Multi Family Investing

4 Replies

Hello 

My name is Jake. Brand new to BP, just Signed up for last night. My main objective for signing up is to learn about real estate investing and specifically multi family. I am coming into a little bit of money and want to make sure I do the right thing with it. I feel mostly comfortable in the Northwest area. Multi family is newer to me and I want to make sure I minimize mistakes. I do have a few SFH and a tri- plex so I'm not completely green to real estate and land lording but still have a lot to learn.

My main questions are what parameters/ numbers are most important when considering a deal?

I guess I don't 100% understand why some numbers are such a driving force/ must fit in the exact parameters for some investors.

My plan at the moment is to find a 8-15ish unit complex purchase price at about a million. I would like to see around $3,000 in  cash flow. I would love to get into something in my more immediate area but am willing to look around within reason. I'm living in a  great small town called Boring, Oregon its about 30 minutes outside of Portland. I prefer to stay in Oregon, Washington, or Idaho. I would like to pick up something I can add value to by either increasing the property and/or driving rents up. I do plan on holding for a while. 

Any pointers/ tips/ considerations would be much appreciated. 

Also wanted to add if I'm too far off base please any other suggestions or strategies would be great to hear. I have pretty thick skin so don't be afraid to speak your mind.

Thanks a ton in advance, I'm super excited to be apart of the BP community.

@Jacob Whitney I think you are on the right track. There are no secret formulas. Buy in areas that you know well and base your purchase on the type of return or gains that you want. There is very low inventory for decent multi-family property. Happy hunting.

Welcome to BP. Sandy might be a good area for you to look at. You won't get the appreciation you do closer to Portland, but you might get numbers closer to most of the "rules" you referred to. Pretty rare to find anything that meets the 1% rule, even for multifamily around Portland. duplex and tri's are showing total rents around 3,600 a month, sales price 500k. so just over .5%. Larger multi family could be better, especially if you can fix something up and bring rents to market.

I think most parameters are estimates, and are made to give some breathing room on the deals. They don't work for everyone and every deal the same. If you have a cash flow amount in place and can meet that I think that is a good place to start. I would just make sure you have a cushion built into your goal. Some of it depends on if you are just investing for income to live off of, or investing to just grow the money you are coming into.

Parameters for someone living off rental income, with no W-2 job, will be much more conservative

Hey Jacob,
Sounds as if you are on the right track. I would recommend finding a good market and a good real estate broker to help find the property that will give you a good return. Also, depending on the market, the cap rate is an important number. Currently the Spokane market is roughly 7-8% cap rate and if you get above an 8% cap rate I would say you are doing well. I am currently looking to add a couple investors to my portfolio in Spokane wa if you are interested shoot me a message.

@Jacob Whitney Welcome to BP! Like the others have mentioned, sounds like you are on the right track and I would mention to look at as many deals as possble that meet your required returns (me personally I look for a 10% COC) and stick with those numbers. Owning apartments and currently in the process of doing my own value add to increase the rents for valuation purposes, I would recommend to do a very detailed due diligence walk through of the property with at least 3 contractors (if you are unsure yourself) to get a good scope. That's the last thing you want to do when you start purchasing these larger properties is over extending yourself and going way over budget.

I've also built a financial model that I help other investors analyze property (especially the larger apartments), so if you ever have any questions or need help don't hesitate to reach out. The BP calculators are a great tool as well and what I first started using. I've posted a case study of the model on my website below. Best of Luck and start looking at some deals!

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