Looking to get into multi fam investing - Need experience!

[Account Closed]

Hello Bigger Pockets Fam! 

I'm excited to be on here with fellow REI's! I'm looking for a little bit of advice right now and wanted to put it out there!

I’m 30 and work in professional sales, I make decent income and have a little over a quarter million invested in the S&P 500 right now. I’ve always been drawn to multi family real estate but never pursued it.. however a few months ago I got really into educating myself on it all. I read “Crushing it in Apartments”, “Multi Family Millionaire 1&2” , “The Real Book Of RE”, and also did a course from Grant Cardone! 

I even re read the “Multi fam millionaire 1&2” and took notes my second round. Needless to say, I have a lot of information and I have the processes sort of outlined - literally hundreds of pages of notes - but I only have book knowledge which is my problem. I don’t have any real experience actually dealing with banks for financing or looking at real OM’s or seller documentation or actually underwriting a multi family … so I’m really not familiar with any of this stuff other than just the text instructions, you can say. 

I’m trying to narrow down a plan and process of what to focus on and learn how to do and I feel the most important thing for me to learn is how to actually underwrite a real deal with real documentation opposed to just reading about it. I want to practice this over and over again but I don’t know how to acquire this info other than actually speaking with brokers etc.. is there a better way to do this for practice ? 

I’m ideally wanting to get a 16 unit C class apartment and value add but again I’m lacking all the experience on this and I’m 100% not comfortable underwriting deals until I’ve done it numerous times so I’m just wondering what you’d think I should do to acquire this knowledge? Are there practice sites for this type of stuff or what? 

Thanks again! Kind wishes! 

[Nathan Gesner]

Quote from @Account Closed:

Welcome to the BiggerPockets forums!

It sounds like you're over-analyzing it and you've paralyzed yourself with fear.

What happens if you save up $50,000 to invest in a single-family home, it turns out the entire transaction was a scam, and you lose the $50,000? Do you die? Does someone take your kids, freeze your bank accounts, fire you from your job, or throw you in prison? Of course not! You lose the $50,000 but your life goes on and you'll be more wary of scams in the future. 

Real estate is a very forgiving investment vehicle. People from the 70's and 80's didn't have BiggerPockets, hundreds of books on investing, calculators with graphs and charts, or any of the fancy tools we have today. They saved up money, bought a nice house in a nice neighborhood, and they rented it out for a couple decades. They made mistakes, learned along the way, and held on to the investment knowing it would produce a profit. 30 years later, they're millionaires without any formal education or hundreds of pages of notes.

Have you ever jumped off a tall bridge or cliff? I used to spend my summers jumping off cliffs and bridges in Oregon with heights of 30-70 feet. When a new person shows up to try jumping for the first time, they are often paralyzed. They stare at the water forever, hoping their fear will go away or someone will give them a secret that guarantees they will be successful and safe. The truth is they just need to jump! Once they jump in from a 20- or 30-footer, they'll realize it's not going to kill them and they can enjoy themselves. Same concept.

There's nothing wrong with educating yourself and making better choices from the start, but you're taking notes as if some magic formula will suddenly appear and make real estate investing a simple, fool-proof process. The truth is, you need enough information to understand the general concepts, you need some money saved up, and then you need to jump in! You'll get through the first deal and realize you've been wasting time looking for the answer when action was what you needed. You'll refine your education and ability from there.

If you can't get off the pot, look for an investor group and find someone willing to let you shadow them. You'll find most investors are not sophisticated people with secret formulas hidden from the public. We save money, find a solid property in a market we believe in, buy it, then do our best to manage it well. Hold on long enough and time will erase your mistakes.

[Account Closed]

Hey Nathan, just wanted to say I appreciate your response! 

Cheers, friend! 

[Kelly Asmus]

Best way to gain experience is buy a Multiunit like a duplex or a tri and live in one unit, or do a house hack and live in it. Learn how to be a landlord, do the maintenance, work with the contractors on any repairs, learn how to do everything with your properties. You can do a low down 5% since you are owner occupying and get boots on the ground experience. Read the lease agreement front to back, join networking groups of other investors. 

You can read all the books you want, watch every webinar on BP and talk to everyone but at some point you are either a real estate investor by doing it or you aren't. 

Good luck. Everyone starts with the first one and it gets easier and easier from there!

[Drew C Grossman]

@Account Closed - good to see your involvement and great questions! This is my perspective on the situation. 

Have you purchased/owned real estate or will this be the first deal? Regardless, you should start small and learn as much as possible with least amount of risk. And the only way you can learn is to physically do it like you touched on! I have been in real estate for years, owning many single family and commercial buildings and have just started dabbling in the past year into small multi family. New construction Duplexes / Tri / Quad ect

You nailed it, book knowledge will only get you so far. The problem with this is it’s ESSENTIAL to know what’s realistic in each market..I cannot stress this enough! You need to know what type of opportunities money can buy out there and what the probability is you will get that deal..how will you find it ect? What are the trade offs? This is fundamental and how you will develop a framework to analyze what deals are good and what deals are bad. This unfortunately just takes time and you can’t speed it up, just need to analyze deals like you’re deciding to put money on the table or not. Overtime you will get better. 

