What's Stopping You From Investing In Multifamily Properties?

Multi-Family and Apartment Investing
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What's Stopping You From Investing In Multifamily Properties?

Gino BarbaroPro Member
Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes

I have posed this question to help me serve my students better.  I know most answers will focus around lack of money, but I think the answer is more complex.  My three biggest reasons for taking action: FEAR, family members dissuading me, and failing at first.

I want to know what is stopping you from jumping into Multifamily Properties!

Thanks everyone!

Gino

Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
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Most Popular Reply

Cassie Sherie
Seattle, WA · Member since 2016 · 81 posts · 43 votes
10y

@Gino Barbaro I believe that too many people don't develop right mindset... our brain and the way we think is what controls everything in our lives (what you think you become)...what also plays a huge role in becoming successful is who we choose to surround ourselves with....this is a choice. (you are the average of the 5 people you hang around the most) think about it.  Whoever says otherwise is lying to themselves. What we choose to do with our time, is also very important. We all have the same 24 hours in a day. It's up to each person to use this time wisely... I have been realizing this more and more... so now I rarely watch TV...go to clubs and bars that whole nonsense waste of time. I spend my time on real estate taking the first actionable steps by reading books, blogs, watching youtube videos, listening to podcasts to educate myself, which builds confidence and the vocabulary to be able to have conversations with other investors who are already successful, think out side of the box, create opportunities, make deals and know what I'm doing and talking about...this is a key part of  your arsenal, and the more weapons you have at your disposal the better off you will be. (this includes how you build yourself up personally and the network of people you take care of and appreciate) Getting rid of limiting beliefs can be difficult (I'm trying everyday) because we become so accustomed to it... I'm not saying we have to be perfect, we as humans are flawed, but we also have to strive to be the best version of ourselves to allow for the right people and opportunities to come into our lives....So we open up ourselves and have a free flowing energy that lets the universe give us all that we want and be able to manifest and become the person we always knew we could be. This all starts and end with you, work on yourself. I've only been learning about real estate investing for about 2 weeks now. Figuring out my niche, which seems to have gravitated towards apartment complexes, there's just so many benefits and endless possibilities. I really get excited learning more and more...when I wake up in the morning, it is different now... there's a shift...and I know that nothing can stop me, I am unstoppable...I know it won't be always rainbows and butterflies, honestly life's a real B... at times...trust me, I've been knocked down over and over again, as I'm sure you have too...but it's still up to me and it's completely up to you to make it happen! With that said... when I'm ready I will be locked, I will be loaded and I will pull that trigger! 😊  

FYI: when I say "you" I mean other new BP members like myself

16Reply
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121 Replies

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  • Sean Ridlon
    Contractor · Melrose, FL · Member since 2016 · 131 posts · 64 votes
    10y
    Multifamily is our goal. We are liquid enough to buy, but our local market seems to be peaking. Most sellers of MF are pricing their buildings for sale far above appraisal, which created situations where 20% down won't get us in the door- out of pocket would be closer to 50%. Rents are high right now, cap rates even on the over-priced inventory are around 8%. The 30% over-value remains a barrier to entry for those of us who could afford a 20% but not pay the difference in asking to fmv.
    3Reply
  • Ashley Wolfe
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y

    My belief that there is only one way, which my husband disagrees with.  So I have to find a way for us to invest where we are both comfortable.

    2Reply
  • Ed Matson
    Investor · Stratford, CT · Member since 2015 · 258 posts · 230 votes
    10y

    Overpriced properties. Too low CAP rates.

    9Reply
  • Hubert Washington
    Investor · Jacksonville, FL · Member since 2016 · 97 posts · 90 votes
    10y

    @Gino Barbaro

    For me there is nothing "stopping" me but I think the biggest hurdle to overcome is lack of experience in multifamily / apartments. Especially because I want to start off in the 25+ unit space. It seems that most don't take you seriously until you have done the first deal and that is what I am currently up against. That is why my primary goal is to get into a deal before the end of this year - even if it is passively or in partnership with another experienced investor. My hope is that this strategy will help me get that first one as soon as possible and start the snowball rolling.

