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Author Topic: Multifamily or Single family for beginners?  (Read 449 times)

Offline Pitthomebuyer

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Multifamily or Single family for beginners?
« on: August 19, 2020, 12:26:27 pm »
Hello all,
 I've been wholesaling and learning about acquiring rental property (own 1 property so far) for about a year and a half now, but is it really the best and highest use of my time?
I've played monopoly and really get the 4 houses for 1 hotel, but I also know people looking to buy into apartment buildings in my area.
Would it behoove me to spend my time building deals on apartment complexes or should I stick to finding single family deals until I can trade them in to get into a larger deal?



Offline javipa

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Re: Multifamily or Single family for beginners?
« Reply #1 on: August 19, 2020, 02:47:13 pm »
Hello all,
 I've been wholesaling and learning about acquiring rental property (own 1 property so far) for about a year and a half now, but is it really the best and highest use of my time?
I've played monopoly and really get the 4 houses for 1 hotel, but I also know people looking to buy into apartment buildings in my area.
Would it behoove me to spend my time building deals on apartment complexes or should I stick to finding single family deals until I can trade them in to get into a larger deal?


You can accomplish anything you can muster faith to believe can happen.  That is NOT an empty cliché.

I started out buying junker houses in S. Kansas City, MO. for cash flow.  I decided that this wasn't gonna get me to my goals anytime soon, but without giving up on my goals, I changed my strategy to buying apartments.

That was after my uncle challenged me to invest in apartments instead.

After a year-and-a-half screwing around, I finally got serious and found 30 non-performing units near The Paseo and I-70 that were unbelievably cheap.  The seller had foreclosed on the previous owner, but because the property wasn't performing, I negotiated seller financing. 

Once I owned the building, I found two partners willing to put up the money to upgrade and allow me to fill the building, and split the profits with me.

After two years, the building pushed off thousands of dollars a month in net cash flow.

The key here was to find a non-performing property.  Everything stemmed from that. 
You can negotiate a better price, better terms, better ultimate cash-flow, and more financial breathing room on properties that have severe problems.  You make money solving problems.

As important, is bypassing conventional lenders if at all possible.  That is, get the seller to finance you.  Remember 'Everything is Negotiable.'  I mean everything.  Price, terms, down payments, personal property, and possession.

I found that I always need a reason for asking for what I want.  It doesn't even have to be a logical reason, but I always offer a reason anyway.  Just having a reason is enough to justify what you want.

Another key is always caring least.  He who cares least wins.

Another key is having the time available to manage/babysit the property until it's fully performing (1-2 years?).

Another key is willingness to learn how to manage people.  I hired a freshly-released convict to manage my first apartment complex, because I was dealing with a boatload of freeloading drug dealers and I sensed that he knew how to deal with them profitably (for me).  I was right.  He also had a lot to prove, and he was a hard worker (with two kids and a wife to feed). 

There's so much more to say here, but the best advice I can give is simply to start heading to where you want to go, and be open to opportunities.  Keep your eye on the prize ...especially when/if the prize is starting not to look worth the effort. 

My prize was cash flow, and after I discovered a faster easier way to get cash flow, I changed course, without abandoning the goal.

Meantime, as you're willing to move forward, the solutions/answers to all your challenges will become apparent.  It's called 'walking by/in faith.'

Finally, it's important to develop a credential book. 

This is a book that shows off your experience, testimonials about your character, the deal(s) you done, your stable involvement/association with school programs/church/community etc. 

This book is particularly helpful, if not critical in generating credibility and trust with a seller that you want to finance you.

I show my credential book to anyone I do business with, regardless if I'm paying cash, or asking for seller financing.  It lets the other party know they're not dealing with a wannabee.

That said, even if you don't have two nickels to rub together; your credit looks like a relief map of the Rocky Mountains; and you're still wearing pink prison underpants, it's ALL the more important that you can present yourself as a credible, honest, sincere operator. 

And that's where that credential book makes all the difference.  If presented correctly, few sellers will even think to ask about your credit, and will agree to finance your butt with little or no down.

I can't cover all the other juicy tidbits here, but this'll get your mind turning.

« Last Edit: August 20, 2020, 04:04:30 pm by javipa »
"149 Ways (Plus One) To Find Motivated Sellers..!"  -Free Report-
>>> Click: http://sub2marketdomination.com/how-to-find-motivated-sellers-2/

Offline heartlandbuyshouses

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Re: Multifamily or Single family for beginners?
« Reply #2 on: August 19, 2020, 09:37:25 pm »
Single-family homes are cheap compared to multifamily housing. They’re easier to finance (between 10% to 20% downpayment), carry lower interest rates, and the cash reserve needed is usually up to six months. It’s easier to get approved for a loan and you’ll also pay less in maintenance and insurance costs.

but

The inability to scale like you can with multifamily housing makes your monthly income less. It takes longer to build a portfolio of single-family homes than it does with one multifamily property.

