Starting Big - Is that crazy?

Question

I'm ready to make an offer on a multi-family. I've got my eye on a few tri-plex/four-plex's - but the deal that appeals to me the most is a 14-unit apartment complex. However, this will be my first multi-family investment property and I'm wondering if I'm biting off more than I could chew this early in the game. The numbers add up, but the numbers are big and its scaring me a little. (Debt service, potential repairs and maintenance costs, insurance, etc.) Am I crazy  to start with a property this size? Should I focus on getting a few smaller deals under my belt first?

Rony Mueller · Answer

I'd love to tell you go big if you have the chance, but it depends on your ability to take on the task which will bring success or failure to you. In other words, What is your professional background and which skills do you have to manage such a large apartment building?

It's an important question to consider, because if you tell me you've been a property manager for 7 years and managed 300 units then what are you waiting for. You will probably apply your knowledge and experience and will be just fine. Not that you don't have a chance to fail. But if you say, "I've been a little league soccer coach all my life" I'd say, well... Consider than you don't know anything about this business and you are more likely fail tremendously.

Brian Gibbons · Answer

@Cort Green

1. Consider jv partnering w cash partner, spread risk

2. Get the best property management

3. Consult wife and real estate CPA and 40 year experienced real estate broker

Andy Robison · Answer

Yes. Having the spouse on board and seeing where your mind is at will be a great asset. If only for your peace of mind when you have to spend 10k to get a drain line repaired.

Matthew Murphy · Answer

Go big or go home! I started with a 4plex but wished I would have put the money into a bigger complex!

Cort Green · Answer

Thanks everyone for your input. I agree @Jett Rao. I plan on having an experienced investor in my area evaluate the deal. I also plan on having a management company that manages an SFR I have manage this property as well, as I work full time at a job I enjoy. @Charlie FitzgeraldThanks for your input. My wife doesn't care what I do as long as there is money in the bank when she swipes her card. But maybe this type of purchase warrants spousal consultation.

Frank Quin · Answer

I don't have this kind of experience. But I want to start big too. I think that putting big deal together takes very much the same work as putting small deal together. Only the numbers are bigger. I even want start bigger. The first is to overcome the fears.

Jett Rao · Answer

Can you consult or even JV with a local experienced investor in your area?

You will be giving up some of the profits but you may save yourself from potential disaster down the road.

To top it off, if it wasn't a great deal to begin with, perhaps the the experienced investor may point out a few things you missed in your evaluation. This would just aid in your development as an investor!

Vincent Crane · Answer

Your first property as a triplex or 4plex is a great idea. I'd say no on the apartment complex simply because running an apartment complex is much more complicated and can much more difficult to get out of it it turns out to be a bad deal

Charlie Fitzgerald · Answer

Do you think Babe Ruth would have hit all those home runs if he would have stepped up to the plate each time looking for a double?  LOL.  You can get sideways in a smaller deal just as quickly as you can in a larger one.  The fundamentals don't change, just the scale and the number of numbers to the left of the decimal point.  I would say listen to your heart (s)...not just your head (s).  If you think you can do this and you are dedicated to getting all the help you need to get when (ideally, before) you need it...then go after it.  Make sure that the numbers make sense for YOU. If in doubt, rule it out and look for the next one.  Rules of thumb are nice...factors, ratio's, rates, estimates...all are wonderful things...but at the end of the day...NONE are exact and it never works right...all the time.  If either of you cannot look the other in the eye and say, "let's do this!  I feel good about it!"  Then the answer is NO.  With no regrets and no resentment.  That's my $0.05 worth...$0.02 adjusted for inflation!

Nick L. · Answer

3s and 4s are the perfect place to start, especially if you can "house hack" by living in one of the units to get favorable owner-occupied terms.

Of course that assumes you have the income and downpayment to make it work. If not, start where you can and build from there.

Starting Big - Is that crazy?

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