    Until then I will keep learning, networking, and analyzing deals with the belief that my passion, desire, hunger, and increasing knowledge will at some point overshadow my lack of experience.

    THINK BIG...THINK BIGGER...THINK MASSIVELY!

    4Reply
  • Jake Thomas
    Residential Real Estate Agent · Grand Rapids, MI · Member since 2013 · 803 posts · 689 votes
    10y

    The biggest problem in my market is a lack of properties. The MLS is cut-throat and the few that are for sale don't make sense based on the numbers.

    6Reply
  • David Alvarado
    Investor · Silver Spring, MD · Member since 2016 · 92 posts · 42 votes
    10y

    I agree the multifamily market is getting pricey unless you can find something that is value add, which is getting more and more rare as people are doing minor reno to push for top dollar. Most of the stuff I'm looking at is 15%-20% above what I believe is market pricing. Personally I think the off market deals by scoping out local owners and building relationships there is the way to go.

    At this point uncertainty in overall macro economic conditions makes me a little hesitant unless I can find something in a relatively stable market that produces a double digit cap rate. 

    1Reply
  • Cassie Sherie
    Seattle, WA · Member since 2016 · 81 posts · 43 votes
    10y

    @Gino Barbaro I believe that too many people don't develop right mindset... our brain and the way we think is what controls everything in our lives (what you think you become)...what also plays a huge role in becoming successful is who we choose to surround ourselves with....this is a choice. (you are the average of the 5 people you hang around the most) think about it.  Whoever says otherwise is lying to themselves. What we choose to do with our time, is also very important. We all have the same 24 hours in a day. It's up to each person to use this time wisely... I have been realizing this more and more... so now I rarely watch TV...go to clubs and bars that whole nonsense waste of time. I spend my time on real estate taking the first actionable steps by reading books, blogs, watching youtube videos, listening to podcasts to educate myself, which builds confidence and the vocabulary to be able to have conversations with other investors who are already successful, think out side of the box, create opportunities, make deals and know what I'm doing and talking about...this is a key part of  your arsenal, and the more weapons you have at your disposal the better off you will be. (this includes how you build yourself up personally and the network of people you take care of and appreciate) Getting rid of limiting beliefs can be difficult (I'm trying everyday) because we become so accustomed to it... I'm not saying we have to be perfect, we as humans are flawed, but we also have to strive to be the best version of ourselves to allow for the right people and opportunities to come into our lives....So we open up ourselves and have a free flowing energy that lets the universe give us all that we want and be able to manifest and become the person we always knew we could be. This all starts and end with you, work on yourself. I've only been learning about real estate investing for about 2 weeks now. Figuring out my niche, which seems to have gravitated towards apartment complexes, there's just so many benefits and endless possibilities. I really get excited learning more and more...when I wake up in the morning, it is different now... there's a shift...and I know that nothing can stop me, I am unstoppable...I know it won't be always rainbows and butterflies, honestly life's a real B... at times...trust me, I've been knocked down over and over again, as I'm sure you have too...but it's still up to me and it's completely up to you to make it happen! With that said... when I'm ready I will be locked, I will be loaded and I will pull that trigger! 😊  

    FYI: when I say "you" I mean other new BP members like myself

    16Reply
  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    @Ashley Wolfe , @Gino Barbaro

    My three biggest reasons for taking action:

    1. FEAR,
    2. family members dissuading me, and
    3. failing at first.

    Ashley is stuck (2) between a rock and a hard spot - - Husband & wife disagree in various aspects of investing, let alone the actual mechanics of any given deal. BRAVO Ashley for understand and keeping the family first :) Any JV or partnership can easily be dissolved, but don't let REI come between you.

    I have trouble with both 1&2 as they are both rooted in lack of RE education.  Those that subscribe to "just take action, go do it" will (or are) ripe for both issues.  When I see posts like "I just xxx, now what do I do" make me shutter to the core.

