Starting in multi family

11 Replies

Hi all, I have been doing a lot of research on multifamily investing and underwriting deals for almost a year now. I’m trying to find my way on how to acquire my first deal. My problem is no money and no track record. I’ve been told that if a deal is attractive enough and has had about 5 years or more of 90 percent occupancy a bank would consider lending. I’m looking to acquire my first deal in my area which I’m very familiar in. I have been attending local REIAs but no one seems to show interest in large multifamily and there are no multifamily investment meet ups in my area. My main issue is finding private money for the down payment. Would it be worth trying to use a hard lender? Would they even lend me anything?

Most private lenders or hard money lenders are going to want to know how and when they will get their money back. Your best option is to focus on multifamily that has potential for value add, If you can purchase, add value, and refinance then you can pay the private investor/hard money lender back. Look for deals that need physical improvements that will allow you to increase rents and occupancy. These are the easiest ways to add quick value. 

Try listening to the Apartment Building Investing with Michael Blank Podcast. It has been the best source of good multi family specific information that I have found. 

Good Luck! 

You may also wish to check out the podcast "Lifetime Cashflow through Multifamily Real Estate Investing" with Rod Kleif.

You might want to join a syndication as a limited partner and get your feet wet.  Going into a deal with an experienced multi family syndicator will increase your chances of being successful (make money) as opposed to the opposite (losing money).  Some deals will allow you in with only 50,000 but if you have no money I am not sure how you get involved.  Perhaps you take the deal to a larger player and get a referral fee

@Stephen D.   having no money at all is an issue, did you try to talk to friend and family members about private lending?

In saying that, their risk will be high if you have no experience, i think you should start educating yourself more.  Books, Podcasts, Multi family events etc. 

You need to invest in yourself to get somewhere...

Once you educate yourself to know the basics you can start talking the "language" you will be coming across as less green. 

Joining a group of like minded investors is key, you can form new relationships that could help you with financing as long as you find a good deal. 

BUT HOW do you find a good deal ??? 

well that comes back to education again.... its the first place to start.

@Stephen D. I am in the same boat as you are currently and the way I solved my issue was I went through a hard money lender and then took out a secured personal loan to come up with the down payment. Now my down payment sounds significantly less than yours but that is another option. Also read, "Multifamily Millions," by David Lindahl

Commercial lenders are going to take experience into account, so don't be afraid to do a smaller deal to get your feet wet as that will still help with lending and credibility for private money. You're likely going to be looking at 20-30% down on a commercial loan, but the rent/ARV can get you the loan rather than your personal financials. Find some private money for the down payment and just try to make a couple bucks after the loans are covered to get some experience!

@Stephen D. Have you considered co-investing with a syndication group that specializes in large multi-family projects, so you can learn the ropes, ask questions and network that way? If you have any questions feel free to message me. I am more than happy to help.

@Stephen D. ,

    How many units are you seeking? 

How old is the complex?

Is it in a great location?

How does it compare to the other apartment complexes in the area?

Have you looked at the T12? Expense ratio, etc?

If it is a large complex (above 50-75), you will most likely need to partner with a more experienced player who can bring some capital and experience to the table.

You may be able to get some cash and a small percentage of the sponsorship in exchange for being the eyes and ears on the ground. If you have construction knowledge, that may be a plus for a value-add deal.

Without any capital or experience, it is going to be hard to lock up a property, so my advice is to partner with someone.

We do this occasionally with talented individuals who want to add value to the sponsorship.

I think one of the biggest misnomers is that the money will find a good deal. Banks will not lend on a good or even great deal if you or your partners don't have a track record and money. Raising money for a great deal is also hard, if you don't have a track record or some major trust. 

Stop looking for the deal and start analyzing ever MF property for sale, educate your self and find partners that have money and a track record. 

@Percy N. I’m looking to get started in my city. Melbourne fl in which I know the market really well. I also have the submarket narrowed down. I’m looking to get into a 30+ unit. I’m interested in being the eyes and ears as I would be local. I also have some light construction background, painting, drywall, flooring ect. Which would be ideal for a value add. The market I’m interested in is a great market. Do you have any connections with potential partners?
@Kira Golden . Hi Kira, I would be interested in co investing of I had anything to invest. I have handyman experience which I think would be good for a value add investment in which I would be willing to take very minimal percentage just to get started. The city that I live in is a great market. I have been doing research and underwriting many deals to get some insight if I were to be able to purchase.