How and Were to start Multi-Family investing for cashflow?

Question

Hi everyone! I am Jordi. A new real estate investor getting into the game from NJ. I’d love to get some advice from this great community. I am looking to build wealth and would like to start with multi family investing. The only issue is How? And Where? The two biggest questions every newbie has! I know that I would like to start somewhere in the Midwest as most markets meet the 1% rule, prices/ taxes are low, and rents are average/rising. What is everyone’s recommended market and why? Additionally, how would I get started? I do not have the capital to get started myself. I have thought about connecting with a PM lender or HM lender but due to my lack of experience I’m afraid the PML might not lend to me and HML will jack up their rates. Is getting a PM for the down payment on a conventional loan an option? How does everyone go about funding their projects? I look forward to hearing everyone’s thoughts.

Lee Ripma · Answer

@Jordi ValadoWhat you are really after is a growing affordable market. Avoid affordable markets that are not growing. You actually don't have as many choices as you might think. Go down this list of 38 markets. Figure out what you asset class will be, which of these markets has a lot of your target asset? Narrow down from there. Texas is brutal on property taxes but also has a lot of growth. I personally invest in LA and Kansas City. You can find the right submarket within any of these markets that will meet your needs and you'll be able to build a team there. Phoenix, AZTuscan, AZSan Antonio, TX Austin, TXHuston, TXDallas/Ft. Worth, TXOklahoma City, OKTulsa, OK Kansas City, MO-KSSt. Louis, MOIndianapolis, INMilwaukee, WIChicago, IL, WI, and INGrand Rapids, MIDetroit, MIMinneapolis, MNCleveland, OHColumbus, OHCincinnati, OHLouisville, KYNashville, TNMemphis, TNBirmingham, AL Atlanta, GACharlotte, SCRaleigh-Durham, NCVirginia Beach, VARichmond, VABaltimore, MAWilmington, NCPittsburgh, PAPhiladelphia, PA Hartford, CT Providence, RI Good luck and go get after it!

Wale Lawal · Answer

@Jordi ValadoHaving a successful multifamily real estate investment often requires a lot of effort, time, experience and knowledge. These tips will help you get off to the right start in the competitive multifamily rental market.1. Choose Your Location CarefullyInvesting in multifamily real estate is all about location. It is the real estate mantra. Tenants typically prefer to rent in areas that have easy accessibility to schools and hospitals. Moreover, they prefer areas that are safe and secure with easy commutes.When investing in multifamily real estate, you should pay close attention to high-yield and high-growth areas where properties are usually in high demand.Also, keep in mind that the location is more than merely local amenities, because the overall crime rates in the neighborhood, condition of surrounding properties and an appropriate mix of properties is important as well. It is vital to remember the location of your prospective property will usually dictate the types of tenants who will be attracted to your property, the rental rates and the value of the property.2. Set A BudgetIf you’re thinking of purchasing a multifamily property for investment purposes, you have to fully know and consider your budget. An operating budget for your multifamily investment can help you in tracking performance and profits. It will also show you where you can cut costs, identify any potential problem areas, help you plan for specific capital improvements and offer you a good reference point for any future reviews.Keep in mind that multifamily properties are usually more expensive than smaller units, and most require improvement and renovation before they can be rented out and generate profit. There can also be unexpected expenses, such as a leaky roof or burst water main. You should always account for these things when you are preparing your budget.3. Start SmallWhen most people think of multifamily investors, they often imagine a person with a huge real estate investment portfolio packed with 70-unit buildings. However, you should consider small residential properties, as they are often overlooked in the multifamily rental market. The best advice I have for investors, especially those who are just starting, is to start with a small multifamily unit, such as a duplex or quadruplex. By starting with a small multifamily property, you can make things much easier for yourself right from the start.Starting small is one of the best ways to learn the ropes, particularly if you are new to something, and multifamily investment is no different. A small complex would help you get an entry in multifamily real estate and better understand the various dynamics of this real estate market. With time and some experience, you will be able to venture into bigger properties.4. Work With Qualified Real Estate ProfessionalsIf you are investing in multifamily properties, you have to assemble a suitable team of industry professionals, such as property managers and brokers, to maximize your investment. This is because being a landlord is usually a team effort, particularly when you have several tenants to manage.A professional property manager can help make you some extra rental income by making sure that all the day-to-day operations run smoothly and seamlessly in a cost-effective manner. Your team should have professionals who will help keep your multifamily property in top-notch condition, secure reliable renters, solve legal problems and help balance books. Also, you should consider working closely with a competent real estate agent who specializes in multifamily deals.5. Determine The Best Rental Rate For Your PropertySetting the right rent for your property can often be a bit of a Goldilocks paradox. If you charge too little, you will risk leaving money on the table. If you overcharge, you may risk having too few inquiries. Keep in mind that setting a suitable rent price is beneficial in a variety of ways.When determining the right rental rate, you should pay attention to your competition and try focusing on multifamily rentals in an area that is similar to yours.6. Expect The UnexpectedOften, unexpected expenses and events will creep up. If you have a large property, you are more likely to encounter things such as unplanned property maintenance and repair, longer-than-expected vacancies or expenses incurred by irresponsible tenants. A good rule of thumb here is to take 10% off of the top of your expected rents in order to prepare for unexpected vacancies, market declines and other factors. It is important to have sufficient cash on hand for covering these events.7. Make ImprovementsEver wondered why some rental properties are rented within a few days, while others sit vacant for several weeks on end? Usually, it all boils down to how appealing and desirable a property is to renters. The key to making good money in multifamily is to keep your property in top-notch condition. If something is broken, you should fix it right away and continue making upgrades, as it is one of the best ways to keep tenants for a long period.Read this article for detailed information https://www.forbes.com/sites/f...All the best!