    If we were playing a card game, we would first read the book of Hoyle and if it were complicated, like Texas Holdem, we would study strategies and techniques of successful players.

    But there is no authoritative book of REI and there's many gateways into this form of investing. Some are closely aligned to Stocks where you're in and out in a short period of time and most issues are the physical asset itself. But add the complications of Buy & Hold and the game takes on another dimension, people and asset management (like going from 2d to 3d Chess).

    IMO,  FEAR should make you cautious but not immobile.  You  conquer fear with knowledge.  If you're not respectful of your fears, IMO you would be better off being immobile (aka do nothing).

    (sorry for the rant, but that's how I see it).

    1Reply
  • Gino BarbaroPro Member
    OP
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @Sean Ridlon

    Hi Sean

    I agree with most of your analysis, maybe time to look outside your market.  You can only buy on actual numbers.  Start to look at properties where seller financing is an option, look for motivated sellers.

    Gino

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
    2Reply
  • Gino BarbaroPro Member
    OP
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @Ashley Wolfe

    I totally agree.  You don't want to have conflict with a partner especially your spouse.  If you can expand upon why your belief is better and remove all emotions out of the equation, then you may be able to convince him.  This seems like a job for a business coach

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
    1Reply
  • Gino BarbaroPro Member
    OP
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @Ed Matson

    Hi Ed

    I live about 45 minutes from you, and I agree with current returns.  That's why I was forced to look elsewhere.  There still are opportunities up here, but you really need to be hunting for them.

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
    0Reply
  • Gino BarbaroPro Member
    OP
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @Hubert Washington

    that stopped me in the beginning. But once you land your first deal, it creates an unexplained momentum that will take over.  You become more confident and experienced.  I got into my first multi with a partner and continued the relationship.  We both add value to the partnership and help each other out.  It is a good way to hold yourself accountable. The average person will do more for others than they will for themselves.  I will work hard for my partner.

    Gino

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
    1Reply
  • Gino BarbaroPro Member
    OP
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @Jake Thomas

    You ain't kiddin. I just went onto loop net and there are ZERO properties in Grand Rapids. It's time to start networking with other brokers and going to REI meetings. Are there any cities next to you where you can invest

    Gino

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
    0Reply
  • Corey Woodruff
    Saginaw, MI · Member since 2016 · 161 posts · 67 votes
    10y

    I personally love the idea of investing in multi family properties because its one property with more than one door which I like. It makes more sense because in my area multi family properties are not that more expensive than single family properties and you can usually( if done right) make more cash flow on them

    1Reply
  • Jake Thomas
    Residential Real Estate Agent · Grand Rapids, MI · Member since 2013 · 803 posts · 689 votes
    10y

    @Gino Barbaro My local market has the lowest inventory year over year of any market in the mid-west. I have been having better luck finding off-market properties for myself and some of my investors. Things will change hopefully but the local market here is still very hot. 

    I don't have a lot of interest in expanding more than 30-45 min away from home. 

    0Reply
  • Cassie Sherie
    Seattle, WA · Member since 2016 · 81 posts · 43 votes
    10y

    @Hubert Washington thanks for the vote! appreciate it 😊 keep pushing forward!  and @Gino Barbaro i like what you said about the average person doing more for others than themselves...

    0Reply
  • Gino BarbaroPro Member
    OP
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @David Alvarado

    I always hear from the pros "the low hanging fruit is not there anymore"  I need to remind everyone the low hanging fruit was around when financing was difficult, occupancy rates were in the toilet and the economy was terrible. Unless you had a ton of cash, it was difficult to purchase back then.  The model is always the same.  Buy an underperforming asset, reposition by increasing revenue, decreasing expenses and adding value.  Bring to a bank and refinance, and repeat the process.  Macro economics points to a healthy rental market due to demographics, jobs being transient, and rents going up.

