What is the best way to start in commercial/apartment investing?

Question

Hello BP Community,

I want to know what would be the best way to start commercial and apartment investing? Would my best bet be to find a mentor and learn from him? or Would I be better off going out and making mistakes on my own? I have been to a few seminars and have read a few books about commercial investing but how did you guys start?

Mike Sedlacek · Answer

I'm not all to sure about some of this advice above here. When I graduated college I went hunting for a multi-family and I came across a 6 family building. I ran the numbers and it worked out that I could buy the property and live there rent free as well. I didn't read any books. What is the big deal. You find a property, get the numbers, determine your investment criteria to make money, find funding or ask the seller for Owner Financing, and buy the building.

If you are worried about tenant rights, google it. If you worry about eviction process, go to the local court and ask for an eviction process package, read up on it, contact a lawyer for help, pay the fee, and go thru the process.

If you are not going to manage the property, then interview several management companies and determine which will be the best fit for you and hire them on a trail bases, 6 months or so.

Get an accountant for help with tax planning. Determine whether you are going to keep the building for 10 years +, and or sell it or do a 1031 exchange when your tax right off  is used up. Move on to a larger project and become well off and financially secure in 10 to 15 years or sooner.

As a beginner don't buy a run down property, very costly, lots of headaches, seems to take for ever to upgrade. Stay into a B neighborhood so that you can rent to a better class of people. Don't buy properties over 30 years old, they usually are way out of date, unless the owner kept things up.

After you own the property put together a team that will help you, accountant, lawyer, handyman, plumber, electrician, insurance agent, your family, answering service, discount material suppliers such as appliances, paint, building materials, carpeting wholesaler, etc.

I guess you have to start by deciding on a  hands on or hands off operation. Plan your strategy for holding and expanding to more purchases.

I started with a 6 family, then a 5 family, onto a 8 family, three 4 family buildings,two 12 families, a 16 family, 5 single families and a 50 unit mobile home park, all with in 20 years.

And I sold them all. Now I'm moving to a new state and starting over but more with fix and flip single families. So there you are. Oh and join a Landlord Association, they have been a great help for me.

Jeff Greenberg · Answer

@Mike Sedlacekcongratulations on your success.  It is fantastic that you were able to learn on the job and be successful.

I, on the other hand spent thousands on seminars, bootcamps and mentoring.

In the end, I would not recommend either method.  I was unaware of Biggerpockets and the community that it draws.  It is not just the vast knowledge that is available, but the people that are here to honestly answer you questions.  The BP podcasts are great and there are more available on sites such as @Joe Fairless joefairless.com.

Ultimately, I will repeat what I have said over and over again, find an investor that is doing what you want to do, and offer your services to them.  Find out what you can do to help them.  The rest will come back to you.

Find a way to get into other peoples deals, even if you do not make any money.

Here is a link that may be of interest.

https://www.biggerpockets.com/forums/223/topics/22...

Marc Henderson · Answer

Dominique Coleman, if you have not already done so, I would suggest your join your local REIA and talk to people who own apartments already for their advice. Joining your local investment club can yield lots of benefits and doesn't cost an arm and a leg. That way, you can get some real world advice from people in your area and learn from them. You can also use this site's learning tools and blogs to follow and pick up information and the lingo used and learn them at your own pace. I hope that was helpful! I wish you and your a wonderful Thanksgiving! LLAP (live long and prosper)

Curt Smith · Answer

It's great to set one's goals HIGH!  Then struggle to achieve them.  Tony Robins et al type advice.

All the folks above have made great comments!

We have bought and put into service 29 SFRs in 5 years, 10 this year, and are 90% of the way through the last step of financing on buying a mobile home park.  We started the "commercial" purchase 2 years ago by going to a boot camp.  There's boot camps for multi family, strip malls, hotels, self storage and mobile home parks and maybe more.  I strongly suggest investing in yourself and go to a boot camp.  For one, you'll learn the radically different purchase contract clauses that are in commercial and NOT in SFR P&S contracts.  Tactics to prevent earnest from going hard?  What's that?

The bank will interview me and my "team",,, what's that?

The seller (or broker) won't talk to you (for long anyway) without a credible proof of funds.

Given the cash hurdles and credibility hurdles it points to the tip above, find someone already in your desired space and offer to work like heck for free,,, to learn and eventually be a minor partner on a future deal.

That said, I feel you need to credential yourself, educate yourself else no successful investor will take you on.   Go to boot camps, 3 day trainings, you'll meet potential partners as well.

Commercial is NOT anything like the SFR world.

Joe Fairless · Answer

@Dominique ColemanI recommend reading at least 5 books on it and listening to at least 10 podcast episodes and speaking to at least 5 current multifamily investors. That should give you a good working perspective on multifamily investing. Then, when you have that as your foundation it would be a good time to bring someone on to help you get farther, faster.

I personally read a bunch of books then found mentors who helped me make my first deal happen (a 168 unit). I've had some sort of life or biz coach since 2012 and it's paid for itself 10x over.

Jeff Greenberg · Answer

@Dominique Coleman Remember that the key to finding a mentor is to find someone that is successfully doing what you want to do, and find out how you can be of service to them.  Don't start out asking a busy person to invest their time in you.  Offer your time to them and you will gain from the experience of being around them.

https://www.biggerpockets.com/forums/223/topics/226846-my-multi-million-dollar-first-deal-at-20-years-old

Ryland Taniguchi · Answer

Start slowly. Can be very very risky. Always recommend you partner with someone that knows what they are doing. Every time I want to get ambitious about buying or building apartments, I always remind myself why take the risk.

Bank loans will want to cross collaterize other assets. Hard money loan for two years is very costly. Best to buy SFR, build equity and then slowly get into apartments.

Sterling White · Answer

The answer to your question is do both! I would work to find someone who is successful in that sector and either partner with them or offer my help FOR FREE. While in the process of finding that person attend local meetups and let people know what you are doing

Richard Rinehart · Answer

And I nearly forgot to say Bigger Pocket podcasts are full of great information too.  And of course Brandon Turner's book on how he bought a 24 unit apartment building with nearly no money down.

Account Closed · Answer

Curt is exactly right on this.  Invest the time in yourself and figure out a way to make yourself valuable to an experienced operator.  For me, I developed a system for reaching owners of mobile home parks off-market.  First, I learned the concepts of the asset class in a boot camp. Second, I figured out a way to generate a massive amount of leads, and third I sought out a partner who could help me convert those leads.  My partner benefitted greatly because I gave him no less than 30hrs/week for almost 2 years.  At present, we have acquired two parks.  My income off of those parks is close to $35k/yr.  Plus a $400k boost in net worth. We are in diligence on a third right now.  That one will push me into the business full time.

Next up for him and I is syndicating.  We've placed all of our own money into home run deals (reason it took 2 years).  Now we are going to scale using the marketing machine we put together and take the next step.  (This is not his first rodeo in syndicating but it will be my first time)

None of these things would have been possible if I hadn't taken the first step and attended that boot camp.  It also wouldn't have been possible had I not figured out where I could add value or had I decided to venture out into this by myself.

What is the best way to start in commercial/apartment investing?

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