Hey Om,
A concept I learned through BiggerPockets that relates directly to your question is called the "Stack Method". It is a way to quickly but conservatively scale your portfolio by doubling your unit count with every purchase. For example, a single family one year, a duplex the next year, a quadplex in the following year, and so on. It allows you to learn and initially make mistakes at a smaller level all the while gaining momentum, growing your confidence, and scaling your portfolio along the way. You can utilize equity growth (especially if value was added) and cash flow from previous properties to assist in funding the down payments for the next level up.
Of course this is a quick summary of this method coined by Brandon Turner. However if this interests you I highly recommend reading the book Multifamily Millionaire by Brandon Turner and Brian Murray. They go into this topic much more at depth and also dive into important concepts such as financing, deal finding strategies, analyzing deals, and much more. Hope this helps, best of luck on your journey!
buy value add deals and sell after you fix up using your equity gains to scale
Hey Om,
A concept I learned through BiggerPockets that relates directly to your question is called the "Stack Method". It is a way to quickly but conservatively scale your portfolio by doubling your unit count with every purchase. For example, a single family one year, a duplex the next year, a quadplex in the following year, and so on. It allows you to learn and initially make mistakes at a smaller level all the while gaining momentum, growing your confidence, and scaling your portfolio along the way. You can utilize equity growth (especially if value was added) and cash flow from previous properties to assist in funding the down payments for the next level up.
Of course this is a quick summary of this method coined by Brandon Turner. However if this interests you I highly recommend reading the book Multifamily Millionaire by Brandon Turner and Brian Murray. They go into this topic much more at depth and also dive into important concepts such as financing, deal finding strategies, analyzing deals, and much more. Hope this helps, best of luck on your journey!
One thing nobody tells you going from 4 units to bigger apartments is the financing flips. Small stuff gets judged on you, the bigger buildings get judged on the property numbers. Get comfortable reading a rent roll and a T12 early, it pays off
Hey all I am just wondering if you guys could tell me about how I could start with small multifamily and get into larger apartments in the Dallas area.
I’d say the easiest way to get into larger multifamily is to start by actually buying a small multifamily property and learning the process from the inside. Even a 2–4 unit can give you the experience, track record, and equity to move into larger apartments.
I’m active in the Dallas market as well and would be happy to connect. If you’re looking, I may be able to point you toward a few ways to structure your first purchase.
I'd probably say that you find something like a 4-plex that you can increase the income. That will increase the value and will let you sell it for more. Then you can take that capital and put it down on a 8-10 unit. Rinse and repeat
You're talking about something I spent a large part of my career doing. I've been involved in multifamily financing, ownership, redevelopment and management, including large apartment communities, and one thing I learned very early is that you don't grow a multifamily portfolio with just one form of leverage.
Most people hear leverage and immediately think debt. Debt is only one piece of it.
You need relationships with lenders. You need equity partners. You need good real estate attorneys. You need bankers. You need property management and construction people. And as you get into larger properties and redevelopment, your relationships with local government, housing agencies and other public entities can become extremely important as well.
That's really how you scale.
Starting small is a perfectly good way to learn the business, but understand that there's a pretty significant dividing line between 1-4 units and 5 units and above.
Once you get into 5+ units, you're really entering the commercial multifamily world. The property's income and expenses, NOI, DSCR, occupancy, debt yield and value become increasingly important. As the properties get larger, the lender is also going to look increasingly hard at you as the sponsor: your experience, liquidity, net worth, management capability and track record.
So if I were starting today with the specific goal of eventually owning larger apartments, I wouldn't just be looking for my first property. I'd be building the organization around me at the same time.
I'd start talking to multifamily lenders before I ever had a property under contract. Find out what they want from a first-time sponsor and what changes when you go from a 6-unit to a 20-unit to a 75-unit property.
I'd start developing relationships with potential equity partners before I needed their money.
I'd find a real estate attorney who actually understands commercial multifamily transactions.
I'd get to know several good commercial bankers because banks can become incredibly important as you grow.
I'd also start developing relationships with brokers who specialize in multifamily rather than relying exclusively on residential agents.
And learn property management even if you ultimately hire someone else to do it. You need to understand collections, vacancy, turnover, concessions, maintenance, payroll, utilities, insurance, taxes and capital expenditures because ultimately all of that flows through NOI and therefore value.
That's another major difference between buying a house and buying an apartment building.
With apartments, you can actually create value operationally.
Increase legitimate income, reduce unnecessary operating expenses, improve occupancy, renovate units intelligently and improve management, and you've potentially increased NOI. Increase NOI and, depending upon the cap rate, you've created value.
That's where multifamily becomes really interesting.
I'd also be careful about thinking you have to climb the ladder one unit at a time. You don't necessarily have to buy a duplex, then a fourplex, then an eight-unit, then a 16-unit before you're somehow qualified to buy 50 units.
Your experience, your team, your capital and the deal itself matter.
You may find that your first commercial multifamily deal is 8 units. It might be 20. You might find a 40-unit property where an experienced operating partner and equity partner make more sense than buying a six-unit property by yourself.
The question isn't really, "How small do I have to start?"
The better question is, "What do I need to build around myself so that lenders, investors and other professionals will be comfortable helping me do progressively larger transactions?"
That's how I would approach Dallas.
Learn the market block by block and submarket by submarket. Learn what rents are actually being collected rather than what somebody's offering memorandum says they can get. Learn the expenses. Learn where concessions are being offered. Learn which properties have operational problems rather than location problems.
Then start building those leverage points.
Capital. Debt. Equity. Knowledge. Management. Professional relationships. Government relationships when they're relevant.
The larger the properties become, the less this becomes a business about you having enough money to buy another building and the more it becomes a business about your ability to assemble and manage all of those resources.
That's how you go from owning a few units to owning apartment communities.
That's a solid long-term goal, and many investors follow that path. I'd focus on learning how to consistently analyze and operate small multifamily properties first. The experience you gain with underwriting, managing tenants, and understanding financing will make the transition to larger apartment deals much smoother.
I'd also start building relationships with investor-friendly agents, lenders, and local investors in the Dallas area. Those connections can help you find opportunities and understand how financing evolves as you move from residential multifamily into commercial properties. If you'd like to compare financing options or talk through a roadmap for getting from your first multifamily to larger apartment deals, I'd be happy to help.