Investing In Small Multifamily Cannot Be Done Well Long Distance Unless…

By sonoran • May 8th, 2009

If you’re thinking or buying a duplex, triplex or fourplex in Greater Phoenix and you are out of state and you want to manage it long distance: stop now and forget about it, because your chances of success are very low.

It’s different with a single family home, but even this you need someone to run your business if you are not here.

A single family home investment is a business but a multifamily is more so.  With multifamily you get a better cash flow but in return you do more management.  You cannot give up the management to lower cost.  This is like trying to let your retail store run itself.

Many of the small multifamily properties out there being sold as REOs are that way because out of state buyers came in to buy the property, milk it and then push it off to the next buyer.  That seems to be the modus operandi of many investors, even ones that are local.

That is why you rarely see prime small multifamily properties: they have been neglected with deferred maintenance and a build up of issues from bad management.

There is no reason for this sort of behavior:  there is a market for buyers who want well run premium properties and for tenants who will pay a premium to live in a well cared for small multifamily property.  Not everyone wants to live in a rat maze.

If I sound a bid irritate, I’m: I am disappointed.  These properties, the tenants and neighborhoods deserve better.  These can be very lucrative and good properties to own and you can have prime tenants in them that will care and respect your property and your business.

It’s not going to happen if you are not here to run it.  it’s not going to happen if you pick a management company for their low price.  If you are not willing to run the business then hire really good people who will put in the effort to manage your business for you and pay them well.

The effort that it takes to turn around a mismanaged multifamily property is extraordinary: extraordinary in money, time, aggravation, but in reward, as well, if done right.

I have seen so many properties out there over the years that just make me sick.  I like multifamily, especially small multifamily because it can be an amazing path of financial stability and possibly financial freedom especially in this once in a lifetime opportunity market as we have now to buy properties in very good locations.

Rarely does a property come on the market that is a ready to run business.  Some of the well run properties will not be sold while the bad stuff seems to float on the open market.  This time savvy investor can truly pick up properties, put some effort and money into them and do really well: I mean really well:  I’m talking about positive after all expenses cash flows of $1,000.00 on a fourplex for $120,000.

Comments(1) Investing in multifamily

Comments

By suzanne on June 6th, 2009 at 08:02

Dear Artur:

Eventually, within the next 5 years we will be investing in these types of property, most likely out of state (we live in CA)- ridiculous prices here, even for foreclosures. My family has owned apt buildings for years, I know the stress of tenants and management.

I appreciate your blog and your ideas. I am looking to buy and manage properties where I can easily drive or pickup a cheap flight to check on the property. You are correct, you need a good maintenance person and relations within the town to keep the properties up. Tenants deserve nice properties, Landlords deserve tenants that take care of the place and pay rent.

Thanks for the blog – love it.

 

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