Multifamily Business Plan

[Ian Ray]

This is my Multifamily investing business plan, based on the Outline given by the wonderful Ryan Moeller. I would love feedback from all of you awesome BPrs, Good, Bad, and Ugly. I am jumping into this new industry and would love to get off on the right foot.

1. Mission Statement – To use the vehicle of investing in multifamily properties of various sizes (minimum of 10 units) to generate wealth for myself and my investors in a stable fashion. I plan to acquire ownership or control of 7,000 units within the next 7 years through a combination of syndication, joint ventures, and personal acquisitions.
2. Strategy – My strategy it to acquire moderately sized (50 to 150 unit) properties in emerging markets that are currently at a C+ to B- grade, as well as acquire large multifamily (160 to 350 unit) properties in stable areas around major industry and academic institutions that are B- to A- grade. The moderate sized properties will be managed by either an in house property management group that is a General Partner, or an outside property management company contracted for service on the specific property.
3. Market – Target markets will include Charlotte, NC, Raleigh-Durham, DFW, Knoxville, Nashville, and Johnson City TN, specifically around public education institutions that have pent up demand for viable student housing.
4. Criteria – I will select properties that can be acquired with a 65% LTV with a cap rate of 5.6 to 10% (based on size of acquisition and financing in place) cash flow sufficient to generate a minimum cash on cash return of 11%. The max purchase amount will be contingent upon the specifics of the deal and the position of the market at time of evaluation. With that being said, I will aim to purchase properties at least 15% below appraisal value. I will seek to hold these properties as long as the value of the investment and the yearly cap rate stays within our models.
5. How to find deals Marketing plan – I plan to network with brokers that specialize in the inventory I seek. I also intend to dialogue with other investors in the space who may be seeing deals that I am unaware of that fit my criteria, but not theirs. I will develop relationships with commercial lenders, and private money sources that invest in my target markets to create an ecosystem for information flow.
6. Finance – Deals will be financed on a case by case basis using a blend of private capital as well as JV and equity partners to raise capital for the down payment on the property. I will seek to use either conventional financing or seller financing where it makes sense to fund the rest of the acquisition of our target properties.
7. How to do deals – How are you going to turn a purchase of a property into profit? Clearly define the steps. Repairs, rent, management, implementation of exit strategies, etc.
8. Exit strategies, Backup Plans – I plan to maintain control of all properties acquired until the opportunity to sell becomes a better proposition than holding long term. I plan to return the bulk of investor principal via cash out refinance after a 3 year period, paid out in order of agreement based upon the specific deal structure. For student housing, I plan to execute a master lease with option to purchase in order to remove investor capital but maintain control of the property. I will also evaluate seller financing options as applicable.
9. Team & Systems – I will structure my team per acquisition. Team roles will include on-site property management and maintenance from a General Partner property management firm, or a contracted firm, as well as in house CPA, Lawyer, and asset manager.

[Brian Adams]

@Ian Ray, this is a good start, make sure to include how you will manage 7,000 units and the staff you will need to have to be an asset manager or the travel required to check on your assets.

You will need money for EMD, third party costs, marketing, and other costs, make sure you budget for.

Also if you haven't done a deal before, you will need a loan sponsor.

Please know I am not one to knock someone else's goal. I will share though that I have bought and sold over 1000 apartment units and it has taken me longer than I thought. The main reason of the longer journey is instead of me just focusing on doing a deal to get my numbers or units up for my own personal ego, I changed my focus on making sure the deals I am doing are the right deals, in the right market, for the right investors.

My point is that 7k units in 7 years is very aggressive if you haven't ever acquired a multifamily deal. 

In my opinion business plans are a nice to have. You might have this in a separate document, but get really clear on your WHY.

Your WHY will get you to your goal or outcome faster. If you get really clear on your outcome such as WHY you want to own 7k units and what will it do for you and your family from a cash flow and financial freedom perspective you will be dialed in and have clarity on why you are doing what you are doing.

As someone who is very active in this business, acquiring large mulit's is hard, but with a clear focus you can get to where you want to go.

Ian, I wish you lots of success on your journey!!