Why do you want a 16 Unit c class deal? What are you going to do with it..wholesale, buy yourself, syndicate? Where do these deals even exist? What markets? How much are you expecting to pay

The smaller more focused your goal the easier. Certainly don’t want to discourage you of thinking bigger but just realize there will be a lot more things to figure out and being newer just adds a lot of risk. If I were in your position, (assuming this is your first exposure to real estate) since you mentioned you are high income earner, I would start by buying your first single family or duplex. figured out what your requirement are, how you want to finance it and then work backwards.

Go find your market based off this! Best of luck and happy hunting

[Drew C Grossman]

Quote from @Nathan Gesner:

Quote from @Account Closed:

Welcome to the BiggerPockets forums!

It sounds like you're over-analyzing it and you've paralyzed yourself with fear.

What happens if you save up $50,000 to invest in a single-family home, it turns out the entire transaction was a scam, and you lose the $50,000? Do you die? Does someone take your kids, freeze your bank accounts, fire you from your job, or throw you in prison? Of course not! You lose the $50,000 but your life goes on and you'll be more wary of scams in the future. 

Real estate is a very forgiving investment vehicle. People from the 70's and 80's didn't have BiggerPockets, hundreds of books on investing, calculators with graphs and charts, or any of the fancy tools we have today. They saved up money, bought a nice house in a nice neighborhood, and they rented it out for a couple decades. They made mistakes, learned along the way, and held on to the investment knowing it would produce a profit. 30 years later, they're millionaires without any formal education or hundreds of pages of notes.

Have you ever jumped off a tall bridge or cliff? I used to spend my summers jumping off cliffs and bridges in Oregon with heights of 30-70 feet. When a new person shows up to try jumping for the first time, they are often paralyzed. They stare at the water forever, hoping their fear will go away or someone will give them a secret that guarantees they will be successful and safe. The truth is they just need to jump! Once they jump in from a 20- or 30-footer, they'll realize it's not going to kill them and they can enjoy themselves. Same concept.

There's nothing wrong with educating yourself and making better choices from the start, but you're taking notes as if some magic formula will suddenly appear and make real estate investing a simple, fool-proof process. The truth is, you need enough information to understand the general concepts, you need some money saved up, and then you need to jump in! You'll get through the first deal and realize you've been wasting time looking for the answer when action was what you needed. You'll refine your education and ability from there.

If you can't get off the pot, look for an investor group and find someone willing to let you shadow them. You'll find most investors are not sophisticated people with secret formulas hidden from the public. We save money, find a solid property in a market we believe in, buy it, then do our best to manage it well. Hold on long enough and time will erase your mistakes.

Well said, Nathan!

[Cory Carlson]

Strategy can largely depend on available capital. If you're looking for a 5+ unit building as a buy/hold or value-add build your team who has the experience underwriting, arranging financing and have them educate you. A good broker will be able to present you analysis outlining your cashflow, debt effects on yield and building upside/strategy. A good mortgage broker can help educate you on loan-to-value restrictions, how to calculate them and understanding of conditions/limitations of financing. 

Some investors want to learn a more hands-on approach and owner-occupy and get familiar with being a hands on investor. I have clients on all end of the spectrum and each have their pros & cons. Some with larger amounts of capital, find their time is worth focusing on their work and they can contract out management and fixes. Others may occupy, self manage, swing a hammer for their own fixes and thats how they get started. 

Strategy changes from those with $100k and those with $1m. 

[Richard Loniewski]

It's not too difficult if you have the right tools and someone to show you the process, message me I can point you in the right direction

[Pierre-Frederick Gauthier]

Quote from @Account Closed:

Hello Bigger Pockets Fam! 

I'm excited to be on here with fellow REI's! I'm looking for a little bit of advice right now and wanted to put it out there!

I’m 30 and work in professional sales, I make decent income and have a little over a quarter million invested in the S&P 500 right now. I’ve always been drawn to multi family real estate but never pursued it.. however a few months ago I got really into educating myself on it all. I read “Crushing it in Apartments”, “Multi Family Millionaire 1&2” , “The Real Book Of RE”, and also did a course from Grant Cardone! 

I even re read the “Multi fam millionaire 1&2” and took notes my second round. Needless to say, I have a lot of information and I have the processes sort of outlined - literally hundreds of pages of notes - but I only have book knowledge which is my problem. I don’t have any real experience actually dealing with banks for financing or looking at real OM’s or seller documentation or actually underwriting a multi family … so I’m really not familiar with any of this stuff other than just the text instructions, you can say. 

I’m trying to narrow down a plan and process of what to focus on and learn how to do and I feel the most important thing for me to learn is how to actually underwrite a real deal with real documentation opposed to just reading about it. I want to practice this over and over again but I don’t know how to acquire this info other than actually speaking with brokers etc.. is there a better way to do this for practice ? 

I’m ideally wanting to get a 16 unit C class apartment and value add but again I’m lacking all the experience on this and I’m 100% not comfortable underwriting deals until I’ve done it numerous times so I’m just wondering what you’d think I should do to acquire this knowledge? Are there practice sites for this type of stuff or what? 

