Multiple Family has a high bar of entrance.

[Joe S.]

So I’m no novice. I have been investing in Single family homes for years. As being self employed most of my life I had to get creative some times and hustle. I’m currently getting a decent income from my SF portfolio that pays the bills and feeds my family. I have looked into getting into MF, before but felt that the financing requirements far exceeded my situations. (When I say MF I’m not talking about 2-4,units. When some people talk multiple family they mean 2-4.)

Not trying to be negative, but a lot of the folks that preach MF have NOT done it themselves and nobody calls them out on it. One guy was talking big game, but he only did one duplex.

I’m trying to find a workable model to scale up, but haven’t seen the light yet. 

I’m ears for a workable model from someone that has walked the walk. Plz advise;)

[Adriel Hsu]

@Joe S. Yes, multifamily does have a high barrier to entry. Yet it still seems over-saturated with tons of competition. 

It's all about connections and who you know in the space. Nurturing relationships goes further than anything else. Good deals are acquired off-market as pocket listings from brokers. For the 10-50 units space, you can still market to "mom and pop" owners, but once you go bigger to the 100,200,300+ units, those all trade via brokers. You have a higher chance of finding a true, heavy value add with the smaller mom and pop deals.

Every market, there are about 5 brokers that control 80% of the deals. Find out who those brokers are and network with them. But don't approach them too early when you're not ready.  Be sure you can raise the funds if you are syndicating and actually close. Don't expect pocket deals to start. There's a long line in front of you who have a better relationship with that broker (unless you're targeting under 50 units as not as many people target those).

For the smaller ones (10-30) you can talk to local credit unions or banks, but once you get above $1M loan amount that's not financed through banks. Those will be agency debt (Freddie or Fannie) or CMBS. Loan brokers service those loans.

Another thing I see is those coming from single family are out of touch with today's multifamily market. They come in expecting 10 CAP on a C-class property. In San Antonio and Houston, a stabilized C-class with mild-moderate value add is trading at a "as is" 6.5 CAP. Even lower in Austin and Dallas.

I think your best bet is target off-market 10-50 unit, mom and pop ones, especially now with many tenants not paying during COVID.  

I closed a 32-unit right as COVID hit and still took it from 90% occupancy to 100% occupancy in 1 month (Apr 1 - May 1).
Found it off-market direct to "mom and pop" seller. 25% down payment. Ferddie Mac SBL loan 75% LTC, 10 year term, 3.89% interest rate with 30 year amortization and 2 years interest only payments. Step down pre-pay penalty. 1% origination fee