The "Holy Trifecta" of Multi-Family Investing

I am a huge proponent of having multiple mentors to help you achieve your goals.  I wrote an entire blog about it.  Success leaves a trail and if you can learn from someone else’s mistakes you’ll make less of your own.Having mentors can streamline your success.

One of my first mentors in multi-family Real Estate was Dave Lindahl.I met Dave at a real estate networking event a few years ago and eventually became a student of his coaching program.Dave has been doing real estate for over 20 years, owns close to 7,000 units and is crushing the multi-family real estate game.

Dave gave me a great educational foundation and I learned a ton from him.One of the most important things I learned from Dave that I took with me was the “Holy Trifecta” of multi-family investing.The “Holy trifecta” are the three most important things you can do to become a successful multi-family investor.If you do two of these things you will become rich, if you do all three you will become wealthy.So let’s take a look at what these three things are that make up the “Holy Trifecta”.

The (3) components of the “Holy Trifecta”:

1) Buy Below Market:Pretty simple.If a property is worth $1,000,000.00 and you buy it for $900,000.00 you just created $100,000.00 in equity for yourself.Below market/off market deals are everywhere, you just need to develop systems and ways to identify them.Motivated sellers, foreclosures, and direct mail campaigns are just a few ways you can set yourself up to buy a good deal for below market value.If you can get into a deal where you are walking into equity, you are already ahead of the game from day 1.

2) Force Appreciation:Unlike stocks where you choose a stock to invest in and take a guess if it’s going to go up or down, in multi-family real estate you can force the appreciation by strategically managing it.Multi-family real estate is not valued like a single family home by the “comparison method” it is valued by how much income it produces.For every dollar you can increase rent you increase the property’s value by 10 dollars!So what are some ways to force appreciation in a property?Bringing existing below market rents up to market pricing.Bringing in quality and effective property managers that can run the property efficiently.Taking care of deferred maintenance that has been put off for years.Renegotiating contracts with your cable providers.Adding storage or coin operated laundry.Even small things like adding lighting and privacy fences can all create value and force appreciation in your property.

3) Buy in an appreciating market:This is the big one that can really make a difference in how successful your property is and can become.Buying in the right market at the right time is absolutely crucial to your success.One of my high school friends bought a 3-family property in Somerville, Massachusetts in 2002 for $385,000.00.He bought it as an “owner-occupied” property at the time and only had to put 5% down on the house.Fast forward ten years later and it appraised for $750,000.00!He didn’t even buy the house off market, he paid fair market value and he never did anything to fix it up.He knew nothing about market cycles, he just got lucky and bought at the right time.His acquisition costs for $35,000.00 for the property and he had created about $400,000.00 in equity simply because he bought right before this city and more importantly this particular part of the city took off due to job and population growth.Now imagine scaling those numbers on a 200-unit property that costs $20,000,000.00 and you can see why buying in the right market is so crucial.For more on market cycles and how to research market please download our free market research guide at www.snacap.com.

Buying below market + Forcing appreciation + the right market = Wealth.That is the “Holy Trifecta”.Accomplish this and you will be on your way to becoming financially free.