Multi-Family Investors - HOW?

Question

Hi BiggerPockets Friends,

I'm a San Diego real estate agent and I manage around 60 or so doors. I lot of 2s, 4s, 6s, a few homes a 7 and a 10. I love real estate and I love when I pick up the rents each month, there are definitely pros and cons but definitely more pros. My questions goes out to successful multi-family investors or anyone who owns multi-family rentals. HOW? How do I get started buying my own properties? If I don't have the money saved up too bad? Should I invest in less desirable cities, states? Should I wait for the market downturn? I have a some money in the bank but my market in San Diego is very high, duplexes go for $300,000 a door sometimes and getting loans are not easy to come by. After a 20-25% down payment your cash flow doesn't even make sense after all the expenses. I always was taught to buy a place where you can kick the tires, but with the prices here in San Diego is it worth it? I would love to one day own 100s even 1000s of units, I would love to have my team of handymen, plumbers, electricians, etc. and I definitely don't mind working 7 days a week if I have to, but it seems with the market I'll never get started. I'll take any advice. I'm hungry. There is many articles on here but I'm tired of researching I want to take action.

Account Closed · Answer

@Anthony D'Angelo I prefer to invest in my backyard but as you may know, the Seattle market is expensive. I traveled 25 miles North to Everett where there is a nice mix of cashflow and appreciation but prices are still high. I was able to get in by living very frugally, saving up an $80k down payment and purchased a 110 year old four plex. Then I did it again and again. Each deal became easier as every property I purchased added to my cashflow and soon I had a proven model and took on an equity partner. Within 6 years I was able to acquire 59 units through hard work and constantly saving and reinvesting the majority of my money.

Dan H. · Answer

Have you considered house hacking a detached duplex with a value add?  With up to 97% LTV, a little money goes a long ways.

Also where did you get your price point of $300K/door for a duplex?   I suspect you looked at MLS listings rather than closed sales.

Your goal of number of a 1000 units is not my goal.  My goal is to have 10 units that produce $10K/month each.  I do not want to work 7 days a week. Heck I may not want to work 1 day a week.

If you really want to make this work, find a detached duplex with a simple value add (i.e. both units need a rehab).  Purchase it.  Live in the more thrashed unit and rehab it while living in it being cognizant that time equates to money and sometimes it is cheaper to hire work out.  After the unit is rehabbed, rent it at top of market rent (if is freshly rehabbed) and move into the other unit.  Repeat with that unit.  After both units are rehabbed consider if a refi makes sense; can you take any money out?   At 97% LTV it will be challenging to be able to extract any of your initial investment but even if you cannot, you have a RE that is worth significantly more than you paid for it and rents for significantly more than when purchased.  If it makes sense to refinance, refinance it before you go on to the next RE (while it qualifies as owner occupied).  You will also have learned a lot going through this process.

You are now ready to repeat it bigger and better.

This is the process we have used on virtually all of our purchases.  We have an STR RE (duplex) that rents for more $10k/month (maybe over $15K/month).  We have refinanced all of our investment out of most of our RE purchases.  So, except for the house hack with the high LTV, we have successfully done multiple times what I am suggesting.  it is definitely possible.

Good luck

Oleg Shalumov · Answer

@Anthony D'Angelo I am in NY/NJ area and the prices are crazy here as well. I remember an advice from one of the podcasts that no matter where you are there is always Properties with good prices “one hour away driving”.

But as a first step, I always recommend to start with househack: find 2-4 units property (better 4-Plex if you can get downpayment or qualify for FHA loan).

Your tenants would normally cover your mortgage and expenses (or most of it) and you can start saving for downpayment on your next property.

Joe Moore · Answer

Go East young man!  If you want to really get started now, get out of Cali and go East to invest.  Only action takers get the rewards.  Wannabes, see you later.  Desire is good, but taking action is the only dependable things that will take you to your Nirvana.  If you want to invest with less cash, miniumun you must forgot the coastal cities.  Even San Bernardino, Palmdale, Stockton are better.  Leaving the state would be even a better move.  Good luck on your journey.

Ben Leybovich · Answer

Here's the thing:

Prices are up today. But if you wait, by the time prices come down (if they do) the lending will tighten up, so you'll have a different problem. The reason 2011-2013 was a once in a lifetime opportunity is precise because low prices converged with available debt, a perfect circumstance. Generally speaking, this is almost never the case.

You have to find a way to be a buyer. To do it, you will always have to overcome one of these problems - not enough deals, or not enough money.

I am here to tell you that there are still deals. So - will you do it?

Danny Randazzo · Answer

@Anthony D'Angelo you should start underwriting 100 deals in a few markets you want to invest in so you can learn the numbers, returns and opportunities. Once you’ve learned the numbers you can submit offers on the best deals. Good luck.

Charles Soper · Answer

I forget which podcast I was recently listening to but the guest made a comment about which states to buy in and why.

Buy in California, New York, Seattle, and some other hot metro's for appreciation, buy just about anywhere else for cash flow.  So now the question is, do you want appreciation and zero to no cash flow, or do you want to stretch your comfort zone and start looking out of state.  Maybe for you it's not so much out of state as it is out of market, there are plenty of secondary and tertiary markets within 2 hours outside of San Diego that probably cash flow pretty well, they're just not "tire kicking" local.

Greg Scully · Answer

@Anthony D'Angelo - If you want to own 1000's of units you will likely have to bring in partners.  That's how I started.  It's a team sport, start building your network and take action.  I'm not keen on my home market, so all of my investments are out of state (all in Tennessee).  It can be done, just take the emotion out of it and rely on verifiable objective analysis.

Josh Oaten · Answer

@Anthony D'Angelo

Another option that you could take is finding an investor in your local market that is successfully doing what you want to do. Im sure you would be able to find some players being an agent. Offer assistance to them in anyway possible to learn.

Multi-Family Investors - HOW?

Most Popular Reply