Real Estate Deal Analysis & Advice

The #1 Thing Newbies Should Do to Get Started With Multifamily Investing

Expertise: Business Management, Commercial Real Estate, Landlording & Rental Properties, Real Estate Deal Analysis & Advice, Mortgages & Creative Financing, Personal Development, Real Estate Investing Basics
126 Articles Written
analyze-multifamily

Interested in getting started with multifamily investing but can’t find any good deals? If so, chances are you’re not making enough offers.

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Most real estate investors who have done some single family house investing are a bit spoiled with regard to finding their next house. While good deals aren’t just laying around, with some persistence you could fairly easily pick up a new rental property every few months without too much trouble.

Single family houses are plentiful, and they’re fairly easy to value if you know the comps in an area. So it’s not too difficult to make lots of offers in a short period of time. As a result, you can get deals done consistently.

With multifamily investing, the principle is the same — the more offers you make, the more deals you do.

The problem is that there are fewer of them, and they’re harder to analyze.

Multifamily real estate is a numbers game like any real estate. When I first got started, it took me four hours to answer the question, “What is the most I should pay for this building and why?” That’s way too much time. Now it takes me 10 minutes to analyze a deal and make my first offer.

RelatedYour Complete Guide to Analyzing a Property in Just 10 Minutes

The problem is that if it takes you too long to analyze a deal, you’ll make less offers and get less deals done. Or worse, you’ll feel so overwhelmed that you never get started.

multifamily-investing-experience

The Solution: Get Good at Analyzing Deals

That’s why I advise newbie multifamily investors that the number one thing they should do early on is to get good at analyzing deals quickly.

Yes, there are other things to work on, such as identifying where you’re going to buy apartment buildings, raising money, and building your time. But if you put a gun to my head and asked me what the FIRST thing one should do to get started with multifamily investing it’s to start analyzing deals.

Follow these two steps to get GREAT at analyzing deals:

  1. Have a good analysis tool.
  2. Analyze as many deals as you can.

Step #1: Get a Good Multifamily Deal Analyzer

To help with Step #1, you could build an analysis tool yourself, but this will take you a long time. It’s probably better to purchase one (just search the BiggerPockets Forums for “Multifamily Deal Analyzer” to get some recommendations).

Having a good analysis tool will cut down on the process immensely. Don’t embark on this journey without one.

Step #2: Analyze as Many Deals as Possible

The next step is to find deals to analyze. Start with www.loopnet.com and search for the kind of deals you’re interested in. Contact the broker and request the marketing package and financials.

Then model the financials using the deal analyzer to determine what the TRUE value of the property is and how much you can offer.

In the beginning, it might take you a while to get the hang of it. But after a couple of dozen times, you’ll get faster and more accurate.

After a while, you’ll start using phrases like, “What do you think the building will trade at?” and “What is the prevailing cap rate for buildings like this?” You’ll start sounding less and less like a newbie, and your confidence will skyrocket. Brokers, sellers, and even potential investors will start to take you seriously.

multifamily-valuation-myth

The Key to Doing More Deals

The rule of thumb is that you’ll need to analyze about 100 deals to get one to close.

So you can work backwards from that to give you an idea of how long it will take for you to do a deal.

If you want to do a deal within a year, then you’d have to analyze at least two deals per week. If you want to accelerate that timeline, then you’ll have to analyze more deals.

Related: Newbies: Don’t Forget These 4 Areas When Evaluating Multi-Unit Deals

A lot of newbies want to do their first deal in the first three months of getting started but are only dedicating a few hours per week. Deals aren’t just going to fall into your lap. You’re going to have to work for it. Multifamily is like any other real estate strategy; it’s a numbers game.

So get out there, get yourself a good deal analyzer, and start analyzing deals. Not only will your confidence soar, but you’re more likely to get that first deal done sooner!

Newbies: How many deals do you analyze in your average week? Any question about how to get started in multifamily analysis?

Leave your questions below!

Michael Blank is a leading authority on apartment building investing in the United States. He’s passionate about helping others become financially free in 3-5 years by investing in apartment building deals with a special focus on raising money. Through his investment company, he controls over $30MM in performing multifamily assets all over the United States and has raised over $8MM. In addition to his own investing activities, he’s helped students purchase over 2,000 units valued at over $87MM. He’s the author of the best-selling book Financial Freedom With Real Estate Investing and the host of the popular Apartment Building Investing podcast Apartment Building Investing podcast.

