Landlording & Rental Properties

Here’s How I Plan to Get From 83 to 1,000 Rental Units

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7 Articles Written

With 83 doors, I’m currently a long way away from my goal of 1,000. Since purchasing one large multifamily, I’ve gained valuable experience in operating an apartment complex. Most components to building a multifamily business are universally necessary. Anyone who owns a property with 75 to 100 units, ultimately realizes that the economies of scale favor larger properties. Leveraging operating costs is a valuable tool to maximize profits. I’m looking for bigger deals, but I’m open to smaller ones too.

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I’m Planning to Buy Right

I was out to dinner with a commercial developer last week. He said something that resonated with me: “You don’t make money the day you sell, you make the money the day you buy.” True. But buying for the right price implies acquiring good debt at a favorable rate.

In the past thirty days, we've seen a spike in mortgage rates as the 10-year treasury has been lifted to three-year highs. This move implies that cap rates are going to be compressed and possibly move up to correlate with the increased cost of borrowing. This hasn't happened quite yet, but I'm anticipating this move. Borrowing from lenders just got more expensive. Hypothetically, if asset prices do not move in tandem with the rise in interest rates, net cash flow numbers will decrease. I'm preparing to bring extra equity to secure favorable loans. In a market with rising rates, a low-interest-rate assumable loan can become a tool to negotiate with.

Related: How to Use Commercial Real Estate to Add $1M to Your Net Worth in 5 Years

Speak with lenders and always be willing to negotiate.

Reaching out to lenders now is a terrific idea, and one that I’m actively pursuing. Finding competitive loans in this environment can be crucial to adding value to deals. I make it a habit to call lenders throughout the week to simply give them a wink and a nod for when a deal emerges. Leverage can be a powerful tool if used correctly. When used improperly, it can be a catalyst for financial ruin. If interest rates continues to rise, smart debt with a reputable lender can make life much easier. Get those ducks in a row now.

Property Management Choice is Vital

Property management is the engine that keeps the machine running. Bad property management can create nightmares. Solid property management can become a gold mine to scale with. After prospecting an area, I sift through the property management companies on Google and ask brokers for recommendations. Once a few have been chosen as candidates, I like to call the properties they manage and pretend I am a prospective tenant. It’s a test to see first-hand what the process entails. The way a property management company handles customer experience and tenant showings is vital. I investigate as much as possible before making a choice.

 

Brokers Can Be Your Best Source to Find Deals

Brokers are a component of the team. I’m a firm believer in consistently reaching out to brokers to remind them you’re there. They are the marketing boots on the ground to bring you listings before they reach the masses. Half of my property-seeking days are spent reaching out to brokers and reminding them that I’m looking. I also reinforce my criteria so that a clear and concise product is in mind for the broker. As is the case with most multifamily players in this market, money isn’t the problem right now, deals are.

Consistently Making Offers Has to Become Habit

I tend to have very strict underwriting guidelines and have room for improvement here. I take a risk-averse strategy that probably excludes doable deals. It insures success on the executed deals. In this market, deals aren’t there for the taking the way they were in 2013. An investor has to have a coherent strategy for finding off-market deals or having brokers bring them deals. Aimlessly hoping deals will fall in my lap is not a winning strategy. Reaching out to brokers and reminding them of buying criteria is an excellent thing to do. I am striving to do more of this every week. The chances of getting a deal done are proportional to the amount of deals analyzed. The amount of offers are proportional to the latter.

Related: Don’t Assume Commercial Investing is Out of Your Reach

This is a Marathon, Not a Sprint

Looking at the past week of the stock market, it feels like we are at an inflection point. Interest rates spiked, and the collateral damage isn’t fully priced in. Volatility has returned in a major way. With so much uncertainty, I’m reverting to my poker days of being a grinder. This is a time to be patient and avoid mistakes. Real estate is a war of attrition and mistakes can become illiquid sizable setbacks.

How do you plan to increase your doors?

Share your tips and tricks in the comments below!

Gus Ross is a managing member of Ownup Capital. An accredited investor with goals of expansion, Gus is always evolving strategies for acquisition and analysis of properties throughout the country. An avid reader and seeking to learn and grow everyday, he has ultimate goals of philanthropy, business, and personal growth. A visitor at local REIA meetings, he is always seeking to network and meet investors and align goals and interests. Ownup Capital

    Raymond Dobbs from Bowie, Maryland
    Replied over 1 year ago
    Great Post! I am new to Multifamily investing still working on getting my first property. After reading this I now know I am going in the right direction. Thanks
    Gus Ross Investor from Delray Beach, FL
    Replied over 1 year ago
    Thanks Raymond and best of luck!
    Jason Johnson Flipper/Rehabber from Lehi, UT
    Replied over 1 year ago
    I like your quote ” The chances of getting a deal done are proportional to the amount of deals analyzed. The amount of offers are proportional to the latter. ” Very true!
    Gus Ross Investor from Delray Beach, FL
    Replied over 1 year ago
    Thank you very much Jason!
    Rama Krishna from Cupertino, California
    Replied over 1 year ago
    Hi, I want to know how to connect with brokers being remote. Also how/ why will they entertain newbies? Thanks, Rama
    Gus Ross Investor from Delray Beach, FL
    Replied over 1 year ago
    Hey Rama and thanks for your question. It really can be as simple as dialing brokers in the area you’re prospecting. Once you reach someone on the other end of the telephone it’s all about selling yourself and why you’re a candidate to close deals. It truly is a relationship business and there are brokers out there always willing to meet new investors/buyers that can help align interests. Keep calling and be persistent. Hope this helps!
    Audrey
    Replied over 1 year ago
    Great post, Gus! I’ve been researching residential real estate investing versus commercial real estate, and had not considering multi-unit dwellings yet. Can you expound a bit more on your suggestion of a “low-interest-rate assumable loan?” Also, what about lease options? Is this a good way to go? Thank you!
    Clery J Galarza
    Replied over 1 year ago
    I have two, one is fha and the other is an investment 4,3 units I’m doing really good. Now I’m thinking in refinancing one of my property and get my 3 one. And for the fha get my 4 one. And after that go commercial. This is my plan.
    Clery J Galarza
    Replied over 1 year ago
    I’m thinking baying my 3 family home.
    Dave Rav from Summerville, SC
    Replied over 1 year ago
    Great post! I like your take(s) on the current market climate
    Chris Behne from Delray Beach, Florida
    Replied over 1 year ago
    Great article as usual. I always take away a great deal from your writing.
    Andrew Syrios Residential Real Estate Investor from Kansas City, Missouri
    Replied 12 months ago
    Great plan Russ and good luck getting there!
    Aaron Wright Investor from Collinsville, Illinois
    Replied 12 months ago
    “Volatility has returned in a major way. ” If that were true, my option selling strategies would be making more money.
    Steve Methiew
    Replied 12 months ago
    Research a lot on people you are hiring and select the reputable team that you can trust.
    Kj Rustom from Kennesaw, Georgia
    Replied 12 months ago
    Great article…From a liability point of view, are your properties in different LLCs ? With so many properties isn’t it an operational/accounting nightmare having to keep up with so many companies etc ?
    Arthur J. Rental Property Investor from West Chester, PA
    Replied 12 months ago
    Hey People. Curious about financing your own purchase … Lest say you have a property with a partner, you can purchase at say 300K. you have the money to buy cash. Would you purchase with you own money and get a rate of return on the property.. Can it be done legally and what are the tax ramifications… Yes I know other peoples money but in this rate environment of 6% on mulit family … I wonder if there are other options.