Newbie to Multi-Family Investing | Where/When/How do I start?

Question

Hi folks. Wife and bring in an annual combined salary of 600k (Net). I have been earning this salary for about a year and expect it to be the baseline for 5-7 years. (My spouse just landed her first gig and is projected to start in November 2024) and we are ready to invest starting fresh in 2025 with minimal payments left on loans, etc. We rent at this time, 3k a month. No major expenses aside from the day-to-day.

I understand it is a difficult market at the moment (High interest, High prices, etc), and I have no problem playing the waiting game. We have decided to start saving, 25k-30k a month (Advised to keep this in MMA's until we're ready to use it to minimize risk) or 300-350k annually, strictly for Multiunit property investing. I have no experience in this field aside from the books and videos I've been watching (Drinking from a fire hose). I typically rely on external sources for experts in finance, accounting, and other areas which I simply am no expert in and am happy to rely on someone else.  To add to the current scope, we do not care for passive income, nor will we rely on it for at least 5 years, but need to break even or cash-positive at a minimum. The end goal is to accumulate as many properties as possible in 5 years. We will likely go part-time with work, and depend on the passive income, after the 5 year 'Investment and accumulation' phase.

- With all the provided background, where do I start?

- Should I source a consultant or some sort of assistance to devise a business plan?

- Our end goal is to use the properties to replace our current income with a goal of 35-50k in passive income a month, are these numbers and the plan too unrealistic?

- If you were in this position, where would you start, and how? Factors such as:

• - Multi-Unit property price range.
• - An acceptable market entry range with factors such as the property price, down payment, and interest rate considered.
• - Do I enter immediately when I am financially ready, or should I wait until I’ve reached the projected savings allocated for this venture?

I guess I need to see this on paper so that I can visualize a clear goal and work towards it. I’ve watched multiple videos on the Biggerpockets channel and it's given me a bit more confidence. Happy to work with someone who can assist with putting a plan together. Thanks in advance for your response and/or advice.

Amandeep Singh · Answer

Thank you all for sharing your experience and guidance. So far my key takeaways are:

1. There is no cookie-cutter method to MF Investing. Best to start small, gain experience with the first property, and move on to MF properties which are priced a bit higher but provide more peace of mind in the long run. Properties in my current area which are 4+ plex properties are no less than 1 million a piece. I like the idea of starting small, paying a bit more on the higher end within an area that has good projected growth (Columbus, OH as an example).

2. Options on loans and to build on an MF property portfolio are readily available. Aside from the mortgage payment on an MF, I want to stick to 0 leverage for now.

We're going to wait to start by early next year. I could probably jump into something sooner but I like the idea of a larger down payment on something in the 5-700k range. Thanks again everyone for your feedback.

Allan C. · Answer

@Amandeep Singh with your income range I highly suggest you steer clear of low cost markets. There are plenty of posts on this forum where high income W2 earners regret buying cheap cash flowing properties.

I suggest you buy properties no less than $750k and ideally target $1M+ assets that have minimum of $200k/door. As you progress life you’ll realize you value quality of life more (ie more personal time and lower stress) than maximizing paper yields. Your first purchase can be lower price point, but look to move past that zone quickly.

Direct experience is the best way to learn, so I recommend getting into the game as soon as you can. Just don’t be haste with your due diligence and choose a market that can fit your short term and long term needs.

Jimmy Lieu · Answer

Hi Amandeep, I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!

Patrick Drury · Answer

@Amandeep SinghIf you are looking to get to 35-50k a month in passive income it will be a full-time job with the amount of untis you'll have. It's best to get started now with something small like a duplex versus sitting on the sidelines for the perfect opportunity to jump in. There won't ever be a perfect opportunity to get started in real estate.

Samuel Diouf · Answer

I would suggest looking to buy in appreciation focused markets where you can still break even or net some cash-flow. As to the price.. buy as much as you can afford where the numbers still look good, and buy sooner than later so your money can start working for you!

If you're looking for what market to start in.. Columbus, Ohio, is a great market to consider for appreciation. Multiple, billion dollar companies are investing heavy in our area, such as Intel, Google, and Amazon. Which will bring plenty of other investors and general business to the area. I moved here from Florida after seeing the projected growth.

Amandeep Singh · Answer

Jason, I appreciate the write up. Will definitely explore the DSCR options. I believe the 400k range is a great initial start for a 3-4 unit. I’ve been seeing Cleveland and some other areas mentioned a bunch on here so may start there. I’m on the east coast and properties are insane here, will surely have to branch out.

“Keep in mind the good thing about targeting MF 2-4 units is that for each door you’re getting an additional rent per month. It makes qualifying for a larger home price easier since you can use 75% of the rents of each door/unit to qualify towards income.” - This blows my mind. The possibilities for additional MF properties after a few years of growth seem to be more achievable versus having to have a chunk of personal cash down. Valuable piece of advice and thank you again.

Jason Wray · Answer

Start now do not wait you obviously have the good credit and income to start the process.  There are also programs like DSCR where the borrower does not need to have or show employment or income.  It uses the rents to qualify to debt service the property with 15% to 20% down.  You can get into a solid 2-4 unit with 15% down going full doc/showing income.

If you target homes in the 200K to 400K that only $30K to $60K for the downpayment.  Not to say you cannot buy a single family for under $200K its possible jut may need to go outside of your specific area or state.

Keep in mind the good thing about targeting MF 2-4 units is that for each door you’re getting an additional rent per month.  It makes qualifying for a larger home price easier since you can use 75% of the rents of each door/unit to qualify towards income.

Remember if you wait to long even as rates come down property values will continue to go up and a higher slaes price with a lower rates can still equal a higher payment.  Buy now save on the sale price and refinance when rats drop back down in 12-24 months.

Newbie to Multi-Family Investing | Where/When/How do I start?

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