Multifamily Myths: Why Newbies Think Multifamily is Easy to Buy & Finance

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Last year I wanted to refinance some of my small rental properties. Four properties, a hundred grand here, two hundred grand there… but you would have thought that I was seeking to solve the mystery of world peace. The process was grueling. It required the exchange of over 200 emails back and forth with the lender and took six months to complete. It reminds me why I have such distaste for financing residential 1-4 unit properties.

Fast forward to mid-2015, and I just closed a $10.75 million acquisition loan on an apartment complex. This took half as many emails, only 60 days, and about half of the time and brain damage. It truly is easier to borrow large sums than small sums. But there’s a catch—to borrow at this level, you have to have a solid plan, a solid track record, and a solid team. These components aren’t required in residential 1-4 lending, but you also aren’t born with them. They must be developed. So while it may be easier for some people to buy and finance large multifamily property, it isn’t easy for everyone. Still, it can be, with the right preparation and planning.

If you have been following along with my series of articles on the myths of multifamily real estate, you’ve already learned why multifamily property is easy to value and why economy of scale is a great reason to love multifamily property. Or perhaps you have learned that both of those statements are more myth than fact, in which case it’s time to evaluate, and perhaps debunk, the myth that multifamily is easy to buy and finance.

Related: Multifamily Myths: Why Economy of Scale Doesn’t Mean What You Think it Does

Finding a Needle in a Haystack

If you follow some of the gurus, you might be led to believe that owners of apartment complexes are advanced in their real estate investing careers so most of them are ready to retire. When they sell, they’ll want to loan you the money to buy it. They’ll probably even want to give you 100% financing or at least carry back your down payment or just simply give you a master lease so you don’t even have to get a loan.

If you live in the real world, don’t believe it! While there are always needles in haystacks, you’ll never create a large business searching for them. While some owners of smaller multifamily properties may lack sophistication, be frustrated landlords, or be looking for an easy exit, you will spend a lot of time trying to find them and even more time convincing them to sell you their property with creative financing. Do you ever wonder why so many budding real estate investors get frustrated, say that the business is impossible, and give up? For many, it’s because they are chasing the needle in the haystack, and it wears them down.

The Untold Truth

So here’s the truth. The only way that buying multifamily property is easy is if you overpay for it, or if you have dump trucks full of cash that you are seeking to deploy and don’t care about maximizing your return. If you are disciplined, you will spend a lot of time looking for a good property in a good area at a good price. It’s hard work. My average effort to purchase one property requires that I underwrite around 100 deals, make offers on ten, and buy one. There is nothing easy about that.

If I were looking to get both a good deal AND creative financing, my odds and my effort would go up exponentially because now I’m looking for not only that one in 100 deal but also the one in 100 owner willing to play ball—giving you one in 10,000 odds of success. Even worse, the owners who are willing to play ball are usually the ones trying to get a price that the market doesn’t support so they are willing to use creative financing as the bait to hook an inexperienced investor into a property they are trying to get out of. You could call it the Greater Fool theory. Don’t be a fool.

Related: Multifamily Myths: 5 Reasons People Think Multifamily Investing Is Easy (& Lucrative!)

I’ve been in the REI biz for over 25 years. So here is some practical advice if you want to be around as long as I have and if you would like to be in the large multifamily asset class someday. Forget about trying to buy apartment complexes as the start to your career “because they are easy to buy and finance.” Instead, start small. Buy houses, and like in Monopoly, progressively move up to larger and larger properties over time. Document your track record and produce success.

Scaling Up

When you have enough experience to handle the responsibility, recruit investors to take the journey with you and produce results for them. As you grow, your investor base will grow and will allow you to continually scale into larger and larger properties. This is exactly how I grew my business from a shoestring financed by credit cards to a $50 million business fueled by over $25 million from accredited investors. When you have investors, you don’t need creative financing. You don’t need that one in a million seller. You can spend your time looking for excellent properties knowing that you can perform when you find that one in a hundred. And lenders will want to make you that loan because you are now an experienced operator with a track record and capital to back it up.

So is multifamily easy to buy and finance? With cash from your investors at the ready, it’s much easier to buy. Just make sure you are disciplined and buy smart. With experience from having built your business over time, lenders will be ready to finance your multifamily acquisitions. So this myth is true, but only if you are properly positioned. If you are trying to get into the multifamily game too early in your career this myth is absolutely debunked.

Investors: Do you agree? Disagree?

Leave your questions, comments and opinions below!

About Author

Brian Burke

Brian Burke is President/CEO of Praxis Capital Inc, a vertically integrated real estate private equity investment firm. Praxis operates on multiple platforms, currently managing active syndications for the acquisition of multifamily, single family, and opportunistic residential assets in U.S. growth markets. Brian has acquired over $400 million in real estate over a 30-year real estate investment career, including over 2,500 multifamily units and more than 700 single-family homes, with the assistance of proprietary software that he wrote himself. Brian has subdivided land, built homes and constructed self-storage, but really prefers to reposition existing properties. As a recognized expert, Brian has been a frequent speaker at real estate forums and conferences and served as co-host and real estate expert on the Fox News Radio show The Best of Investing.


