A newbie multifamily investor gets 125k. What do they do?

5 Replies

Bp family! You're a newbie investor. You want to buy a multifamily property. You're conservative and want to put 20% down. You don't have any reserves yet. No reserve for capex. No reserve to cover rainy vacant months during a downturn. No reserve to rehab or cover closing costs. Ground zero. How do you use this 125k? How much do you set aside for these reserves? How much do you use as a down payment? How many units are you looking for? Is there anything else you would set money aside for? Would you save more or less than 125k? Thanks Bp, Happy Friday! Gabriel
@Gabriel Lamb Hand 125k in cash to the nearest guru you can find (like me). Walk away and wait for my call. Profit. If you don’t like that option I would recommend 1. Not posting how much money you have on a public forum. 2. Reading the other 1 million threads that’s ask questions like this
@Caleb Heimsoth I apologize for not looking for similar articles on the subject. Nothing was stated about how much money I have. It was a theoretical scenario to help with creating a plan for savings. In the future, I think you could go about giving this type criticism in a better way versus making me feel incompetent. Have a great weekend caleb.
Originally posted by @Gabriel Lamb :
@Caleb Heimsoth I apologize for not looking for similar articles on the subject. Nothing was stated about how much money I have. It was a theoretical scenario to help with creating a plan for savings. In the future, I think you could go about giving this type criticism in a better way versus making me feel incompetent. Have a great weekend caleb.

you didn’t state to wanted a saving plan, or that it was hypothetical.  You just said you have 125k.  Anyways just use the search function and you’ll find lots of threads on personal finance and how to invest in multifamily.  Listen to the podcasts for more ill on both subjects 

@Gabriel Lamb Start with educating yourself first: read books on mfh investing, listen to podcasts, network with other investors local at the REI meetups. Also in terms of multifamily, you need to decide you want to go with the residential mfh (2-4 units) or jump to commercial ones (5+ units). Different animal and different approach.

Good question, Gabriel.  The hypothetical $125k you have would be 20% of a 6.25m purchase.  The only challenge with that lenders are starting to cap their max LTVs at 70-75%.  

You'll also have to show liquidity after close.. The liquidity requirement varies from lender to lender, but  the general rule is 10% to 20% of the loan amount.. so, If you’re wanting to borrow a million dollars, you have to have at least $100,000 after closing; $150,000 or $200,000 is even better.  Other times lenders may require 6 to 12 months worth of principal and interest payment. If the monthly payment is $10,000, for example, a lender may want to see $120,000 in liquidity.

Also, for Net Worth, they will want to see a net worth equal to or greater than the loan amount.

The best thing I did when I got into multifamily investing was teaming up with more experienced people.  I had some liquidity and time, so I hustled and got in with more experienced guys who were able to bring track record to the table (An agency lender will not lend to you, no matter how much money you have, unless you or someone on the team has experience with multifamily). 

So, rather than trying to go and secure your first apartment deal alone, I'd team up with others..

I would start with education.. of course, various posts in the BP forums is one place to start.  I would then get out to local real estate MeetUps, Real Estate Investment seminars and conferences.  Finally, I would connect with a mentor - whether you have to pay or can find one to mentor you for free.   Good luck!