Michael Scott · Answer

This is a great list! @Jordi Valado now it's time to start doing the work to find which of these areas fit your investment goals. Start by looking at the Census data and see which areas are growing in population and which ones are decreasing in population. Then really start drilling down into the data and looking at the real estate for sale. Contacting a local investor friendly agent is crucial, as they will know the pulse of the market https://www.biggerpockets.com/... Then it's time to pound the pavement and find the right people to add to your team that can help you achieve those goals. That's the hardest part. I invest where I live and its not always easy to find the right people, but it can be done. I would start to plug into a local meetup group in your area: https://www.biggerpockets.com/... You can build some great relationships with local people who can help in your journey. Additionally once you do find that market, go to a local meetup there as well. It's important to connect with other investors to gain more knowledge and help you find the path that's right for you. Best of luck! P.s. Pittsburgh (on the list) is where I'm from and a great place to invest. Meets a lot of the criteria for a good investment. If you would like to reach out I would be more than happy to answer any questions you have.

Eliott Elias · Answer

Come to Killeen Texas , you will find the 1% rule

Elise Bickel Tauber · Answer

Hi Jordi. Biggest piece of advise I can give you is to research the areas and look for a team. Most investors that I personally know do not invest in the city they live so they need to have a solid team in place including an agent, pm, contractors, etc. Sometimes you can get lucky and find a team that has all of that built in and ready to go, but if not, you will need to put that all together. You may have a hard time in certain metros finding a good pm or a good contractor (etc) so when you have an area you like with a full team assembled, start your search! Hope that helps!!

Wale Lawal · Answer

@Jordi ValadoMy pleasure. Make sure to consume contents here as much as possible.We are here to help each other grow.All the best!

Austin Both · Answer

Once you know the market and criteria, begin to network in the area you want to invest. Find people on Bigger pockets, Facebook, Instagram, and Linkedin. Start creating relationships with commercial brokers in the area, and ask to be on their chain for deals they have or might come across in the future. This is a great starting point.

Jordi Valado · Answer

Thank you Michael, in my research for a great market I will be taking all the relevant census data into account, especially when focusing on population growth.

Jordi Valado · Answer

Hi Elise, I agree a team is the most important part when long distance investing. This is why a huge part of my first few steps is to get connected with a great team!

Jordi Valado · Answer

Wale this is amazing advice and you have hit on almost every point that i worrying me about long distance/ investing in general. I will keep these tips in mind when working through the process of my first investment.