Wholesaling Multi-families
I am new to the real estate business, but have done quite a bit of homework, learning from courses by Ron LeGrand.
I didn't exactly know which forum to direct my post, but figured I would start here. Where I am located multi-families are a solid portion of the market and many for sale or vacant, which I have already done research on several of them.
My question is: Does wholesaling multi's fall along the same concept as dealing with single family houses. I assume the numbers dealing with repairs may become a bit larger, which means I have to adjust what I have learned. Also, are investors looking to get involved with multi's for the passive income with little repair needs, or are they willing to put money into the house as long as there is positive cash flow at the end?
Thanks in advance for any advise. After looking at all the forums and comments on this web page I am glad to have signed up.
If everything pencils, sure investors would be happy to purchase multi-family units from
you. Do a test market and place an ad in your local newspaper:
Apartment house for sale, needs work,
must sell.
Your phone will ring off the hook. Pre-screen the phone calls, build your buyers
list. Find out who the real players are and what they are looking for. You have just built your buyers list!
Best Riches,
Jeffrey Adam
[addsig]
I have learned about estimating repairs for single family houses, but not multis.
Know that a lot more can go wrong with a 2-3 story house than a simpler one floor ranch.
Also, would it be good to put an ad in the paper to begin building a buyers list first just to get a feel for what investors are looking for and what prices I should be focusing on. Is it reasonable to say I should learn my "out" before I get in.
You should definitely place an ad and do a test market. Pre-screen some investors over the phone, find out who the players are. Take them to lunch. Build a relationship with them.
In terms of rehabbing multi-unit. That is a hard one. I would have to see them. I would use a rule of thumb of 5k for each unit on the inside if everything is there.
If you have to put in a new kitchen then that is a different story.
Best Riches,
Jeffrey Adam
[addsig]
Jeffrey
Thank you for the advise. Will just have to get some networking going at this point and get a feel for what investors want.
Mike
From what you have described it seems to me that there may be some negative influence affecting the area. Why so many vacancies and why the board ups? Is something occuring?
Nearby military or government function that just terminated? Some nearby development quicker and slicker and cheaper? Check with great care.
Now do not give up. Sometimes the negative aspects can be utilized for profit. They are not always bad. But you must know what is going on and then on your chessboard of investments correct and compensate for your opening move.
Sometime a quick Castle leading to a rearrangement of the back line can lead to Checkmate
Avec care Lucius
Actually, there are negatives that I need to watch for. There hasn't been much of an economy change, it's just the area is old. Some areas are simply "war zones." However, I am staying away from that right now as I have a hard time finding an investor who would want to put money into a house that is surrounded in a "war zone" right now.
The thing with the vacant houses though is that many of the multis are in the order of 50-100 yrs old or older. Many are older generation people who owned these houses are no longer around and houses are owned by inheritance. Others are boarded up for various other reasons. I am looking into several right now.
The reason why I am looking into them is that there appears, most recently, to be a movement for these multis to be rehabbed and then sold to someone else to generate passive income, or held as rental property. I've noticed it spreading slowly in my area from street to street in various neighborhoods.
For now, as long as I seek out areas that I am seeing even a slight improvement on, then perhaps an investor would be more prone to work in there. But you are right as there can be quite a few negatives if one does not do the proper research and understand the area they are working in.
Time to buy a particular kind of RE is when its market is soft...then, as & when (not if-never if !) market does tighten up, those savvy lowball buyers make out well.
But in Peoples' Republic of MA, I'd sure recommend you check L/T laws to make sure what a landlord is getting into there.
I recall several years ago when somebody tried to get into Manhattan market & evict a bunch of tenants in order to convert to condos, or something similar, Ed Koch and buddies totally stopped him in his tracks with his & his cronies' political influence.
I'd suppose Boston area would be much the same and the little guy would get squashed by the biggies & their weight.
I will have to keep that in mind. I was figuring the way to be the best at this is to pretty much place myself in the shoes of an investor and look at everything at that aspect. Finding houses is one thing, but in order to build my reputation I feel as though I should be looking a prospective house with more than just wholesaling in mind, even though that is how I am going to participate.
One other note, I am not from the Boston area, rather from the western side of the state where real estate in general is considerably different in price from the Boston area.
Wxman,
Like Jeff sugested, you should run the add and meet with potential investors. Run your idea by them and see if they would play the ball. If afirmative, instead of buying and rehabing yourself, you might go for a flip that will make you some cash money to try your luck and rehab one down the line when the niche is established buy your investor buyer/s.
And a few words in regards to NeY York type of dealing...
New York has always been the special city. Edward Irving Koch was a 105 mayor of New York. He served his third term until 1989 and is is currently a partner in the law firm of Robinson Silverman Pearce Aronsohn & Berman LLP. He was defeated by David Dinkins in the Democratic primary. Then came Mobed -Up Giuliani who use to create $350 mill in illegal revenue for New York City by towing diplomatic immunity protected cars.
To support further what JohnMerchant sad above, I would like to present you with an interested quote:
"A son of the mayor's uncle and a guest at Giuliani's first wedding in 1968, was a "ruthless and widely feared mob associate" who headed a massive stolen car ring, according to FBI documents. Along with cracking heads, it says the mayor's father served time in state prison for a stickup, rarely held an on-the-books job and once was a gunman in a mob shootout in Brighton Beach, Brooklyn."
--MICHAEL R. BLOOD, New York Daily News, "Rudy's Kin Tied to Mob", July 06, 2000
I Love NY!
Just wanted to send a quick note of appreciation and thanks for the replies. From what all of you said it sounds like I should go for placing the ad to test my market. Keep thinking of all the little things that come with doing this, such as getting the contracts I have looked at by lawyers and such, but if I don't try I guess I will never know...
There is one concern that I have...
New paint, carpet, cabinets, and doors may cost $10K on a home, but influence the appraiser to the tune of $60K
Multi's (5+ units) are valued based on income. When it comes time to sell a multi, the lender will look at the income that it's generated. If everyone knows that it should produce a net income of $100,000 but it's only produced a net of $50K for the last few years it will only appraise for $500K rather than $1M.
If you have a buyer lined up that either has cash, has private money, or has flexible lenders, they may be able to see the true "value" of the property.
You may have to buy it, hold it for a year, raise the income, and then sell it for the new "value."
Value...such a strange thing.