How do I cut my teeth in mid-size Multi-Family investing?

Question

I started investing in single family homes in November of 2019 and have grown my portfolio to 19 doors. I own one duplex and I am looking at some quads and a 6-unit property. However, I am interested in learning the process of finding, evaluating, negotiating, financing, rehabbing, and operating a larger property (75 -150 units). I have heard of mentors and I believe that will be invaluable when I am ready to buy my first commercial property. However, before I do that, I was wondering if anyone has heard of a shadow program or internship where a seasoned veteran is willing to show you the steps they take as they go through a live deal. Or, if a live, real-time internship is not feasible or realistic, are there any videos that you would suggest that walk you through the process?

Evan Polaski · Answer

@Paul Charbonneau, generally speaking you will be hiring a management company anyways. Not just because there are a lot of moving parts that you cannot manage yourself, but also lenders will require experienced, professional management just to secure the loan.Sourcing: talk to brokers, owners, network, network. Evaluating: depends on business plan, but sounds like you are seeking value add. It is generally the same: understand in-place rents, market rents on current condition, and port renovation rents. Vacancy. Other revenue options: reserved parking, washer/dryer rents, etc, RUBS, etc. Understand inplace expenses and rely on PM input for a stabilized budget. Reassess your insurance and tax rates.Understand capex costs and get healthy budgets to handle rehabs and contingencies. Assess the supply and demand in the market/submarket. Income levels of tenants and market, housing prices, school districts and crime rates.Rehabbing: find a manager that handles construction too.Operating: you are now an asset manager. You are monitoring operations, and execution of business plan. You are solving problems: keeping renovation costs down without hurting rents, mapping out plans for underperforming units, weighing in with marketing ideas, and generally allocating capital accordingly.I don't know of any real shadow programs, but at a very high level, operating a larger property is no different than smaller ones. Have a plan to drive revenue, keep expenses controlled and stay focused. I hear fairly regularly that groups/people running bigger deals run into issues, because they seemingly lose focus on the operations. Asset management is different than property management. It is more proactive versus reactive, and I think there are some that make the transition that are waiting to react, and therefore assume that the manager is doing things correctly because they aren't calling. The asset manager needs to be proactive with the property manager, and make sure they are monitoring occupancy, leasing activity, construction progress, etc.

Arvin Poole · Answer

@Paul Charbonneau check out alvinhopejohnson.org. He has an apprenticeship program foe new commercial developers.

Paul Charbonneau · Answer

Thanks Miguel! I am consuming a couple podcasts each day and BP is my favorite. I just ordered The Multifamily Millionaire, Volume 1 and I am hoping to get a great deal of insight from that. I haven't done any meet ups, but that sounds like the next logical step. Thanks!

Andy Rousch · Answer

That's great that you are taking your mindset to the next level! Talk with property managers as well as they will sometimes have inside information if one of their clients are selling a building before it hits the market

Miguel Diaz · Answer

Hello @Paul Charbonneau, I am a newbie in REI but I have learned a lot from Podcasts, there are a lot of them out there and they help you a lot with people with experience and they usually give their contact information so you can reach them and ask them out, that is a good source as well!! There are a lot of meet ups here in BP that help you with the network and connect with more experienced people!! Have a great day!!

Paul Charbonneau · Answer

Thanks Evan! Yes, I will absolutely need a strong management company. The houses I currently own are out of state and I rely on my current management company heavily. You are correct, I will be seeking a value add property. I like your comment about being an asset manager - it is spot on. Thank you so much for the feedback!

Colby Fryar · Answer

@Paul Charbonneau there are a myriad of ways to do this. I think finding a good mentor or coach is an absolute game changer in this space. There are also a ton of free resources on web and social media as well as books that are helpful guides. You will need a team and the best way to start is through networking. DM me would love to share ideas.

Arvin Poole · Answer

Yes, is a dear friend of mine and loves helping others new to the commercial space. I am considering applying to his apprenticeship program as well. Just need to get my "house" in order for first with my first few properties.

Paul Charbonneau · Answer

Thank you Arvin, I am looking at his website now. Lot's of good information!

Paul Charbonneau · Answer

Thanks Andy, that is a good idea. I know a couple here in the area that I can use as a sounding board. I'm sure they can give me some things to consider as I look for my first commercial deal.