Starting out real estate investing in Dallas
Dallas, TX · Member since 2015 · 2 posts · 1 vote
Hello my name is Soren and I currently live in Dallas, TX. Two partners and I are looking to make our first investment in a multifamily rental unit. We are all around 2 years out of college. I work in corporate finance, one works in construction management and the other in computer science.
I have a few questions for you guys
What sort of loan terms should we expect to be given?
What percentage of a down payment will a bank typically require?
Since we are working as partners is there any advantage to forming an LP or other business type to purchase a property?
We are in the very beginning phase of forming out business plan. What are some absolute things we should have on our list of things to do before we begin hunting for properties?
Thanks for all your help
Hey @Soren Thomsen,
If you and your partners are interested in a multi-family I would probably suggest starting with a 4-plex or less. They are easier, albiet hard, to find than a larger apartment complex in the area and will offer you a good introduction into property management before you bite off a big chunk.
Like Matthew mentioned you can also do conventional or FHA financing on these size units. If you or your partners have never owned a home before it may be a great place to start since you would only need to put 3.5% down. You would not be able to purchase the property in the name of an LLC though.
There is a real estate meet up in Plano I am hosting on April 20th at 12p at The Shops at Legacy. We had some great networking there last time and you can get some first hand accounts from people who are investing in the area. I will include the link below.
If you are interested in seeing what the loan situation would look like feel free to reach out to me.
Best of luck to you!
https://www.biggerpockets.com/forums/521/topics/286233-plano-shops-at-legacy-meetup?page=2#p1895162
@Soren Thomsen Congratulations on taking your first steps in real estate. What parts of the Dallas area are you looking to invest?
There are many answers to your questions, but they all depend on you and your partners situation's. You should take some time to search the BP site, read through the Ultimate bigginers guide, and if you want to do some creative deals the no/low money down book (I just finished it & it was great.
You said multifamily, but how many units/doors are you looking to start with? You can go conventional for 4 & under. You will have to go commercial or private money for anything over 4 units.
With banks you normally have to put down 20%-30%, but there are many other ways to do it. Commercial loans are normally maxed out at 20 years and a conventional loan maxed out at 30.
I wish you much luck in your journey,
Matthew
Hey @Soren Thomsen,
If you and your partners are interested in a multi-family I would probably suggest starting with a 4-plex or less. They are easier, albiet hard, to find than a larger apartment complex in the area and will offer you a good introduction into property management before you bite off a big chunk.
Like Matthew mentioned you can also do conventional or FHA financing on these size units. If you or your partners have never owned a home before it may be a great place to start since you would only need to put 3.5% down. You would not be able to purchase the property in the name of an LLC though.
There is a real estate meet up in Plano I am hosting on April 20th at 12p at The Shops at Legacy. We had some great networking there last time and you can get some first hand accounts from people who are investing in the area. I will include the link below.
If you are interested in seeing what the loan situation would look like feel free to reach out to me.
Best of luck to you!
https://www.biggerpockets.com/forums/521/topics/286233-plano-shops-at-legacy-meetup?page=2#p1895162
Welcome to BP and good luck on your journey!
If you and your partners are interested in the 5+ unit side of multifamily / apartment investing, I would highly recommend the following 4 books:
1) ABCs of Real Estate Investing by Ken McElroy
2) Wheelbarrow Profits by Jake Stenziano & Gino Barbaro
3) Multi-Family Millions by David Lindhal
4) The Complete Guide to Buying and Selling Apartment Buildings by Steve Berges
This will give you a "crash course" in apartment investing. You will find 90% of what you need to know to get started in these books.
THINK BIG...THINK BIGGER...THINK MASSIVELY!
@Hubert Washington Thanks a lot for the reading material. I will definitley check these out.
Hi Soren,
It depends on what you consider multi unit property, is it a fourplex that qualifies under single family financing or is it a 5+ unit apartment? Based on that you have two completely different approaches, if it is a former it really comes down simply to income you and your partners have and a 25% down payment (assuming you are not going to live there) for a conventional agency loan (FNMA/Freddie) and you will have to put it in your names as no mortgage banker will finance an LLC/LP (there are ways to get around it after you buy it in your name and transfer into an LLC without triggering a due on sale clause but that is a different conversation).
If you are talking about a multifamily loan, you can get a down payment for as low as 15% for certain product types (like FHA multifamily) but you would need a loan amount of about $2 million for most lenders. You would also be looking at about $50k in other costs like an environmental report, appraisal, property condition report, survey, title, your legal costs, etc. If that is a way to go for you the rate would be lower than the rate for a single family (up to 4 units) financing. Just to give you a ballpark idea, today you'd be looking at about 3.25% with 0.60% MIP, putting the combined rate at about 3.85% (although you'd be paying the MIP if you were to go with FHA for the owner occupant financing). If this is what you and your partner pursue, LLC would be a way to go (although you might want to hold off on that until you are ready to finance so that the lawyer you will hire to represent you included those costs in the legal costs associated with the loan, saving you some money in the process). If you decide to go the MF route, PM me and I will be happy to walk you through more details. Best of luck!