Should I just jump into a 45 unit multifamily?

36 Replies

I’m a physician who came across a possible 45 unit deal. Other than that I’m in the middle of my first flip and I completely lack experience. I have no plans to self manage. I’m not going to attempt anything other than being the owner. Is it prudent to just jump in? I would have to get an experienced partner on board as well as find the majority of my funding some other way. What do you think?

Doesn't sound like you're ready to "jump in" as you don't have your resources in place, including management and financing, constructions. If it's a great deal it will likely be sold before you get things in place, unless the seller is wanting to specifically sell to YOU. Then you may have time.

@James Canoy I applaud your enthousiasm and would agree with @Ray Harrell that you probably should do some prep work to be 'ready'. Will the owner carry? Is there a PM in place now?

As far as partnerships go, spend some time thinking about that. REI can get really messy, and having to enforce an 'operating agreement' would not be fun! Have you considered investing more passively to start-several syndicators on the board. All the best!

Originally posted by @Ray Harrell :

Doesn't sound like you're ready to "jump in" as you don't have your resources in place, including management and financing, constructions. If it's a great deal it will likely be sold before you get things in place, unless the seller is wanting to specifically sell to YOU. Then you may have time.

 Without any experience, other than my current flip, how do I find these people? Rent a single family? A smaller multifamily?

Originally posted by @Bjorn Ahlblad :

@James Canoy I applaud your enthousiasm and would agree with @Ray Harrell that you probably should do some prep work to be 'ready'. Will the owner carry? Is there a PM in place now?

As far as partnerships go, spend some time thinking about that. REI can get really messy, and having to enforce an 'operating agreement' would not be fun! Have you considered investing more passively to start-several syndicators on the board. All the best!

Thaanks for you reply. You mention syndications. Should I passively invest in a syndication in order to get some experience? Would being involved in a deal allow networking to take place such that it would allow me to go it alone? 

Originally posted by @James Canoy :
Originally posted by @Bjorn Ahlblad:

@James Canoy I applaud your enthousiasm and would agree with @Ray Harrell that you probably should do some prep work to be 'ready'. Will the owner carry? Is there a PM in place now?

As far as partnerships go, spend some time thinking about that. REI can get really messy, and having to enforce an 'operating agreement' would not be fun! Have you considered investing more passively to start-several syndicators on the board. All the best!

Thaanks for you reply. You mention syndications. Should I passively invest in a syndication in order to get some experience? Would being involved in a deal allow networking to take place such that it would allow me to go it alone? 

 James you can definitely gain a lot of experience investing in a syndication, some are designed to be more hands on with regular interactive sessions for members. You will be able to network, understand the deal making, financing, and operations without getting your hands dirty. Check it out for yourself and make sure it is for you. 

Originally posted by @Bjorn Ahlblad :
Originally posted by @James Canoy:
Originally posted by @Bjorn Ahlblad:

@James Canoy I applaud your enthousiasm and would agree with @Ray Harrell that you probably should do some prep work to be 'ready'. Will the owner carry? Is there a PM in place now?

As far as partnerships go, spend some time thinking about that. REI can get really messy, and having to enforce an 'operating agreement' would not be fun! Have you considered investing more passively to start-several syndicators on the board. All the best!

Thaanks for you reply. You mention syndications. Should I passively invest in a syndication in order to get some experience? Would being involved in a deal allow networking to take place such that it would allow me to go it alone? 

 James you can definitely gain a lot of experience investing in a syndication, some are designed to be more hands on with regular interactive sessions for members. You will be able to network, understand the deal making, financing, and operations without getting your hands dirty. Check it out for yourself and make sure it is for you. 

 Cool thanks. Any of them in particular that you could recommend? I don’t want to just hand my money over to someone.

@James Canoy Congrats on the flip. I'm also in healthcare :) I would advise against this move. Conservatively start small. Have you ever owned a rental? Just one? I would go with an SFR 1 unit to start out, maybe even a triplex at most. Get some experience. Rentals are very different than flips. I would rather you not be one of the investors who loses it all. And with a 45-unit that could sink you, plus a few partners. Big stuff there.

@James Canoy personally I am not in any syndications (yet)-so I can't recommend anyone. Currently we are doing most of the PM'ing on our own and using a real PM on 2 properties. If you own an MF property a PM is a filter-some can filter more than others. As the 'owner' it is your asset and ultimately your responsibility. IMO anyway.

