Investing in multi family with lenders
Rental Property Investor · Member since 2019 · 48 posts · 14 votes
Investing in multi family with lenders
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Kim Lisa TaylorPro Member
Attorney · Saint Augustine, FL · Member since 2016 · 242 posts · 234 votes@Alexander Reda, I suggest you get some training in buying multi-family and raising private money. There are lots of trainers out there who can help you avoid making mistakes that cost your time, money and reputation. To name a few, REMENTOR, Jake and Gino, Vinney Chopra are some that I have taught for in the past or are clients; some of them have books. It’s better to educate yourself up front on what’s worth buying before you plunge in.
15 Replies
- Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes6y
The hard part is going to be getting the loan from a bank for the property if you have already taken out a loan for the downpayment and the rest. We solve that by either forming partnerships or equity investments via syndication (there are strict rules about what constitutes what).
You need to find a way to add value to the properties and increase cash flow, 5-6% isn't going to cut it if you're paying off an investor. It's also difficult to cash flow through a downturn if your net income is 5-6% when times are good.
I'd suggest you look for better cash flowing markets, find ways to add cash flow, and/or look to form partnerships that'll help you acquire properties
- 6yJerry PadillaBusiness MemberLender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
Do you own a primary residence? Have you considered house hacking, if you don’t?
- High Desert, CA · Member since 2019 · 319 posts · 161 votes6y
Hello @Alexander Reda is that 400-600k a door? I don't think so, but I'm not sure.
Anyways do you own a home? I personally would start with renting out a property you can handle ( not saying you can't handle it)
Also you can always partner up with someone more experience and go from there.
Also @Jerry Padilla I called and left a voicemail from you yesterday in regards to delayed financing.
- Rental Property Investor · Member since 2019 · 48 posts · 14 votes6y
@Taylor L. Thank you for you advice! I was hoping to get it for no less then a 20% of value. Would you consider buying with another investor if the property would value higher in 10-15 years even though its at a 5-6% ROI? Or would you not take that risk and just move on to another market? I should note that some of these multi families been on the market for over 100 days so a dramatic price drop in purchase could occur. Also factoring in the Rehab to put in and what the other comps are going for if it's even worth it.
@Jerry Padilla I do own my Residency. I did consider renting it out but I have 2 loans on it that wouldn't allow me to do so legally. A CHFA loan and a HDF loan. Do you have any strategies in getting out of that?
@Trevor Aydelott its 400-600 for the building. Since I was factoring in Property management in my expenses, I was planning on using them right off the bat so I don't have to worry about the headaches that come with the job. Also, the job I currently have will be hard to manage property on my own. I am opened for partnership. Looks like that might be the only way to go since the returns aren't as high to borrow from lenders. I am also looking into the BRRRR method with single families in my area but again, it's a hot market so boots on ground would probably be the best method in finding deals.
- 6yKim Lisa TaylorPro MemberAttorney · Saint Augustine, FL · Member since 2016 · 242 posts · 234 votes
@Alexander Reda, I suggest you get some training in buying multi-family and raising private money. There are lots of trainers out there who can help you avoid making mistakes that cost your time, money and reputation. To name a few, REMENTOR, Jake and Gino, Vinney Chopra are some that I have taught for in the past or are clients; some of them have books. It’s better to educate yourself up front on what’s worth buying before you plunge in.
- Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes6y
Originally posted by @Alexander Reda:
@Taylor L. Thank you for you advice! I was hoping to get it for no less then a 20% of value. Would you consider buying with another investor if the property would value higher in 10-15 years even though its at a 5-6% ROI? Or would you not take that risk and just move on to another market? I should note that some of these multi families been on the market for over 100 days so a dramatic price drop in purchase could occur. Also factoring in the Rehab to put in and what the other comps are going for if it's even worth it.
@Jerry Padilla I do own my Residency. I did consider renting it out but I have 2 loans on it that wouldn't allow me to do so legally. A CHFA loan and a HDF loan. Do you have any strategies in getting out of that?
@Trevor Aydelott its 400-600 for the building. Since I was factoring in Property management in my expenses, I was planning on using them right off the bat so I don't have to worry about the headaches that come with the job. Also, the job I currently have will be hard to manage property on my own. I am opened for partnership. Looks like that might be the only way to go since the returns aren't as high to borrow from lenders. I am also looking into the BRRRR method with single families in my area but again, it's a hot market so boots on ground would probably be the best method in finding deals.
At this point no because it hasn't been reliably demonstrated that the property's value will be appreciably higher in 10-15 years (such that it could beat my other investment options). Additionally, at 5-6%, you'd need to demonstrate that you can weather a recession (drop in occupancy and market rents). Betting on market appreciation is what got people in trouble in the Great Recession
- High Desert, CA · Member since 2019 · 319 posts · 161 votes6y
@Alexander Reda doesn't sound like a bad deal. I don't know the area you're in. But you don't have to live somewhere to invest there. Especially as you're already planning hiring a property manager.
And I'm all for partnering up with someone. So one step you can take is find good contractors or sub contractors. Also know how much the property manager costs and what the entails. And maybe find a wholesaler, I know a few in different states and cities.
- Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes6y
@Alexander Reda, as has been mentioned, unless there is a clear way to increase NOI, this is likely a no-go. But just to clarify, banking on appreciation is required, IF it is forced appreciation.
