Small multi families current rent below market

[Kyle Peters]

Hello everyone! 

My wife are starting our real estate investing journey and we would like to scale up with multifamilies. When searching for properties I’ve come across a lot that current rents are below market rent. What are everyone’s thoughts on purchasing properties with tenants in place currently paying below market rents?

Thanks!

[Nathan Gesner]

Quote from @Kyle Peters:

One of the ways to make money in real estate is to buy an asset that has been neglected and then turn it around. Every rental I own was renting for below-market, had deferred maintenance, and other issues. I got a good deal on them because the landlord was tired and ready to be done with them. I fixed them up, raised the rent to market, and placed a higher-quality renter. That increases my monthly cash flow and it boosts the value of the property to increase my equity.

The downside is that it can take a lot of work, time, money, and patience.