  1. Brendan Kelly

    Great article, Brian! I’ve worked in the Multifamily valuation space for a long time but have only been investing in small rentals for a couple years now. I get impatient and want to jump to buying large Multifamily properties but advice from experienced investors such as yourself reassures me that I’m going about my investing in the right manner.

  2. Jerry W.

    Thanks for the article Brian. I appreciate your taking the time to share your experience. Since I am in a small market there are limitations, especially in a declining economy. One of the problems I have is is the good team. It seems to be just as hard to keep good team members as it is to recruit them. Those with great ability keep finding more opportunities, that often lead them out of our area.

    • Brian Burke

      Great point, Jerry. I’ve had the same experience in small markets and that’s why I try harder to avoid them now. Your local market, even if small, is a great place to learn the business and build experience and track record. When you move up to larger Multifamily you can exit the small market and go wherever the opportunity is because the scale makes it worth it. Plus, finding and retaining good teams is easier with larger properties in larger markets.

  3. Roy N.


    As I mentioned in a response to an earlier article in this series, we are 0 for 6 this year – soon to be ought in seven – and one of our investors is growing ansi/impatient with our lack of progress and {my gut tells me} will pull out. I tell them that if I am not comfortable putting my own money into a deal (we would be an equal, or better, partner), I certainly would not consider risking theirs. I am also completely transparent with our underwriting practices and results.

    How do you keep your investors interested and committed? In your instance, you already have the track record to which you can point. In our case, this is will be the first deal where we have not financed the entire purchase out of our own pocket.

    • Brian Burke

      This is actually a more profound point than many readers may realize. If you are new in the game please re-read what Roy just said. Why? Because this is the very recipe that leads to disaster. People have a tendency to buy bad deals because 1. They have the investor and they can. 2. They want to impress the investor. 3. They don’t want to lose the investor.

      Roy is playing it smart. I wrote in an earlier article that I would rather lose half of my clients than lose half of my client’s money. Roy, you just have to be patient, keep looking, and stick to your disciplined approach. If you lose your investor, so be it, you’ll find another one if the deal is good enough to pass your tests. If you get impatient and buy a bad deal and lose that investor’s money, your chances of finding another investor for your next deal is much lower.

      One way I keep investor loyalty is by offering the opportunity to make secured loans against my SFR flips. Another way is to have a lot of investors so that I’m less concerned with what any one of them is doing outside of my firm at any given time. I suggest that you continue to expand your circle so that if your investor moves on you have other folks to take the seat at the table.

  4. Jeb Brilliant

    Roy good luck. I imagine it’s gut wrenching to lose an investor bc you’re being careful with their money. How big of an apartment are you looking for?
    Brian this is gold, I’m really wanting to take the leap into apartments, I have some funding and a great team member that will get us a loan but can you talk about what other “team” members we need? I’m out of state but that seems to be the norm on the medium/large apartment deals.

    • Brian Burke

      First thing you need is to get connected with the brokers in the area that are selling all of the deals. 20% of the brokers will be doing 80% of the deals…know them. Second thing you need is a good property management group that is experienced in the asset size and class that you are targeting. Ask the brokers for their top three and then start looking for the names that are mentioned the most. You’ll also want a contractor, attorney, title company and insurance broker. Your broker and management company can make referrals. It’s all about networking!

  5. Troy Fisher

    Trying to finance my first commercial property, I am learning a lot about the process Brian, and having read so many books on the multifamily, you are absolutely right: It’s a big myth. From the investors whom I’ve talked too, the biggest and most frustrating parts of getting into multifamily though, are those smaller properties. I’ve found that investors that are trying to buy in the 5-20 unit space face the biggest challenges, it’s too big for residential financing, but too small for most commercial financing. Include the fact that it’s usually the beginning of the Multi-family track record, and it becomes even more difficult.

    I’m starting to call it the ‘middle-tier’, you’ve grown from single family investing and are looking to grow bigger, but in this ‘middle-tier’ there are fewer people and most of them are struggling to to learn how to do it, because the velocity of your investing accelerates once you’ve got a couple of years under your belt, and investors find it becomes easier to move into larger spaces. I’m glad someone is looking at this investing space and giving advice.

    I’d love to hear some more actionable steps to help the underwriting, finding, and funding of this middle tier investing space in future blog posts!

    • Brian Burke

      Very true comment, Troy, and it somewhat plays into my article last week about the myth of economy of scale. I think that anything between 5 and 100 units is a tough space, but it is one that you will likely have to endure and survive in your path of growth. If you do survive it you’ll be ready for the big league. I like your term “middle tier”…you are spot on in your observations.