Forced appreciation being increased NOI. But I agree that simply replying that in 5-10-15 years from now the property will be worth significantly more than it currently is without having created that value through operations is a fool's play.
- 6yHadar OrkibiPro MemberRental Property Investor · USA / NZ · Member since 2016 · 1k+ posts · 812 votes
@Alexander Reda Thats solid advise from @Kim Lisa Taylor, you need to get yourself educated.
Personally I can say Jake and Gino has great program, and I'm sure Vinney's is good to.
You must get yourself educated if you are planing to invest million of dollars, and even more so if you going to use OPM (Other People Money).
Everything is possible, if your market is doesn't have good price to rent ratio, choose another market.
Make It Happen!
- Rental Property Investor · Member since 2019 · 48 posts · 14 votes6y
@Trevor Aydelott I'm in the Eastern Connecticut market. That's what I was thinking but now with all the advice I have recieved, I'm second questioning it. I don't want to bank of appreciation. Without realizing it, that's what I was doing.
@Evan Polaski Thanks for the advice. You're absolutely right. I think I am just itching for a deal that I am considering all options. Banking on just appreciation is a fools play. I was justifying the NOI of 5-6%. No one knows what the future brings. Trends can lead to an assumption but I'm not seasoned enough to come to that conclusion.
Thanks for the advice @Hadar Orkibi! I am going to educate myself more on Multi family. I did a lot of my focus on SFH because that was my main target.
- High Desert, CA · Member since 2019 · 319 posts · 161 votes6y
Yeah don't bank on appreciation. I mean it is always nice.
Well if you need help looking into other markets, let me know. I can explore it with you.
- 6yBrandon RushPro MemberReal Estate Agent · Portland, CT · Member since 2019 · 761 posts · 849 votes
Hey Alex, I am also looking in the CT market at multi units and feel your pain. At this point, I would avoid burning tons of capital on expensive and low return multis. It would suck to have all your capital tied up in 1 - 2 properties for multiple years when better opportunities come along. Looking for your first property, I know you are dying to get that first deal but you must be patient. If the numbers don't make sense move on.
I look forward to meeting with you at some point. I am going to try and attend your meetup next month.
- Rental Property Investor · CT · Member since 2015 · 400 posts · 432 votes6y
@Alexander Reda great question and good to meet another Eastern CT investor.
You are in a very hot multifamily market, and I'm assuming your primary is a single family right now? With the CHFA loan? When did you buy and how much equity would you have if you sold in todays market?
My advice would be to hit the reset button if you want, you can sell your house with a Hubbard clause and try to house hack a 4 unit. Good news is that you can do this at the same time, but it will be very tough. You will need to pay list price for a 4 unit (they are going for a premium now) and you will also need a buyer who will want to hang around to buy your house. You will also need some post closing liquidity on the 3 and 4 unit properties. (Duplex not needed). And you may be tight for cash due to low money down on the single, so look into CHFA again?
As far as raising money, do not do it if this is your first true investment. Especially if you're buying anywhere in our market, and I'm generally speaking because there are still deals to be had but they require expertise in certain niches. Which only come from years of experience or partners that have them.
I hope this post doesn't come off as negative but I was born and raised here, have been buying in Eastern CT since 2012, and know of every single multifamily complex and owner in Tolland and Windham counties. There is no longer "stealing" these deals away, everyone who was selling has sold, and the people that are holding want top dollar or are really happy to keep them because they bought prior to 2004.
Which leads me to my best advice I ever heard from one of those owners. He said that you must see what others don't see so you look like a genius in 10 years. He bought a bridge that saw thousands of cars per day, was on market for years and no one wanted it. What he did was put advertisements on it to collect passive income, and he said it was his best investment ever.
I'm saying don't invest, but just be careful with other peoples money, especially in the market we are in. Best of luck and hope to see you at our meetup tomorrow!
- Rental Property Investor · Member since 2019 · 48 posts · 14 votes6y
@Brandon Rush Awesome! hope to see you there.
@Scott Hollister It's nice to get some insight on the market that someone has been investing in for awhile. Thank you for that. I do own a SFH with a CHFA loan. I am not sure what my house would go for on the market. I have lived here for about 5 years and have done some up grades to it as well. I was going to contact my lender to see my options on getting out of the CHFA loan, if it would even be worth it. Or, just sell (if It makes sense) and purchase a home where I can turn it into a rental property in the future. I have a ton of stuff that I can't sell either so a storage unit is in the future as an expense if I don't purchase a home where I can store it all. I am a little shook in borrowing money for multi now that you put in perspective. I have a decent amount of cash in reserves as well. My back up plan was to sell and move into a multi, maybe a 2 unit and get some cash flow that way. Having 0 experience makes purchasing a 500k property that much more scary without having a partner who has done it before. All I have is just a bunch of information in my brain and the willingness to do something with it. I know investors say to stick with one plan and run with it especially as a first time investor but I feel like in these hot markets, you need other strategies. I am currently reading Brandon's book investing with low or no money down. I am about to purchase David Greene's long distance investing as well. Just so I have other options. In the meantime, I am going to get as knowledgeable as I can in seller finance since I feel like that is where the good deals could potentially be, even in a hot market.
side note, wheres is your meetup tomorrow? If I can make it, I am there!
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