Why is it so hard to find a multi family property?

Question

Seriously. I have been looking for the past few months to find a multi family that has good numbers, and I haven't come across anything. Is the Norfolk market currently that saturated or am I doing something wrong?

Cody Barrett · Answer

I'm not in your area but maybe trying off market deals will show better results. Contact agents that work with investors. Drive neighborhoods and look for the diamond in the rough and do some cold calls. The market is doing well and sellers are able to be more aggressive. My city is one of the cheapest places to buy real estate but it's incredibly easy to buy wrong where I live. Every submarket is unique so get creative and talk to everyone in your area about real estate. Tell them what you're looking for and maybe you'll get a lead. Good luck

Nate McGee · Answer

It's not just you Eric M.. I looked around for over a year to find a multi that had good numbers and I finally have one under contract and we are set to close on the 15th of this month. That being said, I did put offers on 11 multi's over the last year. These multi's had good numbers that I could work with, the market is just very competitive. I "lost" 3 properties by a margin of an hour.

I'm also house hacking with an FHA. I thought that over the last year I should really consider changing my investment criteria because it seemed my numbers could never be achieved. As I was speaking to my mentor, he actually commended me for sticking to me criteria and not changing due to not finding a property in a "reasonable" time. I have to agree with him, despite how depressing it was at times. Don't get me wrong, I could've bought many multi's over the last year; however, those purchases would've been an emotional decision, not an investing decision.

My advice would be that if you are going to buy a duplex, be more "understanding" with your numbers, especially if you are going to be living in 1 unit. You may not be able to rent the other unit at a good enough rate to cover your mortgage entirely. If you have a $800/mo mortgage but can only rent the unit at $600, you are still short the $200. If your current rent at the apartment is $1,250 a month but this multi purchase will cost you $200 a month (not included other expenses obviously), you are still making out because you are reducing your housing expenses by $1,050. It may not be ideal but it's not to bad, right?

So I would say run your numbers 2 ways; run them with you living in one unit, then run them with you not living in a unit. Naturally, the numbers start to look better when you aren't living in one side. With 3-4 units, it's a little easier to cover your mortgage and operating expenses than it is with a duplex. I'm sure you already know these things, but I figured I would at least offer the friendly reminder to keep you motivated and to continue moving forward. Best of luck to you!

PS. Oceanview could be another area to look in. Just be aware of possible flood insurance for some areas.

Account Closed · Answer

Eric M. Being the number of MF units in an area is relatively small, your local MF brokers will generally know who all the sellers are and when those deals do pop up, they're sold before they ever see the market.

Kevin Phu · Answer

What kind of areas in Norfolk or the surrounding areas are good areas to search for MFRs? I live in California but am planning on investing in RE in this neck of the woods. I am actually in Norfolk right now for work and I will be here until Oct 20th.

@Armando Melchor @Johnny Quilenderino @Nate McGee @Patti Robertson @Ryan Boyce

Armando Melchor · Answer

@Eric M. @Ryan Boyce @Nate McGee Great question and great advice on here. If you can access the funds, the 203k loan is great for this. I have my eye on a few properties right now that will allow for a fantastic purchase price, great ARV, and great cashflow. I should submit my offer in the next few days. The key is in the renovations and ARV. By getting a house that needs work I've found you can stay a lost closer to that golden 2% cash flow. Due to being in a semi-save-mode I am going to house-hack and roll renovation costs into my loan giving me the favorable cashflow without putting the reno money upfront. If I was using a different loan I would need to front the reno costs or deal with the overpriced MFs you have all seen in our area. Best of luck to everyone, I look forward to more interactions and potentially working with you guy's in the future.

David Moore · Answer

Eric M.

I would advise you that if you cannot find a 2-4 unit property with good numbers, start looking at other types of properties.  You talk about house hacking.  What is bad about the idea of acquiring a 4 bedroom, 2 bath house, and you then rent out the rooms to other renters?  There are many ways to go about this...don't lock your sights on just one type of property.  I own 4 SFR, one four plex, and pursuing an 8 unit acquisition right now.  I started with the houses.

Patti Robertson · Answer

Eric M.  Those numbers are totally achievable.  Call me next week. My contact info is on my profile.

Patti Robertson · Answer

Eric M. - How many units are you looking for and what formula are you trying to achieve.  You are correct that multi unit prices in our market have significantly increased compared to a few years ago.  We have been flooded with competition, not only from our own market but also from other states that have buy numbers even higher than ours.

Thomas Fortune · Answer

Eric M. - what size property, and what kind of numbers would make a good deal for you?

Johnny Quilenderino · Answer

I am buying MFRs but not in Norfolk. Currently the market is not saturated but "great" deals are "off the market" before they are even posted or they are asking for an unreasonable price because of the rental market in Norfolk is good, not great, but it is good enough for people to have high expectations on their possible sell. I am a buy and hold person. I might move into the Norfolk market via a 1031 exchange later in the year or I will stick to where I am buying now, just depends on what is still available. Good luck! Let us know what you get. I am interested to know what you fix up. I am coming back to the area in a couple years to retire.

Why is it so hard to find a multi family property?

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