New Investor, Looking to Get Into Multi-Family, Little Capital
Hello everyone,
I have spent a good amount of time learning about the multi-family and rental industry and am looking to get involved some time in the near future. I am looking to get into multi-family and/or distressed single-family homes, but have little capital. Are there any recommendations of how I should go about handling financing or maybe even how I should be searching for property. Would love to hear your experiences with your first properties.
@Kourosh Abedi Some start out and build capital through wholesaling. Another option would be to find an investor or partner that could bring capital to your deals. As far as financing the deal, look into DSCR loans. With a DSCR loan the lender is only concerned that you have the down payment and that the property itself can cover the (PITI) Principal, Interest, Taxes, and Insurance.
I'm sure there are people on the BP forum who are interested in providing capital and having you do the work of finding the property and doing the rehab as long as the ROI makes sense.
I would recommend finding an agent in your area to help you find the property you're searching for. Go to meet ups in your area to branch out and meet like minded people.
Distressed properties = more $$ out of pocket for the rehab. For your first investment (& with not a lot of capital) I would recommend looking for something that needs cosmetic updates compared to a full gutting. If you can do most of the work you can save money on labor.
I would focus on finding/underwriting deals and networking.
With the way the market is today, you are likely going to have to analyze a lot of deals to find one that works for you.
When you have a deal that makes sense, hit your network for people with capital to deploy. If the deal is right, you should be able to find a partner that can bring the capital.
I also like Zac's idea about wholesaling or flipping houses to generate a capital stake.
Quote from @Michael Randolph:
I would focus on finding/underwriting deals and networking.
With the way the market is today, you are likely going to have to analyze a lot of deals to find one that works for you.
When you have a deal that makes sense, hit your network for people with capital to deploy. If the deal is right, you should be able to find a partner that can bring the capital.
I also like Zac's idea about wholesaling or flipping houses to generate a capital stake.
Michael,
Thank you for the reply. How would you recommend I find wholesale properties and where to formulate lists of cash buyers? I know cold calling is a very common strategy, where do people obtain these lists to call?
Quote from @Kourosh Abedi:
Quote from @Michael Randolph:
I would focus on finding/underwriting deals and networking.
With the way the market is today, you are likely going to have to analyze a lot of deals to find one that works for you.
When you have a deal that makes sense, hit your network for people with capital to deploy. If the deal is right, you should be able to find a partner that can bring the capital.
I also like Zac's idea about wholesaling or flipping houses to generate a capital stake.
Michael,
Thank you for the reply. How would you recommend I find wholesale properties and where to formulate lists of cash buyers? I know cold calling is a very common strategy, where do people obtain these lists to call?
Kourosh,
You are asking great questions and neither of these things is easy. Also, there is no single answer that will work for everyone. I will lay out some ideas below and hopefully they will give you a starting point. Also, this will be mostly focused on the multi-family market, although a lot of the concepts should transfer as well.
Finding Properties/Deals
Identify your target market and the type of property you want to invest in. Be specific in what you are looking for. (I'm in Phoenix, AZ. A possible example for an investment here might be: 12-25 units, Class B-C in the Phoenix East Valley (Mesa/Chandler/Gilbert) area.)
Go to some of the public sites like Loopnet or Crexi (there are others) and set up saved searches for your target properties. Spend some time looking at what is on the market, how quickly properties are moving, how frequently new properties are listed and who the brokers are in the area. The main goal here is to gain market knowledge, not to necessarily find a great deal (and you might find something you are interested in). As you build up a list of brokers in the area, go to their web sites, look at the properties they have listed and sign up for their mailing lists. You will very quickly have a steady stream of properties in your email inbox to look at. From here, you can screen/underwrite the deals that fit your criteria to see if they are worth pursuing.
Finding Funding/Investors
Networking is everything. Go to local meetups/events. Talk to people about what you are doing. Take one of the deals that you find that meets your criteria and create an investment package and pro forma that shows how it would make money. Then, you could show that to people that you are networking with and say "This is the type of property I am looking to get, these are the type of returns I am looking for. If I had a deal like this, would you be interested in investing?" Make a list of everyone that says yes and call them when you find your deal.
I hope this helps and good luck!
Mike
Save some money and then buy a multi unit house using a fha loan with 3.5% down. negotiate for the seller to pay closing cost.
Thats a way easier path than wholesaling. its not as easy as it seems
Quote from @Dell J.:
Save some money and then buy a multi unit house using a fha loan with 3.5% down. negotiate for the seller to pay closing cost.
Thats a way easier path than wholesaling. its not as easy as it seems
Dell,
Thank you for the feedback. The only issue with using an FHA loan is that the mortgage payments would be very high, making it hard for the property to cash flow at all. Am I wrong in saying this?
Quote from @Kourosh Abedi:Kourosh,
Hello everyone,
I have spent a good amount of time learning about the multi-family and rental industry and am looking to get involved some time in the near future. I am looking to get into multi-family and/or distressed single-family homes, but have little capital. Are there any recommendations of how I should go about handling financing or maybe even how I should be searching for property. Would love to hear your experiences with your first properties.
My suggestion is find people doing want you want to do and offer them your assistance. You may not get anything money wise in return up front, but you well get a whole lot more knowledge you would from a book, and start to create a network of like minded people in your market.
Thats just my opinion.