New to 5+ unit MFH, would love advice and tips!

[Pathik P.]

Hello BP community!

My name is Pathik Parikh. I'm brand new to the Real Estate Investing world, along with 2 other members (my younger brother and brother in law), through an LLC based out of NJ. Like many of you, our strategy is to purchase value-add buy and hold properties, with the eventual milestone goal of leaving our W-2 jobs.

About me: I'm an operations guy through and through. I've spent my career as an Ops Manager with Amazon, Senior Ops with a start up, a Senior Ops with Iron Mountain, and Site Manager for XPO. I'm all about standardization, streamlining, and building repeatable processes with a team. I'm big on the mentality of "Take action after doing your due diligence, or lose to analysis paralysis" (typical operations I know). The two partners are both Finance professionals with large banks, so they're heavy on excel crunching every number and creating models to run. So it balances out my eagerness to jump right in and forces me to thoroughly make a case for any investment I propose to them.

Most recently, I proposed that instead of aiming at SFH, we should look into 5+ unit MFHs or small apartments. Since we are an LLC, we keep getting commerical rates/loans. I know I can take a residential loan for 1-4 units in my own name, but I'm going to purchase my own primary residence soon and don't want to hinder my borrowing power there. My argument was that it's ok going slower this way (meaning less properties bought in a given timeframe) because the pure cashflow would be higher than if we went slower with residential properties. The MFH properties are a unique niche in and of themselves because you're not in competition with home buyers or big shot commercial buyers. Financing can get creative as well if the owner of a distressed property owns it flat out for seller financing.

Now I know there are differences in commercial vs residential properties. Valuation is based on profitability vs intrinsic property value like a beautiful house, vacancy can be seen as value add things to improve, rehab is a different timeline given more units, etc.

What I'd love to hear from the community here is any advice you may have in regards to getting into MFH properties, what to watch out for, how to find a solid deal, financing you may have done, value add tips, doing this in higher prices market (like NJ) and lower priced markets, etc. I've read about people saying don't go commercial as your first deal but it just comes down to learning and understanding it the same way you would have with residential properties, and having a strong team.

Looking forward to seeing the replies! Thank you all in advance.