10 Unit Starting Out

2 Replies

Hi all, Quick background: My name is Chris. I’ve been studying real estate investing for the last 6-9 months via BPP, forms, books, etc. I still haven’t entered the market yet but it’s going to be one of my next (and biggest) steps. My wife works for a property management company (300+ unit experience) and my dad has his foot in commercial real estate ownership/management. I’m also a former Marine and currently studying corporate finance at the University of Washington. I know it’s better to start small, fail small, and learn as you go; while also playing the get rich slow game and building credibility and personal equity. I’m not looking to hit a home run on my first deal, but I feel it’s necessary to consider the massive benefits of economies of scale via purchasing multiple doors. My question is: Is it realistic/ reasonable for someone in my position to go after and search for a +/- 10 unit property with help from other investors? I have experience around me, but all I have is “book” knowledge. Thanks for any advice and please feel free to connect if you’re interested or have questions in the Greater Seattle market. Respectfully, Chris Yeakel

Hello @Chris Yeakel ! I was in a pretty similar position as you are when I started. Parents involved in real estate, browsing bigger pockets..

Contrary to what other more risk-averse investors might tell you, I think you should start with a 4 unit. I suggest a 4 unit because they are much easier to sell and buy as a first-timer. You can use conventional and FHA loans to buy a 4 unit. Because of that you have 20 times more potential buyers when you are ready to divest.

When I was starting out, I bought a house with 4 rooms near a college (Didn't have a wife so this was an option to me) and rented out the other rooms to college students. They paid for my mortgage and I made money living there for 3 years.

A 10 unit is immensely harder to purchase your first go around. Commercial lenders like to lend on experience and relationship. Most commercial lenders won't touch your loan unless you have 50% to put down if this is your first property. If you have partners that can help out with the experience part, then you can get around this. But honestly, if you are going to do 10 units, you might as well go for 16+ because that will require there to be an on-site property manager. You could be the on-site property manager, live for free and get paid to learn about real estate management.