Multi family housing as an Investment.

[Jmo1969]

Anyone out there invest in multifamily units? I would love to ask you some questions about the positives and negatives of investing in multifamily properties.

 

[santoball7]

I have 8 units to date and am in the process of purchasing another 2 unit in a few months. What questions do u have?

 

[rayvt]

I would be more inclined to call this a business than an investment.

 

[Jmo1969]

Questions like what are some of the unexpected costs you can incur. Most of the multi family props in my area are quoted as a cost per
"Door" and 7 cap. Help me here.

 

[susswein]

I just posted my thoughts on multi-family property under the "rental property" thread. When I look at potential multi-family property I evaluate it based on "cash-on-cash" return, not cap rate. I consider cap rate to be a real red herring, since it's easier to manipulate. Be especially suspicious of "pro-forma" numbers, and always demand to see the last 2 years tax returns to confirm the income and expenses. Cost per door is also pretty useless unless you're looking at a perfect apples-to-apples comparison. For me, the biggest unexpected expense was turnover. Feel free to contact me directly with any other questions.

 

[nun]

I don't think my multi-family home is exactly what you're asking about, but it might give some perspective. I own a 2-family and live in the upstairs unit. This has the advantage of me always being "on site" and management expenses and worries are minimized. Turn over has never been an issue for me thanks to Craigslist and local college listing. I've seen capital appreciation, love the depreciation I claim on taxes and get $1200/month rent. Now that the mortgage is paid it nets me $1000/month after costs like insurance, maintenance and taxes are taken out. If I ever need a bit more income I could move downstairs and rent out the upper unit for $2000/month.

 

[LandlordInvestor]

The wife and I have several SFR - No multi-family experience. We have thought about it, but the problem is what about when I want to sell? I can only sell to other investors. I always think about a backup plan and my exit strategy for every property we buy. I just don't like the options with multifamily units as much as SFR.

Good luck. We are happy with the rental income and its certainly a major tool for our ER strategy.

 

[Ken11]

How can you assess this investment when we don't know whether or not tax deductions will survive this legislative session??

Ive been thinking about getting into Real estate as an alternative/to compliment my traditional investments. However, I cant ignore the above risk. Its a huge factor in establishing the value of such a move.

 

[Fishingmn]

You can assess the investment on a pre-tax basis. I just figure out what return I want to make without taking into account depreciation/taxes or appreciation. Since real estate is a longer term investment anyway it's hard to really know what the long-term tax impact will be.

I now have 7 rental properties with 2 more under contract. These should produce about 60% of my retirement needs and help protect me from inflation as rents go up when inflation is an issue (as do house prices). Biggest issue is that the low point in my local market was 12-24 months ago and it's getting harder to find good properties.