How to reach the next level of Multifamily units

Question

To all,

I have been investing in short term vacation rentals and single family homes for the past 10 years, and am now in the process of entering the multifamily unit arena.  I realize that moving forward is only through action, and experience is only gained by making that "first deal"(just like it was when I purchased my first rental 10 years ago).

That being said, the transition still feels daunting, given the higher purchase prices and lack of experience as a "first timer" to multi-family real estate.  I have read books, read posts and watched podcasts on the topic, but personal experience I feel is golden.  Could others please comment on their experience making this transition from SF to Multi family investing and share their own advice?  Thanks!

Chris Levarek · Answer

@David Cozzi 3 ways people typically enter multifamily, your choice :

• Scale up slowly, learning on their own. duplex, quad, 10 unit, etc.
• Buy a Mentorship and network. 
• Invest passively in a deal and learn in order to execute on an active deal.

Habits are simply consistent thoughts and actions. Right now you might have a habit of thinking multifamily is hard. You simply need to change that thought by educating on the subject, surrounding yourself with people doing it and then taking action.

Educate. Connect. Take Action. But it's just a mindset shift really, the education and connecting get you shifted.

Good luck!

•

Mike D'Arrigo · Answer

@David Cozzi the biggest difference with larger multi family units is the type of financing available and the operating expenses. Be sure you know what the tenant is responsible for and what the landlord is responsible for. You can request the history from the utility companies but keep in mind that if there were high vacancies the utilities would be understated. I would recommend asking for a rent roll and rental history.

David C. · Answer

@Reginald Ross  Very good advice.  I have reached out to some folks on BP regarding this and have gotten varying degrees of assistance.  One of my biggest dilemmas are those who I encounter who tout using the $20-$40K gurus to have them teach/coach and help make connections.  I am not afraid to invest in myself, but with that kind of price tag, I find myself skeptical regarding the value it would bring me.  If anyone has advice on this, I am all ears.  Thanks to the whole group!

Abiy Tedla · Answer

@David Cozzi Hi David, my brother and I are in the same situation as you going from townhouses, quad rentals and in the process of looking for multifamily apartments.  It's a big jump and it takes a lot more planning and analyzing compared to the relatively simple process of managing single units. We all have to leave our comfort zones at some point to learn new things and step to higher levels!  Good luck with your journey.

Reginald Ross · Answer

@David Cozzi

Hi David!  Congratulations on wanting to take the plunge into multifamily.  After you do the cannonball into the deep end of the pool, it will become additive.  At least it was for me.

Once I accumulated 40-50 SFR’s, I met one of my current partners who was obsessed with MF but had never done a single deal.

We started exploring a few deals together, added a third partner and closed on a 42-unit soon thereafter.  Less than 6 months later we had acquired over 300 more units.

Now, we’re on track to bust 1000 unit next year which is pretty exciting.

My advice: Find an experienced partner and go through a deal together.  Experience is the best teacher.

With a little self reflection, you will begin to learn your strengths, weaknesses, limitations and preferences.  If you ever have any questions, feel free to send a message!

Richard Loniewski · Answer

I like it better, I don't have to deal with contractors, there are tenants but I screened them well and have a property mgt company handling all the headaches

David C. · Answer

Thank you @Richard Loniewski @Bryan Mitchell and @Mike D'Arrigo  Your advice is very helpful.  I find that the initial leap into my first SFH purchase many years ago is not nearly as unnerving as the leap of faith from SFH to the Multifamily unit arena.  Though I have read many books and resources on the subject and listened to lots of podcasts, the multifamily arena seems like a "whole different animal".  Does that make sense ?

Bryan Mitchell · Answer

@David Cozzi, good advice from Mike above. I’ve analyzed many properties in the last two years and it seems like the big variable is fixed/owner expenses. You have to understand those extremely well. Secondly, understanding the current market rents for that property and what they could be upon completion of a rehab effort. There are some properties out there with nothing to compare to. I talked to my property manager who has been in the business for 20 years and there was one property that he had difficulty effectively pricing. There weren’t a lot of rentals for that type of property in this area.

Richard Loniewski · Answer

The first one was tough, I was a flipper in Central Jersey I didn't have the experience to secure funding so I did a JV with a fellow investor. We did a cash our refi after 12 months, now I have the experience which made it easier to secure funding. Finding the deal at the right price is always difficult but there are deals out there

How to reach the next level of Multifamily units

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