Seeking advice: Really nervous about 1st multi-family property

Member since 2020 · 16 posts · 4 votes

Hello. I just entered contract for my 1st multi family property (and 2nd investment property). It is in Berea, Ky. I don't know anything about Berea, Ky! In doing my research, however, it does seem like a nice charming college town. The property is a 4-plex built in 1978 in a B- neighborhood. It is a cash flow move and looks like will net $500 a month. Thoughts? Advise? What should I look for in the home inspection report. Thank you in advance. I am extremely nervous. It is out of my comfort zone.

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Philip JosephPro Member

Investor · Warner Robins, GA · Member since 2021 · 97 posts · 51 votes

One thing to consider if the property is near the university, is do you want to rent to college students. If so, you can usually charge rates that match campus apartments, but you will need to furnish the apartment. For example, my 2/1 would normally rent for $600 per month, but once furnished and fully converted, I rent each room for $2,200 per semester or $8,800 total for one year (not counting the summer months). Normal rent is $5,400 for 9 months. Now there some cons to this approach, but it's a cool option in a college town.

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Lucy Atkinson
Wholesaler · Lexington, KY · Member since 2020 · 51 posts · 25 votes
5y
Hi tri, I am a property manager from that area. I would love to connect with you. I am happy to answer any questions you have!
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- Tri Nguyen
  OP
  Member since 2020 · 16 posts · 4 votes
  5y
  Originally posted by @Lucy Atkinson:
  Hi tri, I am a property manager from that area. I would love to connect with you. I am happy to answer any questions you have!
  
  Hi Lucy. Nice to virtually meet you. Let's connect. See my dm.
  0 Reply
Brad HammondBusiness Member
Real Estate Agent · Portland, OR · Member since 2016 · 1k+ posts · 605 votes
5y
Hey @Tri Nguyen, going outside your comfort zone is scary but as long as you have done a great job of analyzing the property and had everything inspected, there won't be any issues. Having the $500/month is a great cushion in case anything were to happen. The biggest things you want to look at in the inspection report are the roof, foundation, and moving pieces (hot water heater, HVAC, plumbing system, and appliances.
1 Reply
- Tri Nguyen
  OP
  Member since 2020 · 16 posts · 4 votes
  5y
  Originally posted by @Brad Hammond:
  Hey @Tri Nguyen, going outside your comfort zone is scary but as long as you have done a great job of analyzing the property and had everything inspected, there won't be any issues. Having the $500/month is a great cushion in case anything were to happen. The biggest things you want to look at in the inspection report are the roof, foundation, and moving pieces (hot water heater, HVAC, plumbing system, and appliances.
  
  Thanks Brad!
  0 Reply
Philip JosephPro Member
Investor · Warner Robins, GA · Member since 2021 · 97 posts · 51 votes
5y
One thing to consider if the property is near the university, is do you want to rent to college students. If so, you can usually charge rates that match campus apartments, but you will need to furnish the apartment. For example, my 2/1 would normally rent for $600 per month, but once furnished and fully converted, I rent each room for $2,200 per semester or $8,800 total for one year (not counting the summer months). Normal rent is $5,400 for 9 months. Now there some cons to this approach, but it's a cool option in a college town.
2 Reply
- Tri Nguyen
  OP
  Member since 2020 · 16 posts · 4 votes
  5y
  Originally posted by @Philip Joseph:
  One thing to consider if the property is near the university, is do you want to rent to college students. If so, you can usually charge rates that match campus apartments, but you will need to furnish the apartment. For example, my 2/1 would normally rent for $600 per month, but once furnished and fully converted, I rent each room for $2,200 per semester or $8,800 total for one year (not counting the summer months). Normal rent is $5,400 for 9 months. Now there some cons to this approach, but it's a cool option in a college town.
  Not a bad idea. Thanks!
  0 Reply
Daniel Umstead
Realtor · Philadelphia, PA · Member since 2009 · 107 posts · 69 votes
5y
@Tri Nguyen First and foremost congrats on the property. I would also connect with other multifamily investors locally in the area to get their take on what to look for regarding inspections, there maybe specifics in the area that might be outside the norm when it comes to inspections. Don't forget to put away for capital expenditures especially if you're plan on keeping the property long term.
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- Tri Nguyen
  OP
  Member since 2020 · 16 posts · 4 votes
  5y
  Originally posted by @Daniel Umstead:
  @Tri Nguyen First and foremost congrats on the property. I would also connect with other multifamily investors locally in the area to get their take on what to look for regarding inspections, there maybe specifics in the area that might be outside the norm when it comes to inspections. Don't forget to put away for capital expenditures especially if you're plan on keeping the property long term.
  