If I’m not mistaken, you have to have to be an accredited investor and also have and asset portfolio with a net worth over a million dollars to start syndication and purchase large multi units. Lenders want to know you have the experience and are able to manage large multi units. I don’t own any multi units but I am also building my portfolio to get to that point. Best of luck!
@James Canoy id definitely say it would be a good idea to partner with someone! Don’t be afraid to give up equity! Interested in the details of this deal if you don’t mind?
@James Canoy . As a former Wall Street guy, I would say jump in with both feet. You can pull a foot out later if it doesn’t work out. Things will fall into place and you have to believe in it. Having said that, have you done some hard analysis? What is the story with the property? There’s a lot to this but don’t let fear stop you. If you want more info, pm me and we can talk. Enjoy the ride and protect yourself. Best of luck to you!!
@James Canoy I would recommend if you have a experienced partners who has done syndications prior i would definitely jump in and partner if this is a long term goal of yours. Like others have mentioned in this forum, experience when dealing with other peoples money is everything because it comes down to experience, integrity and most importantly trust. Im guessing this is a long term goal of yours so why delay because if you put it off you will less likely dive in later. Also another angle at your scenario would be to wholesale this deal if its really a good deal because I know there are a lot of investors in the apartment space looking for deals. I hope this helps and Best of Luck!!!

@James Canoy ,

I personally would pass on the deal and get "ready" for the next deal. There are many ways you can get ready to invest in real estate so it's up to you which path you want to follow. Ultimately if you want to invest in multifamily I would suggest sticking to multifamily. I've invested in single family deals and while some skills are transferable, the businesses are completely different. I don't think you gain an advantage by investing in single family then jumping to multifamily. This is one of my regrets thinking I needed to invest in single family before owning/syndicating multifamily. This held me back from scaling earlier in my real estate career and I missed a lot of great opportunities.

As a physician, I know you are intelligent, have internal fortitude to succeed, but might not have much time. This was me as well working as a consultant putting in 60-70 hour per weeks. That's why my first investment was in a syndication. In a syndication, like most endeavors, you get out of it what you put in. I've syndicated multiple deals and the limited partners who learned the most were the ones who are active and engaging with questions via email, phone, or in person meetings. 

It is vital to create your team before buying a property or getting a property under contract.
Team consists of:
Lender or mortgage broker (biggest partner in the deal)
Property manager
Contractor
Lawyer(s)
Maybe another general partner
Maybe limited partners

I wish you the best with your investing!

@Raleigh Lewis ,

You do not have to be an accredited investor to buy an apartment, syndicate an apartment, or participate in an apartment syndication. There are two types of syndications that are filed with the SEC. One allows non-accredited investors to investor and the other requires you to be an accredited investor. It all depends on how the syndicator structures the deal.

I will say that lenders will require you and any other guarantor on the loan to have a net worth that equals the debt on the property plus 10% liquidity based off the debt from all guarantors. This essentially will make a purchase of an apartment have a net worth over $1 million, but it is not a requirement.

@James Canoy If this deal is not a listed deal than I think you look for an experienced partner and bring it to them and say I want x% of the ownership side for finding the deal. What that percent is I have no idea, it comes down to so many different factors. But, I think if it's a real deal they will know, they can use their resources and see if it can work.

We've partnered with others who have found deals for us in the past and so far they've worked out well, but we've basically ran the show once the deal was found and brought them in as a minority partner on the ownership side. That way our investors feel comfortable investing because we're running the deal, and the minority partner who found the deal gets a learning experience, credibility, and some profit as well.

I also think being a passive investor first can give some experience, depending upon what you do with it. We have investors who learn a lot and others who don't take advantage. 

Originally posted by @Dave Rav :
@James Canoy

Congrats on the flip. I'm also in healthcare :)

I would advise against this move. Conservatively start small. Have you ever owned a rental? Just one?

I would go with an SFR 1 unit to start out, maybe even a triplex at most. Get some experience. Rentals are very different than flips.

I would rather you not be one of the investors who loses it all. And with a 45-unit that could sink you, plus a few partners. Big stuff there.

I have not rented anything. My reasoning is (assuming I can even put a deal together) that I can find all of the people needed to take care of the property en route.  I've got a friend who has about half a billion in MF investing in NYC who would be who I bring in. I'd run everything by him.  I'm awaiting the paperwork for the place to start running numbers. 

Well, that's good.  Having a partner or mentor with experience can fast track you some.  

Without the above though, i have seen/heard where some folks just jump in on major financial projects like the one you mention.  If they screw up completely, they lose THEIR house and are done financially.   Nothing wrong with gradual, step-wise progressions

Originally posted by @James Canoy :
I’m a physician who came across a possible 45 unit deal. Other than that I’m in the middle of my first flip and I completely lack experience. I have no plans to self manage. I’m not going to attempt anything other than being the owner. Is it prudent to just jump in? I would have to get an experienced partner on board as well as find the majority of my funding some other way.

What do you think?

 James, 

You need to know what you're doing before jumping in.

Here's my experience with a 48-unit apartment. I made over $1M but it's a lot of hard work and to be honest, this deal could have bankrupted me...

Below is the story told with the good, the bad and the ugly :)

https://www.biggerpockets.com/forums/311/topics/64...