All Forum Posts by: Derone Patterson

Once you have determined the type of property & neighborhood/location, tell your agent you need sales comps.  Any good agent should provide this to you.  This will give you a good idea as to what other properties are selling for, and consequently, whether the properties you are looking at are a good deal.  For myself, I will usually drive by the sales comps to get an idea what they look like & compare them to the ones I am looking at.  I hope that is helpful.

Hey @Derone Patterson

 How are you doing buddy? It's def ok to be nervous it's part of this game. As far as your agent goes, and I might be reading into this but see how much she knows about the res. multi family world. If you're new to investing and she's new to the mult-fam world then it might get difficult (might not)  :) As long as she's motivated you should be fine but you have to decide if that's right or not. Have a wonderful night.

To add to what Michael said, location is probably on of the biggest factors when looking at small multis.  Typically areas that have a higher concentration of small multis for sale are lower income, so I would highly suggest making a list of a few in your price range and driving the neighborhoods before making appointments with your realtor.  It will save you both a lot of time and it will help you learn the area better.

I would also go on Craigslist and look at how much rent other landlords in the town are charging and see what they units look like.  This will help you budget.  Then learn what all the associated costs of ownership will be and use that in your financial analysis.  Utilities, taxes, insurance, lawn care, repair, capex, management (always factor in ahead of time).  If you run the numbers for each potential property you will feel much more at ease.  It's natural to feel nervous!

Honestly consider getting an agent that is familiar with multi's. That would be my first advice.  With your opening statements you are hoping to supplement your agents lack of knowledge - which is fine if you have the experience to do this and you are only using your agent to write offers etc. 

As far as what to look for in your purchase -- location, age, sq footage, lot size, future city infrastructure development or redevelopment, potential rental rates (near hospital to rent to medical staff), are you looking for cash flow are you looking for appreciation....etc ... etc... 

There are a lot of things to consider.  Take your time - these are just my opinions.

I hope that helps.

I don't recommend waiting. Think about it, use the profit you make from the property and in 3-5 years you can get more properties.....no brainer! I'm actually in the process of doing the same thing. Good luck!!

If you buy the property under market value with a FHA loan you may be able to refinance into conventional sooner then your mortgage lender or bank have lead you to believe. Example you buy it at 85% of FMV (fair market value) lets say from a deal you acquired through a wholesaler for a fee equaling about 2% of the sales price so you're in the deal for 87% of loan to value (market value).

From this example you'd only need to pay the loan down to 75% LTV to qualify for a refinance with no MI (conventional financing).

Or you can go MCM conventional and still refinance with no monthly MI as well (cannot own any other property). "my community," fannie mae program.

The problem is most lenders are not creative enough to figure out how to structure a deal to yield the most effective ROI but there literally many more ways to structure the deal to achieve the most effective results.

@Derone Patterson

I'd opt for the FHA loan instead of waiting, IF the numbers make sense on what you're trying to buy. Are you "house hacking?" That is, are you planning to buy a 2-4 plex, live in one unit, and rent out the others? If so, that's a great plan. Just make sure that the numbers make sense, that you're not buying at the top of what you can afford or are using numbers that are too optimistic.

FHA is a great way to get started when you don't have 20%. In the five years that you'd have to wait for option 2, you would lose out on principal pay down for sure, rental income and possibly appreciation if your market appreciates.

Good luck!

I'm about to purchase my 3rd property and I'm doing an FHA loan for a multifamily property. You can only get up to a 4 unit property, which is what I'd really like to get. One recent change to the FHA loan is that you have to pay the PMI for the life of the loan. But if you can get 20% equity into it, then you can refi into a conventional loan and repeat the process! That's my strategy anyways.