Trying to learn about MFR

24 Replies

Hey All,

I'm brand new to real estate investing and am trying to learn more about MFR. How would you guys recommend going about this? If you have any suggestions on books or other educational materials, please let me know! I live in SD, California and want to invest out of state because I am interested in cash flow, which doesn't seem very possible here with the current real estate environment. Thanks a lot!

Best,

Eric

Originally posted by @Ali Boone :

What are you trying to learn about MFRs?

Hey again Ali, thanks for the reply. To be honest, I am not sure where to start. I was hoping there were some books that cover a broad spectrum of information regarding MFRs. I am trying to figure out what I should learn before actually investing in them.

I would just start reading about landlording, buying rental properties, etc. The basics are the same regardless whether you’re managing a single family, 4-unit, or 20 unit.

You need to learn about finding qualified applicants, vetting them, leases, rent, fair housing, eviction, security deposits, etc.

The main differences on SF and MF is where you find them and how you finance them. The day to day process is the same (until you have large enough MF that you’re hiring staff)

Originally posted by @Eric Levy :
Originally posted by @Ali Boone:

What are you trying to learn about MFRs?

Hey again Ali, thanks for the reply. To be honest, I am not sure where to start. I was hoping there were some books that cover a broad spectrum of information regarding MFRs. I am trying to figure out what I should learn before actually investing in them.

Well the first consideration should be- if you are talking about MFRs, are you talking about residential MFRs (2-4 units) or commercial MFRs (5+ units)? Those are totally different animals.

Eric, I have read and recommend you to read the ABCs of Real Estate Investing by Ken McElroy, a Rich Dad adviser. It's focused on MFR rather than SFR. I'd spend the $15 because I think it's more worth you time digging through the internet for free, but scattered, information.

Originally posted by @Ali Boone :
Originally posted by @Eric Levy:
Originally posted by @Ali Boone:

What are you trying to learn about MFRs?

Hey again Ali, thanks for the reply. To be honest, I am not sure where to start. I was hoping there were some books that cover a broad spectrum of information regarding MFRs. I am trying to figure out what I should learn before actually investing in them.

Well the first consideration should be- if you are talking about MFRs, are you talking about residential MFRs (2-4 units) or commercial MFRs (5+ units)? Those are totally different animals.

Ah, good to know. I don't really have a preference, but due to capital restraints, I think I will start with residential MFRs.

Originally posted by @David Lao :

Eric, I have read and recommend you to read the ABCs of Real Estate Investing by Ken McElroy, a Rich Dad adviser. It's focused on MFR rather than SFR. I'd spend the $15 because I think it's more worth you time digging through the internet for free, but scattered, information.

Thanks for the recommendation! I will check it out.

Great question @Eric Levy ,have you considered multi-family syndication deals? These types of structures are a great way to branch into the multi-family space especially when investing out of state. Also, you do not have to worry about managing the properties and dealing with due diligence and tenant issues ect. I solely invest in multi-family syndications for cash flow, equity potential and REAL passive income since each deal is 100% passive. Just a thought.

@Eric Levy Hi Eric, Sounds like you are just a bit behind where I am in the search for Multifamily. I've found great information off the podcasts (especially when stuck in SoCal traffic! - #280 most recently I found helpful and motivating) and I just recently picked up a great book The Real Estate Recipe, Making Millions by Buying Small Apartment Properties In Your Spare Time by Brian K. Friedman. 

At least you've narrowed down your interests. That was pretty difficult for me... I'm finally at Multifamily to include Mobile Home Parks (MHP). Best of luck in your search. Feel free to reach out, if I can help, I will. 

@Christy Greene There are some deals offered to non-accredited rather sophisticated investors. However there are much fewer deals like that. You just have to keep looking. Also when such deals are offered by a deal sponsor, you must have pre-existing relationship with such sponsor as these offerings are governed by a ruling requiring it.

@Eric Levy There are tons of great books on multifamily. I recommend you start with Steve Berges book on buying apartment complexes and two of David Lindahl books. I have a much longer list in my library. Feel free to PM for a link.

Best of luck!

@Kira Golden I have actually not thought of that. I will have to do a bit more research on this as I am unfamiliar with syndication deals. What kind of cash flow do you generally see from these investments? Thanks for the suggestion.

@J.M. M. I've heard good things about the podcasts here! I have to fix something in my car and then I plan to listen to them on my work commutes. Are you looking out of state for your investments as well? 

@Alina Trigub A lot of people have recommended David Lindahl so I will definitely check him out. I just purchased The Millionaire Real Estate Investor by Gary Keller which isn't specific to MFR, but was recommended as a good starting book. Thanks for the offer, I will send you a PM.

Originally posted by @Christy Greene :

Are there syndication deals where you can invest and NOT be an accredited investor?  

 Yes, there are quite a few, including on crowdfunding portals. Being accredited gives you unlimited options, but there are options still if you are non-accredited. Start networking and going to conferences. 

@Eric Levy to learn more about syndication, click here:

https://www.biggerpockets.com/blogs/10145/72118-sy...

and

https://www.biggerpockets.com/blogs/10145/73373-op...

Also, there is a ton of great information on podcasts and youtube on syndication. My podcast, Pillars of Wealth Creation, recently covered a 16 week apartment investing series, where we covered syndication as well. I know Michael Blank, Rod Khleif, Jake and Gino, Jason Yarusi, John Casmon, among others cover a lot of good information on apartment investing

@Eric , here's my (admittedly unsolicited) opinion. First, let me say that I own both private real estate and also invest passively through syndication/crowdfunding.

You are a complete newbie to multifamily investing, and you're getting in very late in the cycle. In my opinion, there's a decent chance that you may make some rookie mistakes that will end up costing you a bunch of money. Then you're adding to this the difficulty of trying to do your very first multifamily investment out of state. There are many experienced investors that won't do this, and yet you're taking this on right out of the gate. In my opinion, you are ratcheting up the risk of something going wrong, and you're potentially biting off more than you'll be able to chew.

I think you should strongly consider passive investing through syndication/crowdfunding. The disadvantage is that you are not in control like with private real estate, so you have to feel comfortable vetting a sponsor. And you will have to pay them to do this. However, if you do it properly, the advantage is that you're going to get professional management from someone with many, many more years of experience than you have. So you won't have to worry about expensive rookie mistakes. Also, you can diversify much cheaper and easier across geography, asset types, strategies, etc. then if you buy individual properties yourself. Just my two cents. Are you an accredited or nonaccredited investor?

@Todd Dexheimer Thanks for the resources. I read both the articles and they were very informative. I realized now that I actually know someone who does this, so I will try and talk to them about it next time I see them.

@Ian Ippolito I appreciate the honest feedback. If I invest through syndication though, it doesn't seem like I will get the full experience of owning my own property, which is something I'm willing to take the risk for. I'm also a non-accredited investor, which I assume limits my choices when choosing a syndication deal. I'm in no rush, and I'm definitely not 100% set on MFR investing, so I'm sure there are other options I can pursue as well.

Great question @Eric Levy, every deal is different and unique but I can give you an example of a typical syndication deal.

  • 8% preferred return (meaning the investors get 100% of the first 8% the project produces before "we" the syndicator make anything).
  • Targeted 10-12% annualized cash-on-cash returns (meaning we believe the project will produce 10-12% annualized cash flow for investors after we add value to the property)
  • Targeted 20% IRR (meaning the internal rate of return) This is the annualized total return we strive to deliver to investors. This is realized toward the end of the deal when we sell or refinance the property. The IRR is a combination of cash flow + equity gains, therefore, the equity gains are not realized until we sell or refi.

Hope this helps!