Don Wede
Heartland Funding Inc.
www.heartlandbuyshouses.com

Offline javipa

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Re: Multifamily or Single family for beginners?
« Reply #3 on: August 20, 2020, 01:27:26 am »
Single-family homes are cheap compared to multifamily housing. They’re easier to finance (between 10% to 20% down payment), carry lower interest rates, and the cash reserve needed is usually up to six months. It’s easier to get approved for a loan and you’ll also pay less in maintenance and insurance costs.

but

The inability to scale like you can with multifamily housing makes your monthly income less. It takes longer to build a portfolio of single-family homes than it does with one multifamily property.


I agree with several things you say, but let me challenge you on a couple other things, based on my experience.

* Single-family is much more expensive on a per-unit basis than an apartment building.  Units can be bought for about half the price of a comparable single-family unit.  That savings is one thing that makes apartment investing more attractive. 

Yes, you are buying several units at a time, and the overall price is higher, but all things being equal, door prices are cheaper on apartments.

* Multi-family (5 units or more) is easier to get financing on than single-family.  On houses, banks look first at the buyer's credit/income.  On apartments, banks look first at the project's income/expenses, and if they aren't good, 'then' they look at the buyer.   And if they're having to look at the buyer, the financing is likely gonna be more expensive.

* Single-family units rarely cash-flow the first five years (or more), and the owner can expect to donate time and money to the cause, until the rents cover the maintenance and management.  That's one reason why single-family units require so much more cash down to break even, than multifamily units require.

* Expenses, expressed as a percentage of the Gross Scheduled Income (GSI), run about 50% of market rent.  That percentage can be higher if the rents are below market. 

Owners will donate time and money to projects that are smaller than 30 units.  30-unit projects and larger can begin paying for full-time maintenance and management help without donating to the cause, and/or putting up larger down payments, etc. 

* Cash-flow increases are much faster with multifamily than single family.  If you raise the rent by $50/mo on a house, this translates to a $600/yr increase in annual cash-flow. 

However, if you raise the rents $50/mo per unit on a 30-unit building, that translates into a $18,000 increase in annual cash-flow.

============
Apartment sellers are much more pragmatic negotiators and understand the value of seller financing.  It's not unusual for sellers carry all, or part, of the down payment in return for a better price ...or just a sale at all.  Some sellers will finance 100% if they're not forced to wait too long for their money, and you seem like a good risk. 

One supreme financing strategy I recommend and have used, is to take over the seller's existing financing on an under-performing property, and then do what's necessary to raise the rents; develop a stronger performance history; refinance the project based on the new numbers; and cash out the seller. 

If you bought right, the refinance will leave you with a LOT of equity that you created by improving the performance of the property.  This is called 'forced appreciation.'  They key is not paying for what you're not getting up front.  You're not interested in working like a dog, and giving the seller all your hard-earned equity profits.

FWIW


 

       
« Last Edit: August 22, 2020, 01:25:16 am by javipa »
"149 Ways (Plus One) To Find Motivated Sellers..!"  -Free Report-
>>> Click: http://sub2marketdomination.com/how-to-find-motivated-sellers-2/

Offline Gifted Invictus LLC

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Re: Multifamily or Single family for beginners?
« Reply #4 on: August 21, 2020, 02:59:16 pm »
This thread has so many golden nuggets, I would also look into recession resistant investments such as mobile home parks and storage units.
We Buy Houses in Houston
www.giftedhomebuyers.com

Offline SteveKay

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Re: Multifamily or Single family for beginners?
« Reply #5 on: August 23, 2020, 09:16:30 pm »
There is no right or wrong answer here. You build significant wealth either way, I think it comes down to what fits with you vision. Whatever you pick if you preserve and keep  growing you will find succes.
New Orleans Investor
https://homebuyerlouisiana.com

Offline ShaunMartin

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Re: Multifamily or Single family for beginners?
« Reply #6 on: August 25, 2020, 04:08:01 pm »
pick one and learn everything you can and go with that. I 100% believe they are no easier or harder than the other. I personally stick to SFH for the exit at the other end but after 14 years buying and selling now I believe you can manage both just as easily. Are we talking managing? or learning or what? Either way if you are a beginner choose one and focus 100% of your efforts on that.
Always looking to meet other great people in the real estate industry.
SM
https://www.watsonbuys.com

 




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