McKinney, TX · Member since 2015 · 14 posts · 2 votes
I am new to REI, and I am wondering if starting out in multi-family is for me. My net worth is not close a million dollars, but if I don't spend (waste?) money on someone's educational program, I have several thousand dollars more to put towards this potential first investment. Are local REI clubs the best place to meet MF investors, and how do I know when I'm educated enough not to get taken advantage of? Also, is there some regulation requiring me to be a "sophisticated investor" before I can passively invest in a multi-family deal? Is there some way I can meet this requirement without paying thousands of dollars up front for this education? Can anyone shed some light on this and/or provide some personal experience. I feel like MF would be the best potential return on my investment but I'm not looking to be naïve or get in over my head either.
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
11y
I am an "accredited" investor and all that means is you have a certain income OR liquid net worth. It is also mostly self declared and I have never once have anyone ask for any documentation. The idea of paying thousands of dollars to get this title is the most ludicrous thing I have ever heard and only the hucksters selling these courses would ever claim such nonsense.
Investor · Wethersfield, CT · Member since 2013 · 371 posts · 191 votes
11y
@Chris Jones you don't have to be a millionaire to be a sophisticated investor. But, the annual income requirement is high. See this Wikipedia article for details. You don't need to be a sophisticated investor or an accredited one to get into multifamily real estate.
From 1-4 units its not really different than buying any other kind of house. Anything in excess of four units is generally considered commercial real estate.
Investor · Cypress, TX · Member since 2014 · 496 posts · 205 votes
11y
To invest in someone else's "real" multi-family (5+ units - but probably much bigger) deal with a syndication (multiple investors), you generally need to be known to the managing member/partner (family or friend), an accredited investor (the $1M stuff), or a "sophisticated" investor.
For me, it's worth spending $15k up front to join an education and mentoring group where that education is not only valuable in itself so that I know the business model and have help all long the way, but also provides sufficient evidence of being a sophisticated investor by virtue of the documented training received and the ongoing mentoring from experienced active investors.
And in TX you have a group that has produced the National Apartment Association's Independent Owner of the Year for 8 years running (with 8 different members). Nice track record to have in your corner.
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
11y
I am an "accredited" investor and all that means is you have a certain income OR liquid net worth. It is also mostly self declared and I have never once have anyone ask for any documentation. The idea of paying thousands of dollars to get this title is the most ludicrous thing I have ever heard and only the hucksters selling these courses would ever claim such nonsense.
Investor · Seattle, WA · Member since 2015 · 16 posts · 2 votes
11y
I also thought Multi Family was the way to go for me but I was turned back onto Single Family as well. I was looking at 2-3 units with not much more return then a Single Family and a lot more work.
@Chris Jones you don't have to be a millionaire to be a sophisticated investor. But, the annual income requirement is high. See this Wikipedia article for details. You don't need to be a sophisticated investor or an accredited one to get into multifamily real estate.
From 1-4 units its not really different than buying any other kind of house. Anything in excess of four units is generally considered commercial real estate.
You don't even need a certain income level to be a sophisticated investor, just a certain amount of sophistication to be able to analyze prospective investments and understand the risks. Accredited investor is the title w/ all the objective hurdles. Syndications can have up to 35 sophisticated investors. @Chris Jones, if you want to meet some MF leads outside of LS, Brad Sumrok's event this weekend is probably your best bet.
I'm still a bit foggy on how exactly you determine whether you are a sophisticated investor? Practically speaking, is it just a matter of having a relationship with a sponsor who can put you down on the deal as a sophisticated investor?
Rental Property Investor · Smyrna, GA · Member since 2018 · 974 posts · 645 votes
6y
To participate in an Reg D 506(b) designated investment offering that accepts up to 35 non-accredited investors, those investors still must be "sophisticated". The SEC defines a sophisticated Investor as someone who has enough knowledge and experience in business matters to evaluate the risks and merits of an investment. The below article does a good job of highlighting what's needed, but it is still a subjective answer the investor must attest to before subscribing to an offering.