LandInvestors.com Forums **Ask A Question** Multi-family properties

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    Luke Smith
    Moderator
    Post count: 1318

    Recentaly went to a multifamily conference where I got motivated to persue mailing multifamily properties.

    I have been studying data. Watching the markets. See underutilized properties. Going to mail them cash offers.

    I’m targeting areas by APN sceam.
    Using a baseline price approach customized to the market in that APN area with kickers on each property, size, zoning, build age, SQ foot, rooms, baths, parking, etc

    Preato principle the high and low off.

    End up with units to buy and mail them cash offers.

    Do you think the price of multifamily properties in market will point to local rents or should I figure that out and come back to price?

    I’m thinking the rent yield approach makes more sense in Detroit and Chicago.

    Price of a unit makes more sense in the speculative arena on the west coast or other hot markets. What do you guys think?

Viewing 5 replies - 1 through 5 (of 5 total)
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  • Michael Aillon
    Participant
    Post count: 316
    Pro

    The price of a (decent) multi-family property is usually the cap rate which of course is based upon the NOI / Amount invested. So your NOI is based upon the total rents minus your expenses. Just stay above 5 units otherwise owners/realtors will value their property on comps versus performance.

    If you’ve been to a least 1 conference or read a book, I’m sure you already know the basics of determining value. I think the bigger question is how do you get motivated sellers to respond to your mail in a way that does not waste your time or there’s. So I think it comes down to the wording in the mailer. Do you price the mailer with something like “We will pay XX per unit” or do you use something like “We are looking for properties that perform at X cap rate”? I’ve spoken with a multi-family investor before and basically his favorite is “B class properties with pitched roofs, individual access, no common utilities, with a management problem that he can fix.”

    Be careful out there. Multi-family can really bite hard. It’s such a complete opposite of what we do. If you find one, you could spend an entire year(s) getting it going, adding value, and selling it again.

    Joe Schmitt
    Participant
    Post count: 131

    It depends on the sizes you’re looking at. If you’re looking at 2-4 units, the assessed value and/or property tax is probably a pretty decent determination of value. Rents vary from block to block, and the assessor probably has the property valuation relative to rent dialed in pretty well. If you can come in with an offer a bit below market value, that would help weed the motivated sellers out.

    joe@hyhproperties.com

    Kevin Farrell
    Moderator
    Post count: 1681
    ProAdvanced

    Luke – In 2016 I studied small apartments and that was going to be my path (before I found Land Academy). There is a lot more to pricing than looking up comps. I found Bigger Pockets to be a great resource for information. You should take into account deferred maintenance, current rents vs market rents for the area, etc. You should make all offers contingent on an inspection to include all units. The final price to be determined after inspection.

    Kevin Farrell - Moderator
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    Schedule a 30 minute call - https://calendly.com/kevin-629

    Kyle Bryant
    Participant
    Post count: 71

    Luke, I’ve dabbled in the multifamily game, and have considered mailing Multifamily properties in the future as well.

    Whether you price by unit, cap rate, or % of assessed value, you can get to a good number for sellers; it just depends on what kind of property you want to attract. Bottom line is that you will need to know what market rent is for certain classes of properties in certain neighborhoods in each market…if you want to be the one to take down and manage the asset.

    Another route you might consider is wholesaling apartment deals. I know several syndicators in the Houston area who pay handsome fees for folks who bring in good deals off the street. There’s a lot of money flowing around here, and deal-finders are regularly paid six figures per deal closed. Not a bad gig if you can send out quality mail.

    Frank Malvagna
    Participant
    Post count: 11
    Pro

    You can get great deals on multi-family properties. I have bought several, in my area of the Midwest, through direct mail but have never sent blind offers. They were always “We buy Houses” types of postcards. Some of the best deals I purchased were for less than half of what they were worth after repairs and management improvements. If I were looking to send blind offers to apartment owners now: I would look at everything mentioned above, (i.e noi, common cap rates for the area, rent rates, price per door etc). Figure the gross income by taking the average rent rates for the area multiplied by the number of units. Assume that expenses are going to be about 50% of the gross income. Factor in some sort of a repair amount for deferred maintenance. Then pick a percentage of that price that you would be happy with. Since joining LA, about a month ago, I have actually considered this, for my area, but my wife and I are looking to transition from MF into Land.

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