      In the interest of transparency, I don’t do the middle tier, my minimum is 100 units and I prefer to stay above 150. I might have survived the middle tier but I don’t actively play there anymore…that might make me unqualified as an expert in that space in today’s market. However, I do think that a lot of what I said in this article series is certainly applicable across all tiers of multifamily. More to come!

  6. Great article Brian! Can you please tell us some of the approximate numbers for our education as to what may be a good deal? Like, how many doors, IRR, CAP rate, interest rate, repairs, which state, closing costs etc.
    Also the steps like how many times back-and-forth negotiation, inspection, counter-offer, earnest money etc..

    • Brian Burke

      Well, Austin…answering this question would be like answering “what food should I eat”. The complexity of that food question is evidenced by how many different kinds of restaurants are out there. Everybody likes different food, can afford different kinds of restaurants or has different dietary needs.

      So, I can’t tell you what you should do. But I can tell you what I do. I stick to 100 doors or more (because I’ve worked my way up to that level). I target an investor IRR of 14% to 17% (depending on the risk profile–and this is after my carve-out). I borrow at market rates (which are in the fours right now). I don’t care about cap rate (see my earlier articles as to why). I like value add properties that are underperforming, oftentimes due to poor physical condition so I’m not bothered by big repair budgets. And I focus on growth markets and right now Texas is a great growth market (but there are plenty of others, I just happen to have infrastructure there).

      • Christopher W.

        Brian – great article and series. Coming to the realization I wont be able to work my corporate jobs forever I am taking the plunge and even before buying my primary residence I am looking to invest in real estate to create a cash flow that can support me in 10 years or so. I am from CA but looking at Texas as well since there aren’t many deals here. I am looking at fourplexes or so, I have about $2-300k cash and looking at $1m total purchase. I would love any insight you could offer from contacts to great areas around Dallas to invest in. I agree with you myths – at then end of the day it is what you are comfortable owning and managing and what provides cash flow.

        • Brian Burke

          Tread very carefully, Christopher. Investing out of state in multis with no experience is a very risky thing to do. It would be worse to lose your money than to miss the opportunity. If you are sure that you want to proceed, I suggest getting connected with an agent in the Dallas area that has a lot of experience selling fourplexes. Search the BP forums to see if anyone has made referral suggestions and if not you should post a thread. There are a lot of folks on BP that are based in Dallas or work that market that can provide referrals there. Getting good advice will be critical to your success so choosing the right people to work with is very important. I can’t help you with contacts–everyone I know is selling much larger properties than quads and they would be the wrong resource for you. Setting aside the risk of going out of state, Dallas is a great market to be in right now. Just be very selective because I suspect that the small Multifamily market might be getting a bit frothy there. Buy low enough to give you a hedge against the downside and be prepared to hold through a cycle.

  7. Ben Leybovich

    I am really concerned for you, Brian…follow much logic.

    We all know that real estate investing is the hardest way to make money there is in this space. Brandon very capably proves to us that writing books is easier. With this in mind – quit messing around writing articles, it’s time for a book – this is what I want to say to you.

    On the other hand, with all of this talk about how difficult this game really is, and how much perspective is requisite for success, how in the hell are you going to title your book…?

    You’ve boxed yourself in, and this concerns me. Especially since my name (be it in small print under yours) is destined to be on the cover. We really do need to think this through and regroup…:)

    • Brian Burke

      You’re right, Ben…I have boxed myself in by just telling it like it is. Having a book to sell would displace my objectivity. Hey, wait a minute–you sell a course on how to invest in real estate, but you say that it’s the hardest way to make money. So right back at you!!

      Besides, if I ever were to write a book it wouldn’t likely be a “how to” book, but rather just telling my story of how I got here from there. I can tell that and still be objective. No rah rah books from me. LOL

  8. Nick Thompson

    I just listened to Ben Leboyvich’s podcast with Mark Ferguson . I live in Michigan in an area filled with “pigs”. As a new investor, it’s great to read posts like this, which really help when shaping my plan for the future. I’m really thinking multifamily in my area may be the way to go. Thank you for the valuable information!

  9. Courtney Merricks


    Great article, as a new investor especially looking at starting out wIth small multifamily properties in my market I have been getting beat out on offers by other investors looking to over pay for them. I am still interested in these type of properties, but I am now looking to switch my focus to SFR until I am able to find the right multifamily to acquire. Definitely thank you for taking time out of schedule to write this article.

    • Brian Burke

      No sweat, Courtney. Consider this, however: it’s always competitive. There are properties out there that you can acquire at a number that makes sense. One of two problems is holding you back: 1. You aren’t looking hard enough. 2. You aren’t evaluating the numbers properly. Try to figure out which it is and make the correction.

