Multi-Family Journey... 4-month update

25 Replies

So I posted here a while back about my shift from transactional real estate (wholesaling with a bit of flipping) to multi-family acquisitions after I realized I had gotten away from what initially attracted me to real estate... buy and hold/passive investing.

I wanted to give a quick update since I got so many kind and encouraging responses to that post.   

  1. Have I purchased a multi-family property yet? The answer, to date, is "no", but I'm getting close... I think.  More on that.
  2. What have I done in pursuit of my first multi-family deal? 
    • I've read several books on multi-family investing and consume podcasts on the subject.
    • I joined Michael Blank's Deal Maker Mastermind which may have been one of the best things I've done in terms of education, boosting my confidence and networking with other multi-family investors.
    • I've spoken to a boatload of commercial brokers, although honestly not nearly as many as I should have.  But as I've spoken to more and more brokers, I've gotten much more comfortable having those conversations and not feeling like a poser :)
    • I spent a day touring a market that I'm interested in with a broker with whom I have fairly regular contact now.
    • I've toured a couple of multi-family properties in markets outside my local one.
    • I've submitted 4-5 LOI's on properties - again, not nearly enough.
    • I've analyzed somewhere around 60-70 deals using a multi-family deal analyzer (again, kudo's to Michael Blank for his Syndicated Deal Analyzer - love that thing).
    • Early on, I had conversations with about 8-10 lenders, even when I didn't have a specific deal to discuss, just to get a feel for their terms, what areas/types of properties they like, etc.  I highly recommend doing this - it came in handy once I had real deals to discuss.
    • I created an app in Podio to keep up with brokers and lenders: I set follow-ups so I remember to reach back out to them on a regular basis (at least the brokers) and record all the details of my conversations so I have it all in front of me the next time we speak.  
    • I've spoken or met with numerous other multi-family investors (both active and aspiring investors), many of whom I met through my BP post from 4 months ago, and learned a ton from them.
  3. Why do I feel I haven't contacted enough brokers and submitted enough LOIs?
    • Sometimes I get shiny object syndrome and go do a flip (just closed one this past week :))  or decide I'm going to explore AirBnB in my area or just drop a little mail campaign to try to buy more houses to flip.  Nothing wrong with these things but they did take me off track for a bit.
    • After reading (and beginning to implement) the 4 Disciplines of Execution and Deep Work by Cal Newport (thanks @Brandon Turner , for those 2 podcasts.  They were game changers for me), I've gotten much more focused on my goal than I was there for a couple of months.  Simply defining the "whirlwind" and recognizing it for what it is has made such a difference.  And knowing that it's ok to turn off my phone, remove the distractions and go super deep into analyzing a deal and getting lost in it without feeling like I have to constantly be connected has helped so much.
  4. Where am I today in my pursuit of 50 units by 12/31/2019?
    • I have an accepted LOI on a 24-unit property in a small market about 1.5 hours from where I live.
    • I should be going under contract next week on a 25-lot mobile home park about 2 hours from me.  
    • IF both of these go to closing (and there is still a whole bunch of DD to be done and financing to be finalized), that would put me at 49 "units", and get leave me 1 unit shy of my goal.
    • Both deals have some shaky areas that will need to be explored heavily during DD; I'll post with updates.

So, on a scale of 1-10, I would give myself about a 6 or so with respect to my commitment to doggedly pursuing my multi-family goal, but I'm hoping when I update this post in a month or so, I can say it's more like a 7 or 8 :)

@Julie Kern

Don't sell yourself short! I think you've done a ton of homework and DD in the last four months! And definitely taken action like no other! You're on the right path, stick to it without any deviation (no AirBnB or anything else) until you buy/close on your first property! 

Here's an article, that will hopefully encourage you further to stick to your ultimate goal: https://www.biggerpockets.com/member-blogs/10850/85351-nothing-will-work-until-you-do-maya-angelou

If I can help in any way, feel free to reach out.

Best!

@Julie Kern Congratulations on your new and continuing endeavors. I can relate a lot to what you've posted. 

I think what holds some people back from doing anything in real estate is their lack of knowledge regarding single family, or multi-family real estate investing. For myself, multi-family investing, even trying to talk to a broker about possibly purchasing a property without speaking to potential investors is a bit overwhelming. But the only way to overcome that is be learning and asking questions of people who are more knowledgeable and experienced.

I too have joined Michael Blank's DMM and recently submitted an SDA for a 17 unit apartment in the area. I'm also reading Peter Conti's book Commercial Real Estate Investing for Dummies.

Keep up the good work and encouraging others too, since there are others who have similar obstacles to overcome as you have.

@Julie Kern

I don't know why people always act like its shiny object syndrome to invest in multiple

types of real estate. If you understand a market extremely well that can be a a way of specializing in its own versus investing in one asset class in multiple markets especially because you can leverage one team to manage all the properties and be more efficient in managing one team versus multiple so don't

feel bad. Also I flip houses, not because its best return on time or dollar because its not either its just simply because I like to. Working on houses allows me to express my creative side and gets me out of office so don't feel bad. Investing in real estate does not have to be just for max money.

@Julie Kern

Wow that’s awesome!  You are definitely on the right track .  Please keep going!

@Alina Trigub Thanks for the encouragement, and that's a great blog post you wrote!  Very true.  

@Kurt Michaelson Thank you so much!  Is the 17-unit one you're considering buying, or were you just using it to practice underwriting using the SDA? 

@Charles Kao For me, it's shiny object syndrome because my commitment at the beginning of the year (from the post I referenced in this post) was to focus on acquiring 50 units this year and to move away from the transactional side of real estate, because (a) I don't really enjoy it and (b) it's not moving me and my husband to where we need to be.  

