It seems like it would be harder to find a deal on a multi family property. Is this so? There are many for sale in my area and my stratagy will be just lowball on 30 or so and someone will take. They thing is I look on hud sites, and reo sites and never find a multi family there.
Question #2, Is it safe to assume that since in my area there are over 50 multi families listed that some of those are landlords who are really trying to get that house off of their hands?
I feel like something is missing. The concept of seems to easy. “Just go out and make low offers until someone bites”
Fifty properties seems like alot unless you are looking at a pretty big metro area. Probably a lot of duplexes or if you are in an older city, big houses that have been broken up into units.
There might be a few things worth considering. The first cut is prices vs. gross rent. If it ain’t close to 100:1 then forget it.
Next if you find a few intersting ones, then get some actual rent number and I always like to know how long people have owned the property and how much they paid. This is public record and depdning on the locality, I either get it myself (on-line) or I have my agent go to the courthouse for me or just ask the Seller. This information can give you some idea of what you are up against. I have gotten the best deals from older Sellers who have owned properties for a long time. People says you can lso get good deals from recent buyers who found out they hating being a landlord. I have not found this to be the case. (Maybe someone else can chime in with some real experience) These “motivated” sellers usually seem to be want their cake and eat it too in that they want to cash out and get a big profit due to recent appreciation of RE in most areas, but still want out. I suppose if you find someone in enough pain, then maybe that is not the case. Also, newbie LLs in many cases overpaid so that impact the price they are trying to get. I have seen this on numerous occasions. In a couple of cases, I would not even paid what they had paid several years before despite figuring the appreciate they shoudl have gotten. That a sad situation as those people are screwed (and usually upside down)
That’s some rambling thoughts on a Wed am.
Work the numbers, know you market and keep looking. Its a funnel process and 95+% of what you look at are dog deals, but that is NOT wasted time as it help you to gain further insight into the market, what works and what does not.
Fifty properties seems like alot unless you are looking at a pretty big metro area. Probably a lot of duplexes or if you are in an older city, big houses that have been broken up into units.
It is an old area that just has many duplexes.
There might be a few things worth considering. The first cut is prices vs. gross rent. If it ain’t close to 100:1 then forget it.
So it clears that filter, now you can get down to business and really analyze the deal to see if its a winner. Don’t forget, that 100:1 rule is just a filter to cut out obvious bad deals and doesn’t mean this particular building is a definite cash cow.
I have not seen a single deal that will cash flow with real world expenses when only getting monthly gross rents of 1% of the investment. In fact, most multi-family properties will barely have adequate cash flows at 2%.
If you question that, post some real numbers and we’ll take a look.
Finding a multi-family deal is no different that finding any other deal. The vast majority of multis for sale are being offered at retail. You need to find that one or two percent of properties that are a real deal.
2 units houses list for 100-140k here. The 100-110k properties gross $1500-$1800. The $140k ± are properties usually are bigger and section 8 for around $2200.
There are also 3 unit buildings that gross from 2300-2600. There are listed for 160-180k.
I would offer 70% of the ARV which is where I get the 70k from. These properties sit for a long time and I am willing to bet I can get a deal on a few.
Why? if they are good shape, these properties work pretty nicely (in my playbook). Is it a weak rental market??? Vacancy will kill you despite excellent gross (pro forma) numbers.
I don’t know why they are sitting. Most of the houses, not matter what type, have been sitting on the market for a while now. The number of properties on the MLS has doubled over the last year. In my opinion the properties are sitting because they are in relatively bad neighborhoods, but nothing worse than I grew up in. Infact I grew up in one of the areas I am talking about. Most “investors” that I have talked to around here stay away from section 8 because of the sterotypical section 8 tenant. Many of these properties are section 8 currently. I also believe the the sellers are asking more than buyers are willing to pay and either noone is lowballing the sellers of the sellers have not yet realised that the market has changed here and they are not going to get what they want for the property. I saw a triplex with a gross off $2200 list for 169k then they dropped the price to 150k after it sat for 6 months.
I am in South Jersey. You won’t find these prices north of my area. I work 50 miles from my house and the proce difference on property is huge. I am in a good area. It is 20 miles from Camden, 30 minutes from philadelphia, and 6 miles from an industrial park withthousands of jobs.
Those sounds like very good deals compared to prices around here. What’s the situation with those other items like annual property taxes, insurance, water/utility bills etc? Get a number for those and figure out where you are per month. Give yourself a 90% occupancy rate. Hopefully you can make a few hundred per month and then recoup things on the depreciation and tax savings at tax time.
Typically it’s the 3 families that will make you money, usually the per unit cost of two families are higher than three families although 3 families are a little harder to finance than a two family, but not a big problem.
But in the listing comments:
This 2 unit needs some work, but would make a solid investment. Subject to a short sale. Appraisal has been done, price reflects repairs needed. Lower unit has newer furnace, some newer windows, large back yard.
What exactly is meant by subject to a short sale? And how would people suggest proceeding?
A short sale is when the bank allows the property to be sold for less than the amount owed to the bank. This doesn’t always work because the bank needs to be talked into it. I made a full price offer on a property that was subject to the short sale and it didn’t go. Someone else offered a little bit above asking and it still didn’t go through. Went to auction instead.
If you wanted to proceed, go look at the property and talk to the listing agent and get more info on things such as how much it would cost to repair everything. Then make an offer and see what happens.
what this really means is “I (the Seller) am underwater on this property” and the bank will have to approve the sale. Thus, their list price really means nothing. Its a suggestion upon which the bank may or may not approve and offer.
We have the highest property tax in the nation. Rentee pays all utilities except sewer and sometimes water. There are way better places to make money in REI than here but this is still a good place when it comes to rentals.
