My Multifamily Real Estate Journey
Hello BP Familia! I'm finally taking some time to post on BP to contribution for once instead of just getting priceless information from this wonderful site!
So, My name is Trent and I started doing real estate back in 2003 fresh out of college. I was introduced to RE during the wild wild west period of lending, where you can get a $250k loan by just stating your income and assets. Mind you, I was fresh out of school w/ no job and no assets, but yet I got approved for 3 home loans over $200k each. I rented out these homes and everything seemed to be going well until the market crash of 2008 came along and knocked my block off! Every mortgage I had went through the roof and I was upside down. I had 2 foreclosures and 1 I barely saved by filing bankruptcy (which I later regretted).
I took some time off real estate to get my feet back on the ground, but not too long, because I saw the opportunity in the down market we were in. I saved up some money and bought a nice 3/2 here in Atlanta for $15k and resold it that same week for $20k! This got me back up on the saddle and I was ready to ride! I did a couple more sweet flips and decided to tell my brother about what I was doing. We partnered up and start buying houses to flip without doing any rehab. This worked well until the market started to rebound. The market told us that flipping was slowing down and it was time to buy and hold! (tip: Always follow the market, not your own opinions)
We were able to buy a couple of single family homes for under $30k each at the time and rent them out via Section 8 that was paying well above market rent. We had a process of working, saving money, and buying more homes to build our portfolio. Cutting back and sacrificing was necessary to save up money to buy cash...but eventually everyone's cash will inevitably dry up, which ours did.
This is when we had to look at financing. We started talking to BB&T (which is a great bank to work with if you're a small business). They did a refinance for us on a few of the properties we owned, and we sold off a few too. The goal was to find an apartment building to buy!! We were new to this and didn't know what we were getting into, but had the confidence we could do it.
We had a friend that was a commercial broker that told us about a 52 unit building that was being foreclosed on by the lender. They were willing to transfer the mortgage on it with very little underwriting and give us an additional loan for rehabbing the property! This was a gift from the heavens due to the rarity of something this sweet! We bought it for about $910k which included $100k for rehabbing the units that weren't occupied.
This complex was already operating with a property management company the bank put in place, so we let them stay in place to run the property. 12 months went by. We had the whole complex renovation and rented up to about 85% but.....we hadn't made a dime! Literally, we hadn't made any money in our pockets. The management company was taking all the profits! This wasn't being done maliciously; it's just the way management companies work. Nobody cares about your money more than YOU! They don't care about how much they spend on maintenance or take the time to prioritize tenant requests. They don't put in 110% effort to rent out vacant units, nor would they shop around for the most affordable contractors.
After that first year we decided to get rid of them and self manage. We hired a part time property manager to work for us and handle the day to day task. Immediately we started seeing profits!! Self-management was definitely the way to go for us.
We've grown a lot since our first deal. We continue to try to learn and network and build up our credibility in the real estate community.
We now own a little over 100 units and plan to have over 500 in the next 3 years.
The best advice I can give folks wanting to get into multifamily real estate is to build your profile!
Your profile consist of your credit score, your IRS documented income, your cash, and your assets. It sounds like a lot, but start small and grow slow. You will need to work closely with banks, and this is what they'll want to see....so paint them that picture! Build your relationships with the bankers that matter. Meet with commercial lenders and take them to lunch. Get them to like you and want to fight for you to get loans. Do the same with commercial brokers. They need to like you to want to send you deals before they send it to all their other buyers.
I think that's enough for my first post! I will share more in the future as I'm starting to structure my first syndicated deal.
Success is not overnight. Be patient and always remember to enjoy the journey!
Peace
-Trent