It’s been over 2 years since my first BP post! And I still feel like I’m at Square One in a sense.
My goal then was to buy my first property and house hack a multifamily residence. Feels good to say that I’ve accomplished that with my duplex!
2017: Bought, renovated (Contractor), moved in and currently house hacking a duplex. Lots of lessons learned from this one, mainly contractor related. The inherited tenant who I thought would give me the most headaches has been very easy to work with.
Now that I have my own living situation figured out, and got my feet wet with remodeling and property management, I’m not quite sure what my next steps are.
My long term goal is to net a minimum of $15K /Month in 5 Years, roughly. Leaving the W2 position behind and being an active real estate investor. Not interested in a 40 hour workweek though, more like 20 hours/wk.
I know that I don’t want to own SFRs, so that leaves me with MF only.
Is it feasible for me to invest in apartments as my second deal?
I’m interested in the economies of scale, but do I start small with ~10 units and work my way up? Or start with ~100 units?
Do I need to flip for a few years to hopefully become an accredited investor then look into apartments?
Should I not even consider this as an unaccredited investor? Should I start actively and buy my own or passively with other investors?
I know there are plenty of possibilities and limitations, such as capital and experience.
But, I plan to be far more active this year on BP and at local meetups while also learning as much as I can through reading and research. Should I also be cold-calling brokers, private equity firms, syndicators?
Any suggestions, tips, and/or recommendations are greatly appreciated!!!
Every Apartment investor I've conversed with has said the same thing: you don't need to do 1-4plex rentals in order to "graduate" to Commercial (5+) apartments. You are totally on track, go the commercial route.
Those same investors have also said they wish they had gone bigger from the get-go. The consensus is most often 75+ units are the best because then you can afford to hire a fulltime property manager and get much better discounts when need to hire contractors or get professional services.
The primary item that will "hold you back" will be finding good deals. Once you find a good apartment building, you'll be shocked how fast people want to invest in your deal, and beg for more deals! It's truly amazing.
As for next steps, contact a local broker for your target market and tell them what you're looking for (neighborhood A/B/C, Stable or Value-Add, min. Cap Rate, min. CoC, min-max unit count, sale price or $/door,...) Be sure to be super responsive to any deals they send you so that they take you more seriously. Ghosting a commercial realtor is the fastest way to get on their 'waste of time' list.
You'll do great, excited to see you nail it!
I'm doing something similar to you but in the Memphis area, we can definitely partner on deals.
I'm pretty conservative by nature so I would tell you to take it slow and work on another smaller property next. Gives you time to learn more and make less costly mistakes. We're at a pretty high point in the market so there's a good market cycle argument for going slow as well.
However you aren't going to get to $15k/month net in 5 years going slowly. That's a lot of properties and unless you are already fairly wealthy it's going to be hard to achieve. Also I'm an impatient person so I understand that.
So, if that's the case with you, my advice would be to do more networking as you mentioned but specifically I think you should start going to the syndication and apartment investing type events.
You're in a great area for it as most of them seem to be based in Dallas. I've been to and would recommend the Real Estate Guys 'Secrets of Successful Syndication' event. While I was there I met Brad Sumrok and I know he does events there as well. I'd also recommend you read books by Ken McElroy and Dave Lindahl and catch them at any events they might be speaking at.
Also try out the Old Capital Podcast (they are Dallas based apartment lenders) and Michael Blank has some good content.
Finally I don't have any experience with them but I know there are some investor education and networking groups like Lifestyles Unlimited in the Texas area I hear mentioned on podcasts.
@Lissa Dear congratulations on your first deal! Take what you learned and apply it to your next.
Yes it is definitely feasible to invest in apartments either actively or passively. As far as what size, you really have to look at your goals and ask yourself if you want to manage them yourself or have a 3rd party property management among other things. If you want to learn and are ok with managing yourself (although you can still hire a 3rd property management for a 10 unit) buying a 10 unit would be a great size.
If however you would rather not manage yourself, then investing in a larger multifamily property can be a great option. You would basically have 2 choices. One, you invest passively in an experienced sponsor's deal. Two, you bring the experience/ deal/ net worth to an experienced sponsor and partner with them on it.
My advice either way is to educate yourself as much as you can. Like you mentioned, get out there and network, read, listen to podcasts, connect with others that are doing what you want to do and finally, keep taking ACTION!
You don't need to be an accredited investor to buy apartment complexes. However, you do need to have some money. The "no money down" thing that is often taught in the single family world doesn't work with large apartment complexes. There are many great multi-family networking groups in the DFW area. Get to know some local investors and learn from them.
Appreciate the feedback guys!
@Nathan Platter I've heard the same from apartment investors. Or business owners in general, they wish that had gone bigger, sooner!
@Jeff Kehl I'm conservative also, but knowing that about myself is why I want to take more risks. I think my day job will allow me to be a bit more aggressive on the real estate side. My drawback with starting small is that it won't net me the income I'm after, and it will take away from my time and resources before I'm in a position to buy another property.
@Juan Vargas I need to clearly define my goals to decide which route I want to take. I will need to learn a bit more before I can do that. But I will most definitely keep taking action!
@Paul B. Networking is definitely in the works, and I plan to bring money into all of my deals. I just need to learn and find some deals.
Thanks a lot for the input :)
Lissa, congrats on your first deal!
I have just gone through a very similar situation with buying and househacking a MF property this year. I'd definitely recommend networking networking networking, I know I'll be doing that a lot next year. Good luck!
Howdy @Lissa Dear
You need to decide on some criteria to achieve your goal. Like what condition you want the property in. Rent ready, minor repairs, or Value-Add (Rehab required). What kind of cash flow per unit? $100 p/m, $150 p/m, $200 p/m? That will determine how many units you will need to reach $15,000 per month. $100 (150 units), $150 (100 units), $200 (75 units). Can you purchase 30 units per year? At an average cost of $50,000 per unit that could mean $1.5 million per year. My point is make sure you develop a thorough plan to achieve your ultimate goal.
@Lissa Dear Congrats on your success thus far. Anything is "feasible." Flipping is an option, but most flippers do it in order to one day be where you are, an owner. Being an accredited investor has nothing to do with the goal that you stated. Accredited investors are able to invest in other people's deals. It sounds like you want to do your own deals. Also, don't rule out SFR if the numbers work, do it. Exiting an SFR deal is much easier than an multi-family, more available buyers and a bigger market for renters.
the first thing you need to do is to find a mentor or someone who has accomplished what you are trying to do. Apartment investing is not rocket science, and it is a learned skill just like any other.
You need to select a market to invest and begin to build out your team members, especially brokers.
The fact that you have a stable financial situation is key when you start.
It is totally feasible to look to apartments/small multifamily as your next deal. The cycle in many markets may not be favorable, but that should not stop you from educating yourself and getting ready for the next correction