  Thanks Daniel!
  0 Reply
James WilcoxBusiness Member
Real Estate Agent · Bowling Green KY ~ Lexington, KY · Member since 2015 · 1k+ posts · 602 votes
5y
@Tri Nguyen welcome to BP! When it comes to Berea there are pretty high taxes compared to it's neighbors. It is a college town but much different than other standard college towns, ask me how IK lol. I was in Berea a little over 4 years. Good luck with your future investment. Main thing to keep in mind on the inspection report are just really big tickets items like roof, water damage, HVAC, and HWH. Paint and flooring can go a long way in refreshing a space. If you are local you could manage yourself but as an OOS investor you will want to make sure you have solid property management.
REI James w/ eXp Realty54 Reviews
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- Tri Nguyen
  OP
  Member since 2020 · 16 posts · 4 votes
  5y
  Originally posted by @James Wilcox:
  @Tri Nguyen welcome to BP! When it comes to Berea there are pretty high taxes compared to it's neighbors. It is a college town but much different than other standard college towns, ask me how IK lol. I was in Berea a little over 4 years. Good luck with your future investment. Main thing to keep in mind on the inspection report are just really big tickets items like roof, water damage, HVAC, and HWH. Paint and flooring can go a long way in refreshing a space. If you are local you could manage yourself but as an OOS investor you will want to make sure you have solid property management.
  
  Oh wow. Did you go to Berea College? Thank you. How is the rental market there as compared to Lexington or other big cites? I am also concerned about vacancies. It seems like most people rent in Berea. Can you recommend a property manager/management co? Thanks!
  0 Reply
Scott M.
Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
5y
First off congrats! You are right where you should be. Nervous is spot on. Looks like you are netting 125/month for each unit. That makes me a bit nervous for you : ) Can you share what was deducted from gross to get to that net? Hopefully you have maintenance and vacancy and cap ex accounted for among everything else. Just not a lot of room for errors.
If you have a chance to be present when the inspector is doing his job or access to him/her after I would ask talk to them, ask them all the questions you have. They are likely to say more in person/over the phone then they can put in the report. The reports are largely driven by their insurance company and it limits what they can say. I think the conversation is where you will get the most bang for your buck.
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Jason MalabuteBusiness Member
Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 901 votes
5y
@Tri Nguyen
1st thing is you should have done your market research initially .
It sounds like you got a c property in a b neighborhood so you need take account rehab cost. Only consider rehab cost if you can can get 16-20% return in next 12 months .
You calculate this by :
Rent bump per unit x 12/ rehab cost per unit = 16-20%
Malabute & Company CPAs525 Reviews
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- Tri Nguyen
  OP
  Member since 2020 · 16 posts · 4 votes
  5y
  Originally posted by @Jason Malabute:
  @Tri Nguyen
  1st thing is you should have done your market research initially .
  It sounds like you got a c property in a b neighborhood so you need take account rehab cost. Only consider rehab cost if you can can get 16-20% return in next 12 months .
  You calculate this by :
  Rent bump per unit x 12/ rehab cost per unit = 16-20%
  
  Thanks
  0 Reply
Kayla Johnson
Owensboro, KY · Member since 2021 · 18 posts · 6 votes
5y
Berea is a great little college town! I went to college in a neighboring town, same county, and rented apartments and houses for the 7 years I lived in the area. There’s a great demand for rentals in the area being as it is a college town and people often don’t intend to stay for long. And then there are people like me who meet their spouses, get married and hang around renting for twice as long as intended, hah!
I don’t have any real investment advice, just some support for the area you chose to invest. I think the town will be a good place to start this adventure!

Best of luck to you!
1 Reply
- Tri Nguyen
  OP
  Member since 2020 · 16 posts · 4 votes
  5y
  Originally posted by @Kayla Johnson:
  Berea is a great little college town! I went to college in a neighboring town, same county, and rented apartments and houses for the 7 years I lived in the area. There’s a great demand for rentals in the area being as it is a college town and people often don’t intend to stay for long. And then there are people like me who meet their spouses, get married and hang around renting for twice as long as intended, hah!
  I don’t have any real investment advice, just some support for the area you chose to invest. I think the town will be a good place to start this adventure!
  
  Best of luck to you!
  
  Thanks Kayla!!! That's reassuring.
  0 Reply
James WilcoxBusiness Member
Real Estate Agent · Bowling Green KY ~ Lexington, KY · Member since 2015 · 1k+ posts · 602 votes
5y
@Tri Nguyen did and graduated. If I was an OOS investor I would prefer the rental market in Lexington. You would see more growth there. Berea is a pretty small town in comparison. The vacancy rate concerned can be mitigated by providing a great product at a reasonable price. Rentals are in sort supply pretty much anywhere. Just DM me more PM contact. We can't post information like that on the forums.
REI James w/ eXp Realty54 Reviews
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Tri Nguyen
OP
Member since 2020 · 16 posts · 4 votes
5y
Quick Status Update. The inspection report came back with some major structural damage e.g. water damage , foundation issues, etc. Pulling the plug on the deal for sure. Onto the next property.
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