Thanks again! Kind wishes! 

 Hello Kory!

I'm from Ottawa aswell and in the multi-family space. Great initiative with the reading and good on you for building that portfolio. To practise underwriting, especially as a beginner, you can use DealCheck.io . It's free. Eventually, especially if you're looking at 10+ units, you'll want to use more complex Excel spreadsheets and base your underwriting on the right assumptions.

I'd recommend you check out OREIO.org (Ottawa Real Estate Investors Organization). It's a monthly educational real estate event, and they have a 15-minute networking segment. There's also plenty of time to meet new people before and after. I'd also recommend that you find yourself a local mastermind and/or a mentor and coach, as there is little to no information available on the Internet despite the immense return cash for keys value-add potential there is here in Ontario. I'm apart of the WealthGenius mastermind, getting mentored by Alfonso Cuadra which is from Ottawa and has 700+ doors, and that's changed the game for me.

I sent you a PM- would love to get on a call and see what your goals are and if there's anyway I can help you get there.

Cheers,

Pierre

[Paul Sverdlin]

@Kory Louvelle @Pierre-Frederick Gauthier

Great post Kory. I am in Toronto, been investing in single family in Ottawa for the last 4 years or so and also been looking to expand into multi-family. The prices in TO are sky high compared to Ottawa. It is also a very stable market and a next-largest hub for immigration outside of GTA.

It is easy to say "just jump into it". With 15 years of investing behind me, I'd say it is quite possible to loose big money investing in real estate. When those losses go into hundreds of thousands, the recovery takes years if not decades. It also prevents one from participating in other deals, stalling any progress and emotionally draining the entrepreneur in you. Thus I fully support your choice of going with books and courses prior to jumping in.

How to start: my approach would be to start slow. A 3-plex or a 4-plex would be a decent entry point. There are a lot of legal issues around being a landlord in Ontario, something our US friends can't usually appreciate. Having a portfolio of SFR in Ohio I can tell that its a night and day to be a landlord in US vs. Canada.

Let's connect, perhaps we can do something jointly!

[Account Closed]

Thank you to everyone whose contributed to this post, its excellent to hear so many view points and get talking with other investors! Thank you, again! 

I wanted to add a little bit more into what I'm thinking..

I am trying to avoid everything under 16 units entirely as from my understanding, which Grant Cardone echos, anything less than 16 units doesn't provide the pure cashflow needed to have a property manager as well scale as well as the added risk of few tenants. 

I'm not really looking for a single, duplex, tri etc.. as in my opinion that's very high risk as if you have a 4 flex and lose 1 tenant you're now only 75% occupied and lose 2 tenants you're now 50% etc.. I believe the smaller units are also the most foreclosed upon out of everything.. the higher the units the more tenant mix you get which would also mix up their income sources to diversifying thus limiting risk from few employers etc.. 

so yes, I want in the neighbourhood of 16-32 units and ideally BRRRR the thing and do a cash out refinance and pull my money back out of the deal and then invest into a another place with double the units to employ the Stack method (see Multi Fam Millionaire Vol 1 for this method) and just keep repeating this process..

I want to limit risk as much as possible which makes me uncomfortable putting my whole investment account into a deal so I'd like to take at least $100K and "Potentially" partner with someone to jump the units, but I really dont think there's a chance in hell to get that many units with that little capital... I know the traditional lenders are normally in a range of 1=3 or 4 so I think id probably have to buy a fixer upper, employ BRRRR etc if im only using $100K.. Of course my plan is subject to change as I learn new information, this is just a rough idea of what I'd LIKE to do... now getting there is a lot harder than just saying what I plan to do!

Thanks for your time and feedback friends! Much love! 

[Ramis Zaheer]

Hi @Account Closed, I started out with buying small multi family properties but now I am fully transitioned to larger multi family properties. Building out your team and having the right systems and process for you to scale is the crucial foundation.

Happy to grab a coffee and chat about real estate, I am in Toronto also!

[Zorya Belanger]

Hi @Account Closed

I get it. You want to practice analyzing dead and that’s exactly what you should be doing. I’m part of a group of mostly Canadian investors and we have weekly zoom calls analyzing deals together. We initially called it the “100 deals call” as some people say you need to look at that many before you recognize/find a good one. 

Message me if you’d like more info or want to chat.  I’m in Edmonton and investing in Alberta & Texas multifamily. On track to close on about 400 doors early next year with my team. :)

[Jay Thomas]

you are just talking about it.

No amount of reading or watching educational material will give you the same level of experience as actually purchasing a multi-unit property and getting your hands dirty with the day-to-day operations. Even if you're only owner-occupying one unit, you can still gain valuable knowledge on everything from leasing, tenant relations, and maintenance to the legal aspects of being a landlord. Furthermore, you can use an FHA loan with only a 5% down payment to get started.

In addition to gaining practical experience, you should also join networking groups and read your lease agreement cover-to-cover. This will help ensure that you are in full compliance with all the legal requirements that come with being a landlord. By taking these steps, you will be well on your way to becoming a successful real estate investor!

Good luck!