Finding The Small MFR Deals Around Phoenix

16 Replies

I am just starting to look for small MFRs on the west side of Phoenix (Glendale/Surprise/Peoria/etc). 

At this point, showing up to the game as late as I am, is my best bet to find another investor who is trying to offload and/or cold calling owners? 

The MLS hasn't been very promising so far nor Craigslist when it comes to cashflowing properties.

I would think most owners of MF are investors.  You can try to direct market to that population.  Without understanding what your requirements are, it's tough to point you in a direction.  If you are looking for stuff under 100K then you likely will find nothing.  

I'm shooting for between 100k-300k in a C+ (on anew A-E scale) or better neighborhood and in well kept condition. Basically turn key but with room to update or improve.

Just to elaborate, I'm not looking for true turnkey properties. I'm looking for MFRs that could pass a VA inspection. I think price wise I'm in a good range for the area. I'm just having trouble finding properties that cashflow period, much less well, on this side of the city.

Are you planning on living in the multiplex? I don't know how the VA loans work. We have mostly SFH, however I have been watching the MF units for awhile. I would say you could still get the 1% rule near sunnyslope and apache junction. On the MLS there is one in Tolleson for 93K that could rent for $500 a door, I don't know about the neighborhood but says currently rented for $530 a door.

Don't give up hope, there are still property that can make you money out there.

I do plan on living in it. As far as the 1% rule, I've been able to find those or at least felt confident enough that I could reasonably offer and meet the 1% rule. The issue I've been facing has been that deals that work out right off the bat tend to be in terrible locations. 

Now I haven't run the numbers on the Tolleson duplex as I'm trying to avoid 1/1 units only (I'd like to get small families so 2/1+), but I can tell you that next to it is an industrial lot that runs the length of the block and that it's within about 300ft of a train stop for medical waste. Add in that homes surrounding are stockpiling cars/debris and that parking for the property is on the lawn and that puts this property right in an E rating and off my potential list.

I'll, of course, keep looking. I just hope to see something that works that doesn't also make me recoil at the type of tenants it would likely draw. Time will tell. @Stone Jin , thanks for the input.

I believe for a VA loan you need to be under 4 units correct? Your best bet would be to build a mailing list using List Source or something similar. I'd then dig through the list looking for owners with multiple properties, owners who didn't put them in an LLC (non-corporate owned), Senior owners, as well as out of town owners.

Multiple Properties: They may be willing to cut their lowest performer giving you an opportunity for value-add. 

Non-Corporate: They weren't sophisticated enough to utilize a corporate veil. They may sell for less than the going cap rate.

Senior Owners: Folks wanting to retire/cashout.

Out of town: Someone sick of the MF turnover.

**Bonus** Owner Occupants: You may snag someone who is wanting to stop living in a MF.

If you're going to do direct mail I wouldn't use a mail house. I would do it in house. Your list is going to be small enough that you might as well personalize and do it on your own. 

If you're wanting to owner occupy you have an advantage over the investors that are likely mailing them. 

Template:

********************************************Template*********************************************

Dear Mr/Mrs Home Owner, 

I hope that you're having an awesome day. My name is Brian Volland. I'm looking to buy a small apartment building in the (whatever areas they're in) area. I would like to discuss buying (property address) from you. It matches what I'm looking for and I'm already pre-qualified for a VA loan.

Sincerely, 

Brian Volland (handwrite your name as well as phone #. Throw a handwritten date top right of the page as well) 

Ps: Call anytime. I look forward to hearing from you and I appreciate your time. 

*******************************************************************************************************

I would send this in a hand addressed envelope to anyone that you seriously want to meet with. If you have a S/O get them to help and it will go pretty quickly. I'd at the minimum use some pastel invitation style envelopes. Print the letter on just regular white paper. Most homeowners are sick of the "yellow letters". 

Ryan Dossey, Real Estate Agent in IN (#RB15001099)

So since you will be living in 1 of the units, are you looking for property that can cashflow with 1 of the 2 or 3 being utilized by you?  

@Ryan Dossey , thank you for the template and the advice. I'll look in to List Source and we'll see how that goes.

@Stone Jin , I am analyzing all the properties I find assuming rents don't change and ALL occupants, myself included, paying posted rent. So no freebies for me. If i see that rents can be increased based on surrounding properties, it's an incentive to pursue the property but not something to factor in to offer price since it's a hypothetical and not actual numbers.

@Brian Volland  

If you want to go that route let me know. ListSource gouges folks who don't do a hefty volume. I don't mind assisting if you need it. Using their interface correctly can be a bit of trial/error. 

Ryan Dossey, Real Estate Agent in IN (#RB15001099)

Hi - I have been looking into buying a duplex or triplex under 175K that cashflows but running into roadblocks when it comes to cashflow. Thanks for the Listsource tips - this is a marketing technique I have been wanting to try. 

@Sarah Kartsher If you keep a close eye on the MLS they pop up occasionally. It depends on how much cash flow you're looking for. I've also noticed a decent number of listings w/ upside potential that could make a property worth looking in to.

It seems like rehab to cash flow and off-market is the name of the game for now.

@Evan Bell , as I've become more and more connected with wholesalers, agents, and other owners we've seen more potentially good deals come across our desk. The MLS still provides some opportunities but they require more effort to ferret them out.

That being said, we've not yet made a purchase here but that is due to our established timeline, not a lack of potentially good starters.

@Evan Bell, I want to see listings for all multifamily properties between $140k and $400k in the greater Phoenix area as it aids my market research. But, to more pointedly answer your question, I will not be looking with the intent to purchase until June 2017.

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