Buying Multifamily with Private Money

13 Replies

Wanted to see if anyone else on here is doing the same thing when it comes to purchasing multifamily properties. The last 4 properties I have purchased equalling 12 units was all done with private money at 10% interest. Even at that rate I am still able to make net about 10-12% per year. This is i n Arizona of course does anyone know of any similar markets? 

Paul,

I live in the Phoenix area.  How long have you been investing? I would like to learn about the tools you used to find, evaluate and secure these properties.

Perry

I have seen some rehab deals that look promising in Phoenix but require capital upfront and have to be purchased in cash. I have bee looking more in the Tucson market lately because the prices and the return make more sense then Phoenix. The only area I feel worth investing in Phoenix would be close to downtown such as the Coronado Neighborhood or really between 15th Ave to 16th St and from Thomas to Washington (maybe a little more south). I have used some private money from a few individuals in Tucson to purchase properties in Tucson who had self directed IRA's or cash lying around that they wanted a better return on.. I want to start buying the Phoenix market I feel downtown will continue to become more desirable and expense in the up coming years. I feel there is still good opportunity in Phoenix for deals you just have to really look for them. I'm in the process of trying to raise capital which always seems to be the biggest issue to overcome. Let me know thoughts, sorry for the delay in response I was out of town this past weekend.

Originally posted by @Paul McComb :

I have seen some rehab deals that look promising in Phoenix but require capital upfront and have to be purchased in cash. I have bee looking more in the Tucson market lately because the prices and the return make more sense then Phoenix. 

I have to agree with you there. I have one property in Phoenix, but since I bought it, prices have shot up substantially and I am not seeing similar deals any more. I live in Tucson, so it wasn't that hard for me to transition over to buying here, but the economy here is not as strong as Phoenix, and the growth is slower. Also the rental vacancy rate here is higher.

402-965-1853
When you get private money like that - how much are you putting in of your own $
Originally posted by @Chris Seveney :
When you get private money like that - how much are you putting in of your own $

I'm putting roughly %20 down of my own money, I will not really go above the 150K price point on these types of deals because I feel there is a diminishing return on NOI if you borrow to much. I pay 10% interest on all my loan and am still able to make about %50 cash on cash which I fell is right around where you should be. I wouldn't real consider anything less because because its too much work for the return and I not counting some repair cost which seems to always average in the 5-15K range. For example the last property I purchased was a short sale in South Tucson for 125K for, four units and each one will be renting for $525 after I do the necessary repairs on the last two vacant units. It will probably end up costing me in the 10-15K ranges for reapirs. What is a bonus is all utilities are split including water which is rare. There are deals similar to this in PHX but more in the 250K price range that need a lot more work probably in the 5-7K per unit and we are talking about 10-12 unit buildings. This price range with the repairs are harder to get into without having the cash on hand and without using real hard money and paying points because most of my loans are at least 5 years. I feel these are the types of properties that need to be purchased especially anything close or near downtown PHX or in Tucson.

Originally posted by @Paul McComb :
Originally posted by @Chris Seveney:
When you get private money like that - how much are you putting in of your own $

I'm putting roughly %20 down of my own money, I will not really go above the 150K price point on these types of deals because I feel there is a diminishing return on NOI if you borrow to much. I pay 10% interest on all my loan and am still able to make about %50 cash on cash which I fell is right around where you should be. I wouldn't real consider anything less because because its too much work for the return and I not counting some repair cost which seems to always average in the 5-15K range. For example the last property I purchased was a short sale in South Tucson for 125K for, four units and each one will be renting for $525 after I do the necessary repairs on the last two vacant units. It will probably end up costing me in the 10-15K ranges for reapirs. What is a bonus is all utilities are split including water which is rare. There are deals similar to this in PHX but more in the 250K price range that need a lot more work probably in the 5-7K per unit and we are talking about 10-12 unit buildings. This price range with the repairs are harder to get into without having the cash on hand and without using real hard money and paying points because most of my loans are at least 5 years. I feel these are the types of properties that need to be purchased especially anything close or near downtown PHX or in Tucson.

 That sounds like a decent deal, though I'm not a big fan of South Tucson. Just out of curiosity, why the private money to do that kind of deal rather than a conventional mortgage or portfolio loan?

402-965-1853

 That sounds like a decent deal, though I'm not a big fan of South Tucson. Just out of curiosity, why the private money to do that kind of deal rather than a conventional mortgage or portfolio loan?

 I haven't looked into a portfolio loan, but many of the properties would not qualify because of condition and or "extra unit/units" on the property that would effect the assessed value not saying that is the case if you know what I mean. 

I have used private money on many of my deals. It depends on what interest rate you're paying for the private money.  At 14% or more and paying points, the deals aren't as attractive, but at 10-12%, deals are still available. Prices, however, are increasing like crazy. Come April-May when four plexes will be over $200,000, not so much. I have clients buying every 2-4 unit property they can right now because values are steadily increasing. 

Dawn 

Go to Visio Lending & speak with Martha Baredda. She got me an 8.7% fixed rate with a foreclosure on my record. She also has a 4-5% rate for good credit & up to 30 yrs financing on rentals with payment, mortgage & insurance included in the payment

I am looking at a 15 unit complex in my area going for 340k. All units are 1bd except one which is a two bedroom. avg rent would be between 400-450/month per unit. I'm trying to get more information from the agent on some other info so I can do more number crunching but if it all looks good I would need hard money or alternate ways to get this. I don't have 68k to put down on this so i'd need help.

Ariel,

You other avenue is to syndicate the deal.  Find some private investors, but with such a small deal it may not be worth it since you have do get a SEC documents together, and that could cost you 10 to 15 K alone.  

See if you can do a partnership with someone.  

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