    Nick B. Investor from North Richland Hills, Texas
    Replied almost 4 years ago
    What if your analysis constantly shows that the asking price is 30%+ higher than a reasonable price? That’s been my experience with listed properties.
    Michael Blank Rental Property Investor from Northern Virginia, VA
    Replied almost 4 years ago
    Hi Nick … you’re right, it’s been tough to find good deals. It’s really a numbers game, like most of real estate investing. In times like these it’s a matter of creating more deal flow from (1) more brokers, (2) networking and (3) direct mail etc. Nevertheless, analysis is key , and it’s one of the first things a newbie MF investor should focus on.
    Tim Puffer from Lansing, Michigan
    Replied almost 4 years ago
    Find unlisted properties. Send out a few mailers. I recently sent out 8 handwritten notes to targeted duplexes I was interested in and had 4 people respond back to me.
    Nick B. Investor from North Richland Hills, Texas
    Replied almost 4 years ago
    That’s what I started to do – sending mailers to long time apartment owners. Although, I have my doubts these owners would take out-of-the blue letters seriously. After all, an 100+ units apartment complex owner is a little more sophisticated than a duplex owner to fall for a handwritten note 🙂
    Jerry W. Investor from Thermopolis, Wyoming
    Replied almost 4 years ago
    Multi family is rough in my town, I can only think of 5 multi units greater than 4 plexes and I own one of them, and I have already talked with the owners of two more.
    David Rocca Investor from Hollywood, Florida
    Replied almost 4 years ago
    How did you find those duplexes to write letters to?
    Steve Vaughan Rental Property Investor from East Wenatchee, WA
    Replied almost 4 years ago
    David, I like driving around in 70’s build neighborhoods for plexes. Long-time owners that own personally (especially) get a postcard from me. I also look at craigslist for rent postings. It will usually state if it’s a plex. If that address is managed by one of the poorer management co’s, it’s a bonus!
    David Rocca Investor from Hollywood, Florida
    Replied almost 4 years ago
    How do I find out which are built in the 70’s?
    Ayodeji Kuponiyi Investor from King of Prussia, Pennsylvania
    Replied almost 4 years ago
    Great article Michael! I downloaded your deal analyzer and going through the tutorial videos. So far so good. Thanks!
    Michael Blank Rental Property Investor from Northern Virginia, VA
    Replied almost 4 years ago
    Thanks Ayodeji … !
    Steve Vaughan Rental Property Investor from East Wenatchee, WA
    Replied almost 4 years ago
    Thanks for sharing this article, Michael. I like plexes for direct marketing, too. I also like posting specific ads on craigslist in real estate for sale. For larger complexes, it’s seems to be much more involved. I meet who I can at meetups and rental association meetings and try to build relationships. It’s a work in progress in a small market without much out there for me, like Jerry. Being able to perform quick, down and dirty analysis as a first screening tool is key like you recommend. Comes with practice and knowing your market. Stick to your criteria and don’t become a buyer at any price just to acquire. Thanks again!
    Steven Chang from Plano, Texas
    Replied almost 4 years ago
    Thanks for the article! Though any reason the BiggerPockets rental property calculator isn’t good enough? What does it not consider that a good multifamily deal analyzer should?
    Michael Blank Rental Property Investor from Northern Virginia, VA
    Replied almost 4 years ago
    Hi Steven, sure! the BP calculator is a great start! But it’s faily simplistic (good for starters!) and is most appropriate for smaller rentals. It also does not accommodate investor scenarios, or the ability to model value add deals over time. But, yes, a great place to start! (in addition to what I mentioned in the article).
    Patrick Hall from Ridgefield, Washington
    Replied almost 4 years ago
    Financing….that’s my challenge…how do you get to the point where you are ABLE to write and offer after your find the right offer? Help?
    Nick B. Investor from North Richland Hills, Texas
    Replied almost 4 years ago
    That’s an easy part. I know several experienced people who would partner with me and provide financing and the rest of it if I bring them a good deal.
    Matt Scheer from Cincinnati, Ohio
    Replied over 3 years ago
    Am I okay starting with the third or fourth largest county in a smaller metropolitan area, or would I be better served by the sheer volume that the top two counties provide?
    Michael Blank Rental Property Investor from Northern Virginia, VA
    Replied over 3 years ago
    Hi Matt – start there! If you run out of deals, than expand. Whatever you do, though, get started -;)