Just as investing in homes an investor should consider location, demographics and financing in making their decision.  Part of your due diligence is  solid inspection.  As important as inspections are in homes, they are even more important when purchasing a multifamily property. 

The fact is that multifamily properties for the most part are not as well taken care of as houses.  Here is a list of items to pay particular attention to.

The location. 

The location is important for different reasons then a house.  A multifamily building is more like a business and your analysis should take into account if this property will attract tenants.  What are the amenities, like shopping, schools and so on.  Communication is very important so make sure there is good access to freeways and public transportation.  Also pay attention to activity in the area, visit in the evening as see how it is.  Survey your competition.  How will your potential purchase compete against other apartments vying for the same tenant.

Acoustics and Noise. 

A common concern for tenants is noise in neighborhoods as well as from other tenants.  Be aware of the types of walls the flooring of the apartments.  You don’t want to be hassled by tenants who constantly complain about jumpy neighbors upstairs, or music next door.  If you plan on remodeling you can add acoustic dampening but factor that cost in. 

Leases. 

Study the leases carefully.  You don’t want to be stuck with a 4 year lease with no provisions for an increase.  Sometimes lease may be false, so the tenant may thing he/she is paying one rate while you were told another, most likely higher rate.  A good way to protect yourself is to insist on an estoppel agreement.  These are signed by the tenants and spell our any obligations to the owner, even promised obligations should be noted.

Plumbing. 

In many older units there are old galvanized pipes.  If these have not been causing problems  then they will.  Be careful as somethings copper pipes are seen on the outside but behind the walls they still may be galvanized.  Check to see if there are any invasive trees around the property or the neighbors.  Some of these trees take over water and sewer pipes.

Electrical. 

Older properties tend to have old wiring.  Some of the electrical boxes have been recalled as well but they are still on these properties.  Tenants these days have microwaves or electric water kettles which require a lot of power.  Some lines are not meant for these, and may be a hazard.

Exterior Appearance.

How do the buildings look on the outside?  Look at the details, will you need to paint or refinish the fascia? Are there cracks in the walls.  What about landscaping.  Some buildings have no landscaping and others have unkept or outdated landscaping which will scare away better prospects.

Parking. 

Seems like everyone has a car and often this causes parking problems if there is a lack of spaces for all tenants.  Be aware of how many spaces are available for each unit and if it is enough.

Interior appearance. 

A good indicator of bad, is sloppy work done by people who don’t know what they are doing; crooked grout lines, bad patching jobs will need to be fixed at some point. Prospective tenants do notice these things.

Mold. 

Though not as big a factor as in other parts of the country, we do have mold in Greater Phoenix and its more common in apartments where tenants don’t often tell landlords about leaky pipes under the sink or owners are simply not aware because they don’t inspect the property enough.  Look carefully where ever there is water for leaks, even a slow small drip  over time can be mold forming.

Security

Security is a big factor for tenants.  You don’t want to advertise that you provide a secure dwelling because it opens you up to responsibility, you do want to check the overall security of the property during your due diligence.

Laundry facilities.

Many properties have laundry facilities either in each unit or a shared laundry either owner owned or with leased equipment from a third party.  When purchasing a property make sure you know who owns what and if its a third party get a copy of the contract.  I have seen obnoxiously long 5-10 year lease with absolutely no out for the owner and little in therms of compensation.  These laundry facilities are more often for tenant convenience then profit but you want as much your cost to be covered as possible.

Roof.

Oh yeah the roof.  Be very wary of flat roofs.  On older properties these flat roofs are more like ponds holding tons of water after a rain, relying only on the sun to dry them off.  While there may not be any leaks, these roofs with water wear out quicker, shortening the life of a very expensive thing to repair.

These are just a few of the issues that need more attention but check everything and most of all, hire an inspector.  If you don’t buy a property because of an inspection you’ll think of the money you lost for the inspection but imagine if you didn’t do an inspection and purchase a property which drained your pocketbook and profit.  Its well worth the cost.

In a future article we will jump into the next part of your due diligence, namely the income and expenses and financing.

from: PMT

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South Arcadia has an area with a cluster of small multifamily buildings; triplexes, four-plexes and unique duplexes make up a large part of a neighborhood North of Indian School and East of 32nd St.

 
This is an ideal location for a multifamily investment with great access to several major freeways,  its right in the middle between downtown Phoenix and downtown Scottsdale.

The East side of Phoenix has rapidly developed and become more in demand.  Hip restaurants, shopping, clubs all make this part of Phoenix the place to be.  Much of the older home stock is being remodeled while others are torn down for new homes, condo developments or for upscale contemporary town-homes.

In this cluster of multifamily homes you can find a mix of duplexes, triplexes and 4-plexes.   Many are owner occupied.  In fact this would be one of the best places for savvy first time home buyers or for a vacation home.  

Unlike other parts of the city, most of these apartments are well taken care of, clean and very attractive.  Some are very good examples of mid century modern architecture.

Because these multifamily properties are in such a good location and most are in good shape, they commend a higher price then other parts of the valley.  That is the trade off in this case.  You give up some return but gain in vacancy stability and the possibility of appreciation or even an opportunity for re-positioning.

 
Some recent sales  include.

