jamie Grubb that’s what I’m trying to find out, markets with higher cap rates. You are right with the conclusion that my investors are looking over the 10% while in reality 6-7% are more likely to find

    1Reply
  • Sara Aviv Berger
    OP
    Flipper/Rehabber · Pittsburgh, PA · Member since 2019 · 52 posts · 22 votes
    5y

    @Kim Meredith Hampton thank you. I know that specially in FL rates are closer to 5%

    1Reply
  • Sara Aviv Berger
    OP
    Flipper/Rehabber · Pittsburgh, PA · Member since 2019 · 52 posts · 22 votes
    5y

    @Arn Cenedella I never thought to be pleased with a 5% in the US market 😁 I know there are higher rates but I guess you pay other prices for it (high risk)

    0Reply
  • Sara Aviv Berger
    OP
    Flipper/Rehabber · Pittsburgh, PA · Member since 2019 · 52 posts · 22 votes
    5y

    @Lavi Halutzy thanks!

    0Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    5y

    Congratulations on taking action and building wealth. I've attached a great article by Brandon Turner. It's a step-by-step guide on how to purchase a MF property. I hope this helps! 

    https://www.biggerpockets.com/...

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  • Cameron Braig
    Atlanta, GA · Member since 2021 · 493 posts · 162 votes
    5y

    @Sara Aviv Berger

    The sun belt has continued to provide great opportunities. The major metros like Atlanta, Charlotte, Raleigh, Jacksonville and Tampa has seen employment diversification, new corporate hubs, demographic shifts and rising rents and income. These markets are competitive but their success has led to other markets growing like Winston Salem, Mobile and Birmingham which provides a different type of opportunity set. 

    1Reply
  • Jeffrey Donis
    Investor · Durham, NC · Member since 2020 · 1k+ posts · 691 votes
    5y

    Hey Sara!

    As many have mentioned, finding anything over a 6% cap is difficult. Not to say that those are not out there- you could try being direct to seller and eventually you may find one. However, a 10% cap is not something we have seen...again you could have some luck if you were to go off market. It is a numbers game but the amount of time, money, and energy spent on marketing to find these would probably not be worth it. I suggest coming up with some foundational goals you would like to achieve- certain amount of cash flow, what markets, # of units, year built, asset class, etc- and then start looking. You can build relationships with brokers/agents depending on the unit size, or as I mentioned going direct to seller if you are experienced with the marketing that it will take to find these deals. 

    Let me know if there is any way I can help! Best of luck. 

    Thanks. 

    0Reply
  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    5y

    @Sara Aviv Berger, cap rate is a measure of risk. A 10% cap rate in the current market (regardless of area of the country) implies a very risky asset. And I am guessing numbers that pencil to a 10% cap rate when truly adjusted for risk (i.e. higher turn over cost, lower collections, more Capex) will bring those number down anyways. Unfortunately, there is no return substitute for flips.

    But as noted, midwest, south (Missippi, Arkansas, Alabama) all seem to offer better cash flow, but there are risks with any out of state investing, and even in these areas you run the risk of being in worse parts of town to chase yield.

    1Reply
  • Frank Rodrigues
    Investor · Kansas City, MO · Member since 2021 · 110 posts · 65 votes
    5y

    Hi Sara, I have an incredible 14 unit multi that is currently being rehabbed (almost done) in the KC market. If you want to see what that looks like PM me. 

    1Reply
  • Sara Aviv Berger
    OP
    Flipper/Rehabber · Pittsburgh, PA · Member since 2019 · 52 posts · 22 votes
    5y

    @Cameron Braig thank you! That give me the direction I was looking for

    0Reply
  • Sara Aviv Berger
    OP
    Flipper/Rehabber · Pittsburgh, PA · Member since 2019 · 52 posts · 22 votes
    5y

    @Frank Rodrigues sure. I would love to see it

    0Reply
  • Sara Aviv Berger
    OP
    Flipper/Rehabber · Pittsburgh, PA · Member since 2019 · 52 posts · 22 votes
    5y

    @Evan Polaski thank you!

    Yes, I’m aware of out of state risks, I did several investments the last two years without me being present all along

    0Reply
  • Melinda McDonald
    Property Manager · Kansas City · Member since 2021 · 59 posts · 42 votes
    5y

    Hi -

    That is a risky cap rate. There are still many good deals in Kansas City Missouri with strong appreciation.  If I can help with a team in KC or in St Louis, please reach out.  As an OOS investor, you need a good and dependable team.  

    1Reply
  • Arn CenedellaPro Member
    Rental Property Investor · Greenville, SC · Member since 2008 · 786 posts · 1k+ votes
    5y

    @Sara Aviv Berger

    I listened to Neal Bawa the other day and he said check cap rates in London or Singapore or Hong Kong and elsewhere across the globe, you will find they are lower than in the US. Negative interest rates exist in many countries in Europe. Add in the fact the US is in many ways the largest most stable capitalistic democracy in the world and it makes sense to invest here.

    [email protected]650-575-6114
    0Reply
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