We believe the sweet spot for investing right now is the 3-15 unit building space. The only demand for these properties are, for the most part, local real estate investors. These properties are too time-consuming for the major national investment syndications and funds to acquire. The high net worth individual is typically not interested in the complexity of multi-unit buildings. Outside of a few house hackers out there, it also doesn’t work for people looking for a primary residence.
To get even more specific, we believe the REAL sweet spot is 5-15 unit buildings because these buildings get commercial appraisals. If you use the BRRRR method (buy, rehab, rent, refinance, repeat) of buying properties, the appraisal is key to returns, as it dictates how much money you can pull out of the property. We have found commercial appraisals often appraise higher for strong cash-flowing properties, especially once you have the property leased out.
What’s the cap rate for 5-15 units in BA? Is it much better than 1-4 units?
You’ll need to hire an onsite manager, maybe just choose a responsible tenant as the resident manager.
This plan may work better in weak markets where you can buy a high vacancy rate building and get it fully leased. BA buildings are mostly fully rented.
I talked to a commercial lender. Interest rate is at low 4s, down payment is 25% or 35%. As long as the rent covers the carrying cost, it’s not hard to get a commercial loan.
My biggest fear about commercial is liability and management. Onsite manager may become your employee, you may need to buy workers comp for the resident manager and maintenance worker. Better to do it as full time, it’ll take a lot of time
Loop net
I doubt there is much available. In South Lake Tahoe there are 3 duplexes on market… No multi family on market.
Shortage everywhere… I will put my 8plex on market in June… high demand short supply means high prices…