If you enjoy flipping, then you should flip.  I like staging my rental properties and holding open houses with fresh-baked chocolate chip cookies and soft music playing.  Some would say that's a complete waste of time , but I actually really enjoy it - it makes me happy when a prospective tenant walks in and says "it just feels like happy and cookies in here" (quote from the last open house I did) :)  I do that because I enjoy it and I want my future tenants to see that I care, not because it will necessarily yield the max money.  So I do get what you're saying.  

@Joshua Diaz Thank you!  Appreciate the encouragement, and I will! :)

@Julie Kern

I’m definitely looking forward to any posted progress you want to share.

You are further cementing the idea to focus on one niche before moving to the next when it comes to RE education.

I need to get that drive you have for locating Mobile home parks.  

If I may ask, where did you find the commercial brokers to contact?   I would be looking for parks with pads between 60-100 spaces and am looking for ideas .

@Julie Kern It certainly for practice, but if the numbers work out, then it will definitely be a consideration. We shall see.

Thank you for sharing =) im also starting up my multi-family investment recently!

@Joshua Diaz If you're looking specifically for MHP Brokers, I would start on mobilehomeparkstore.com and look for brokers with listings in your target market. There are also MHP listings on LoopNet; contact those brokers as well. You can also contact other brokers in your target market off LoopNet who have apartment listings because there is always the chance that they'll pick up a MHP listing. And be sure to check the MLS. That's where I found the one I mentioned in my post. Those can sometimes fly under the radar, although the ones I've seen are typically smaller than what you're looking for. Hope this helps, and best wishes to you!

@Kurt Michaelson Hope it works out for you!  What is your criteria for multi-family deals? Are you looking to syndicate the 17-unit if the numbers work or would you be taking it down yourself, or with partners?

@Julie Kern

Awesome! Thanks a lot for the suggestions!  If you ever want to know more about the space I’ve been trying to take in as much info as I could so I’ll try to answer any questions you might have

@Julie Kern Great job on taking initiative. I’m in a same boat as you. My challenge is finding decent multi family in Atlanta market where numbers make sense. Like your idea about connecting with lenders before hand. I may have to pick your brain on this 😀

@Al Pat Yeah, to be honest, I'm not even looking in the metro ATL area.  I'm looking at markets in TN and AL that are within a few hours driving distance.  Feel free to PM me anytime to connect!

Amazing job thus far! Keep at it and keep your enthusiasm just as high as it is now. You will find success in no time. 

Good Luck!

Quick update to this post from a month ago... 

  • I'm under contract on the 24-unit (as of July 3rd) referenced in my original post on this thread
  • Closing date should be around the end of August.
  • Inspection is scheduled for this Monday, July 15th. 
  • Due Diligence ends 8/2/2019.
  • The property management company who will manage the property has been identified.
  • I did not move forward with the mobile home park for several reasons: (1) I felt it was more important to focus on one deal at a time, and this one has alot more upside (2) I got some very negative feedback from a local building inspector who has this park (and others in the city limits) in his sights.  This one is next on his naughty list, and I didn't have the bandwidth to take that on while working on this other deal.

A few highlights of the 24-unit:

  • Purchase Price is $650K
  • We'll be borrowing between $150K and $200K to fund the rehab
  • The property is a USDA Rural Development property, or was, anyway.  It is no longer part of that program, but the USDA will be issuing housing vouchers to existing tenants, which will help us through the stabilization period.
  • At closing, we'll have 6 vacant units, with 3 others likely coming vacant within a couple of months.
  • The ultimate plan is to reposition the property and bring rents up from the current USDA rent-restricted rate of $455 (avg) to between $650 and $750.  Projections are based on the lower end of the range, with $750 being a push number.
  • The goal is to refi within 24 months and pull 100% of capital invested back out, with $100/unit cash flow after debt service.  

This has definitely been a rollercoaster, and I've been ready to pull the plug several times, but then new, favorable information would come to light and the plug stayed put :) I was very fortunate to pick up a partner with multi-family experience who is serving as an advisor and mentor, and he has been awesome.  

I'll update this thread after inspections have been completed and we have the report back.  

@Julie Kern

Awesome! Thank you so much for that update.  I’m really glad for you for having this deal under contract and I hope it all goes well for you!

Yes mobile home parks do get seen in a negative light and sometimes fighting the city just isn’t worth the hassle.

I’m glad you never pulled that plug and your future set will be glad, too.

Looking forward to the updates!

Hi @Julie Kern (sorry @tag doesnt work)

Congrats happy to see the progress. Does this property have any deed restrictions? Basically just make sure that there are no restrictive covenants that will prevent rents from increasing to market rates. I have had experience in the past where some other agency like DCA (Georgia Department of Community Affairs) that will.come out of the woodwork and start auditing and making sure the rents are controlled. So make sure to completely have it vetted with your legal team. When it comes to these government agencies no one has the slightest clue and its a painful process to uncover the drama. Its like being a CSI :-)

Btw where is this property located? Good luck and much success

Hey @Azeez K. !  Great to hear from you.  In fact, there are deed restrictions that are *supposed* to end upon prepayment of the USDA Rural Development loan (which has already happened).  However, this is a GREAT tip and definitely something we'll be digging in to deeper during DD.  

Was the experience with DCA something that happened on one of your deals?  I would love to hear more details about that - when was the deed restriction discovered (post-closing), what was the resolution, etc.  

And the property is in Jasper, TN, about 30 minutes west of Chattanooga. 

Hi @Julie Kern

Let's connect offline. To answer your questions will take a long time would be best if we hop on a call next week so I can answer live. 

Thanks

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