  10. Larry Russell

    Great article! I love this line, “Instead, start small. Buy houses, and like in Monopoly, progressively move up to larger and larger properties over time. Document your track record and produce success.” Like most investors, I’m anxious to ramp up my rental property count by buying a number of multi-family properties to expedite my path to financial freedom. Maybe I should take a step back and continue focusing on SF properties to establish a more proven track record before tackling a larger multi-family acquisition.

    • Brian Burke

      Yes, you should, Larry. But if you have some SFR rental experience you are probably ready to move up to small Multifamily. Try a duplex, triplex, or 4-plex. See how it works and then you never have to look back, only up (unless you want to and that’s OK too).

  11. Matt McCourry

    Great article Brian! Being the guy who read every guru real estate book imaginable, I am here to tell ya, the seller financing option more often then not gets you laughed at by the seller (and your broker)! I still ask for it, but only if its 100% financing and the price the seller requires is reasonable. The best thing I have found is forgetting about the special federal loan programs and going strait for a commercial loan with a local bank. It may cost a little in the short run, but for long term growth it makes it easier to scale. Down here in Myrtle Beach duplexes have treated me well, but it is the thought of moving into the space in which your operating that keeps me hustling! Again, great article as always!

    • Brian Burke

      Thanks Matt! I’ve just found that establishing a track record and then getting investors is a more reliable approach than just focusing on the remote chance of getting a good deal with seller financing. It can be done either way, but one just seems to work better than the other.

  12. Scott Stamps

    Brian, great article! I have been following the entire series. My questions pertains to the 100 underwrite/ 10 offers/ 1 deal ratio that you mentioned. This past weekend, I attended a seminar in the Dallas area. One of the speakers mentioned that their ratios are more like 600 underwrites/ 50 offers/ 1 deal. Much of the highly competitive market was attributed to institutional money entering the space. The speaker owns a national RE company that specializes in purchasing and holding large multifamily. They have a strong track record so i feel that they the numbers are true. After reading about the difficulties of the 5-100 units space and considering the 600/50/1 ratio for larger deals, is multifamily investing a viable business any longer? Even if someone can make it out of the small to middle market, the larger market appears to be saturated with institutional money that will accepts 2-3% Cap rates. In my market, this would be analogous to starting a business looking for distressed properties. There isn’t enough inventory to support a new business.

    • Brian Burke

      I don’t place too much emphasis on that, Matt. First of all, if it is institutional dollars that are blocking them they are likely in the class A space or in properties over $20MM. It’s very competitive there because there is a lot of money chasing inventory. I mostly stay in the $5MM to $20MM space because there is less competition from mom and pop investors (too big) and from institutions (too small).

      So is there enough inventory? It depends on how much capital you have to deploy, what type of properties you are seeking to buy and how much deal flow you need to consider the business viable…and how hard you want to work to look for it. For me, if I did 4-5 $10MM deals per year I’d consider that to be a fairly decent living…

  13. Brian Nguah

    I’m new to this and I want to get started in multifamily investing after selling my business. I keep on hearing that investors are very important and I do have some investors interesting in working with me once I make a move. However, I do not know how to pay them once they invest. Does it work like the stock market, where if someone invested 20k into a property valued at 200k they are entitled to 10% of the profits until they cash out?

    • Brian Burke

      It’s a bit different than that. You add up all of the investor contributions and divide that investor’s contribution by the total. That’s how much they get from the total investor distributions. But typically you, as the investment sponsor, would be entitled to some of the profits for putting the deal together and managing the process. How that division is calculated is entirely up to you and your investors. There are almost as many structures as there are partnerships.

      • Brian Nguah

        I see. Just to elaborate more, I am looking to purchase a building with a friend. The property is worth 500k and I put 75k down and he puts 25k down. I will be doing most of the work and everything is owned and operated by myself, he is just an investor. Given that he put down 25% of the total down payment, is he entitled to 25% of the NOI, or 25% of the total revenue? Do I calculate his percentage based on the down payment or the total purchase price?

        Also, lets say I purchase the same property with him, but he has good credit and I would like to apply for the mortgage with him, but I will be making the down payment. How would that work?

        • Brian Burke

          The split is of cash flow, not NOI, and the cash flow can come from operating income, refinance proceeds and sale proceeds. If you are both splitting the work, your 75/25 split works fine. If you are doing all of the work and your partner is just a passive investor, you should get a higher split as compensation for doing all of the work. How much more is up to you both.

          To keep it simple, let’s say you agreed that doing all of the work (and bringing the deal, signing on the loan, etc) is worth 50% of the cash flow. In that case, you would get 50% for doing the work and 25% of the other 50% for investing 25% of the cash. Your passive partner gets 75% of 50%. When you sell or refinance, first you two get your invested capital back and then the remaining cash is split as described above.

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