Duplex = all 2br/2ba $560,000
Duplex = 3br/2ba  2br/1ba  $380,000
Triplex = all 2br/1ba  $345,000
Fourplex = all 2br/1ba $450,000

Interested in investing in apartment buildings or even buying one to live in?  Take a look at these Phoenix apartments for sale.

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(Total Sales of Duplexes, Triplexes and Fourplexes)

While the fourplex sales were very low, total sales of residential multifamily properties held steady and within the recent trends which are down.  15 total sales is below the 24 last month.

Below is a list of all the properties that sold in June 2008.  Listed is the address, units in each property, list price (LP) and sales price (SP).

(Residential Multifamily Sales)

June 2008 Fourplex Resale Data for Greater Phoenix.

Phoenix Small Multifamily Properties For Sale.

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Fourplexes or 4plexes in Greater Phoenix come in a variety of styles, usually following the trends at the time they were built.  The oldest ones are found in Central Phoenix and Downtown Scottsdale. 

The property above is located in the Medlock Place Historic district neighborhood.  This is a row of several fourplexes in Central Phoenix.  These were built in the late 50′s.  You’ll find this type of architecture, a mix of low built ranch style buildings and buildings with moder elements quite often.  It really depends on the area whether they are attractive or not.  Just as with homes, well maintained properties look very good, despite being over 50 years old.  In fact centrally located older multifamily properties can have an advantage over new built properties because of an increasing popularity of historic and older but well maintained apartment properties in Phoenix.

The property below was built in the 50′s as well.  Its located along the Rose Lane corridor in North Central Phoenix where four units apartment buildings are mixed in with single family homes in a wonderful lush green mature neighborhood, desirable by both tenants and owner occupied residents. 

This is an example of a ranch home style Phoenix fourplex.  It’s actually 2 building under one roof with back yard for all units and a shared pool which has seems been made into a yard for the private use of one units.  The original landscaping was grass as is common in the area, but a recent trend toward conservation and the realization that desert landscaping is not only beautiful but also economical has convinced this owner along with several others along the street to change it to desert landscaping.  This is a bit off topic but the lush desert landscape has increased the appeal of the property to prospective tenants. 

The appeal of ranch style fourplex is that it looks more like a house then an apartment community.  Often each tenant has covered parking and a storage space.  While there are such building in original condition, many have since been in whole or in part re-modelled; you’ll often find the need to do some deferred maintenance on older buildings but the location and the style make them popular with tenants. 

Toward the 70′s the properties changes slightly,  becoming a bit more bland and unlike single family homes.  I don’t have any examples here.  The property below is built in the 1970′s and has many characteristics of that time; characteristics like simple design and a carry through of the low roof line from the decades past.

The next big boom time for fourplex construction in Greater Phoenix came in the mid 1980′s. These fourplexes are much different from those of the past.  By now construction was mostly framed with a stucco finish for both homes and fourplexes.  Since land had increased in prices it’s more common to find two story fourplexes in the late 70′s and 80′s onwards then it its in the 50′s and 60′s, but land cost was not the only reason for this.

The fourplex below, a 4plex in North Central Phoenix has many of the characteristics of the time.  You’ll find more 2br units and overall the side of apartments units had grown.  Many now feature 2 bathrooms or at lease 2 sinks in a bathroom.  There are walk in closets, sometimes, fireplaces. 

The newest fourplexes like the one below located in Fountain Hills, are larger, more townhouse like with tile roof and a stucco finish.  They are still basic but larger.  It’s not uncommon to find fourplexes built after 2000 with 3 bedrooms and 2 bathrooms.  Some, like the one below, have garages.  Of course, the price per unit for the new fourplexes is much higher then the older buildings but rents are not proportionally higher in most cases. 

Still, don’t discard the older properties.  These tend to be in some of the more desirable established neighborhoods like Central Phoenix, some of the Phoenix historic neighborhood, the rapidly developing Downtown Scottsdale or the Madison Schools area; each of these neighborhoods is very desirable by tenants and residents.  Many of the newer fourplexes built in the last few years are infill properties in areas that had cheap land for a reason; new buildings in a certain areas don’t equate to better investments.

This should give you a good overview of what fourplexes look like in Greater Phoenix.  Of course the diversity is greater then that presented here, but the styles don’t diverge very much from what you see here.

Call Artur Ciesielski, CCIM (Certified Commercial Investment Member) at 602.628.4349 if you would like to discuss investing in Greater Phoenix real estate income properties.

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From the  200 Active fourplexes in Phoenix, Scottsdale and Glendale there are 27 which are short sale or foreclosed; lender owned properties.  This is down about 20% from 2 months ago.  Many of those lender owned properties have been purchased by savvy investors. 

Fourplexes currently start at $99,000. Yes it’s a fix up but someone is going to make money on it.
Others are available for less then $200,000 while some really good fourplexes can be purchase for less then $300,000.

Purchasing a foreclosed fourplex is a little different and requires more cash and reserves because most often these properties are completely vacant, so an investor will not only have to prepare a neglected property but wait to fill the vacancies. Make sure you calculate that in before you buy.  None the less the prices are amazing and buying properties with that will cash flow is possible.

You can search for multifamily income properties here.  Select the advanced tab and select multifamily but its easier if you let us know and we can do a more thorough search for you.

Call Artur at 602-628-4349 or Joanna at 602-358-1392

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