    I am reading Bill Nickerson's book "How I turned 1000 into 5 million.  The same "problems" have been around investing for the past 50 years.  The book is fantastic

    Gino

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
    6Reply
  • Gino BarbaroPro Member
    OP
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @Cassie Sherie

    Hi Cassie

    I have learned that the energy I put out, will be attracted.  If I am positive and uplifting, all of a sudden I will be thrust into these situations.  I just have to remind myself to stay there. It is all about managing your state.  When in a positive, powerful state, you will make more empowering and creative actions, and vice versa. I am training myself to control my state through positive incantations and neuroscience.  It may sound hokey, but I am just mirroring people with massive success like Tony Robbins.  

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
    2Reply
  • Gino BarbaroPro Member
    OP
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @Corey Woodruff

    If you can invest in multis in your market, then focus on them.  You will love the economies of scale and the ability to scale your business.  Financing will be easier because in most cases it's about the financials of the asset and not the ridiculous comps.  It is objective, and left up to an appraisal

    Gino

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
    1Reply
  • Cassie Sherie
    Seattle, WA · Member since 2016 · 81 posts · 43 votes
    10y

    @Gino Barbaro not hokey at all... I totally agree... as I basically ranted about energy, the universe, working on ones self...etc. in my reply post to you......haha! it's a good way to be instead of being a miserable A-hole.  😊

    0Reply
  • Gino BarbaroPro Member
    OP
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @Cassie Sherie

    that's why I enjoy talking to you!  I don't have to put myself in state after I read one of your posts.  Your post has accomplished that for me. 

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
    0Reply
  • Cassie Sherie
    Seattle, WA · Member since 2016 · 81 posts · 43 votes
    10y

    @Gino Barbaro Awesome! happy to help. thanks Gino!  😎  👍  ✌

    0Reply
  • Jennifer King
    Bellevue, WA · Member since 2016 · 154 posts · 57 votes
    10y

    Awww, the energy here is so amazing! I can almost feel @Cassie Sherie's crackling from here in Bellevue. :) And @Gino Barbaro, I always enjoy your posts. Your perspective on the "good times" is invaluable to those of us just starting out in hot markets -- the fact that the game is always the same (as you outlined it) and low prices due a low economy mean other troubles, so it's never all perfect. Always takes the same diligent work. Thank you for that! 

    2Reply
  • Brian Wolfe
    Investor · San Diego, CA · Member since 2013 · 19 posts · 16 votes
    10y

    For my 2 cents, I own SFRs and a 4-plex, and I see multi-family as a great way to go, though it seems there are factors coming online that might make it challenging in the next few years: peaking rental rates (historically high as I understand versus income), lower cap rates, significantly increased construction for apartments in most cities where I am looking (which will eventually trickle down in impacting rents from A to B to C class), and the nature of commercial real estate loans (relatively short term, eventually adjustable, and it seems they can only go up in rate). 

    I really like the multi-family model, but difficult to get in at this place in the cycle - just my opinion.

    1Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    Multifamily is top of the cycle for most markets.

    Sellers touting 4% or more rent growth, 3% vacancy, 40% opex on a 6.5 cap. Those are bubble numbers and not sustainable.

    If you look over decades vacancy is closer to 10% average, rent at 2 to 2.5%, and opex runs about 50% and even 60% of gross expected rents if landlord pays water and sewer.

    When you underwrite properly you are now looking at a cap rate in the 5's. Might as well buy single tenant net lease and do nothing but collect a check for those returns. Multifamily across the country tax assessors for the city and county and ramping up tax bills. The tenants do not reimburse  you like with some commercial properties.

    I don't want to load  up on a multifamily property with a low cap rate and high debt that is frothy.

    I am not against multifamily it's much harder to find a deal these days that works for that asset class and everyone is trying to chase it now.

    When people call me looking for a 10 cap in a high quality area for multifamily I tell them you are about 4 years late to that party. Everyone wants a bottom market price in today's market. Good luck with that one.

    Some are deciding to build new over buying existing. Example if you can build for an all in 9 cap instead of buying an older 30 year old building someone put lipstick on for a 7 cap it can make sense.  

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