I didn't want to mess around with small stuff. I knew I wanted professional management.
I first invested passively through syndications, and then moved over to the sponsor side. My first deal passively was a 202 unit. My first deal as a sponsor was a 98 unit. Both were here in the Phoenix area.
I didn't want to mess around with small stuff. I knew I wanted professional management.
I first invested passively through syndications, and then moved over to the sponsor side. My first deal passively was a 202 unit. My first deal as a sponsor was a 98 unit. Both were here in the Phoenix area.
@Sam Grooms Not to hijack the thread, but could you expand a bit? How much capital does one need to be involved passively? What do you learn when investing passively; that is, did it afford you the opportunity to be hands-on and see all the facets involved?
@Sam Grooms Not to hijack the thread, but could you expand a bit? How much capital does one need to be involved passively? What do you learn when investing passively; that is, did it afford you the opportunity to be hands-on and see all the facets involved?
Most of the deals I come across have a $50K-$100K minimum. You can go smaller than that by investing through a crowdfunding platform, but I probably wouldn't recommend it unless you have to. No, it doesn't afford you the opportunity to be hands-on and see all of the facets involved. But, if you have a good sponsor, you can see a lot of the decisions they're making, why they're making them, how they communicate with their investors, what information gets provided to investors (from monthly financial reporting, to quarterly and annually), and much more. Regarding the decision making, I was able to see their detailed plan to reposition the property, including renovation plan and budget, their expected rent increases, how they determine both of these amounts, etc. Regarding the communication and reporting, if your goal is to become a sponsor yourself, I'm not sure how you don't start this way. You won't know what investors expect unless you've been one.
Sam grooms. That's some good info. How did you find someone to invest with. I'm looking to transition into bigger buildings but in my area and my circle of investors, we are all doing sfh conversions.
Also what was the time frame of your passive investment. And were promised a % on your money invested or a % of new building valuation/equity? Thanks
and to answer the original thread, I started with condos then sfh and converted then to legal duplexes. That is the strategy I learned from investors in my area. I live in Toronto canada so larger properties are out of reach.
I did - My first property was a 14 plex, then a duplex, and last a 22 unit. I really like the ability to scale, limit the risk on eviction and vacancy with higher numbers.
For me, I flipped 1 SFH then went straight into MF investments. Saw that for long term wealth growth and stability, MF was the way to go. Went from 0 to 45 units (3 properties) in 2018 with partners and looking to grow more in 2019.
Sam grooms. That's some good info. How did you find someone to invest with. I'm looking to transition into bigger buildings but in my area and my circle of investors, we are all doing sfh conversions.
Also what was the time frame of your passive investment. And were promised a % on your money invested or a % of new building valuation/equity? Thanks
As far as finding sponsors to invest with, take a look at this thread from last month. I gave a pretty detailed account of the process I went through:
I was investing in value-add plays, so the time frames were 12 months, up to 36 months. Since I was on the equity side, I couldn't be promised a % on my money (lenders don't like that, because it looks too much like debt, aka a second mortgage). However, I did get a preferred return, usually 8%, meaning the sponsor doesn't get a cut until I hit that return. Investors would then get 60-80% of everything after the 8%. When we sell the property, I get my investment back, plus 8% return for the year, and then 60-80% of the left over profit.
@Sam Grooms Thank you for all the great info. It's always fascinating to me to hear people's reasoning.
Often times it's easy to fall into the SFH $100 cash flow per month trap. Looking at the numbers you roughly outlined above someone could get a much better rate of return while letting true experts guide the investment as well as get your initial investment back plus some. Definitely something of interest to me.
I also think it comes down to how passive of an investor you want to be.
Like @Paul Choi highlighted, for him it was about growth and stability. Paul, I see that your local, where are your MF located?
I went straight to multifamily houses . I have no interest in sfh . There's a higher level of safety and it's more profitable from a cash flow standpoint . I'm not a landlord because I think it's fun . I'm doing this to make money and secure my future so I want high ROI
Often times it's easy to fall into the SFH $100 cash flow per month trap. Looking at the numbers you roughly outlined above someone could get a much better rate of return while letting true experts guide the investment as well as get your initial investment back plus some. Definitely something of interest to me.
I also think it comes down to how passive of an investor you want to be.
This is all so true. Every sentence of it. You might have received two notifications, because I just tried to vote for it twice (accidentally, but deserved).
@Sam Grooms Thank you for all the great info. It's always fascinating to me to hear people's reasoning.
Often times it's easy to fall into the SFH $100 cash flow per month trap. Looking at the numbers you roughly outlined above someone could get a much better rate of return while letting true experts guide the investment as well as get your initial investment back plus some. Definitely something of interest to me.
I also think it comes down to how passive of an investor you want to be.
Like @Paul Choi highlighted, for him it was about growth and stability. Paul, I see that your local, where are your MF located?
Agreed.
For a SFH or MF the process is roughly the same - findings deals, vetting thru them, underwriting, walking them,reaching out to lenders, insurance, property managers, contractors, etc. In the end you end with 1 door vs 20 doors (for example). I can't imagine going thru 45x this process in 1 year to acquire 45 SFH.
We have properties in 2nd and tertiary markets - Sacramento, Stockton, etc. We are also looking at Arizona, Texas and Nevada (much less so these days). Anywhere from 10 units to 80. Competition is stiff on the larger MF deals especially in core markets. As the market cools or retracts, hopefully cap rates expand a bit and then we can look at closer towards core metros.
Awesome @Paul Choi thanks for sharing. I just drove through Stockton on my way to the Sierras last weekend. Sacramento definitely has some great pockets.
@Andrew Neal I went straight to multifamily. Single Family is mental a prerequisite that many fall into. For me, I wanted to start with single family and buy a house a year for a buy and hold strategy for cashflow. The problem was, it's not scalable and i'm stuck being the management company. I didn't want a headache I wanted freedom eventually. With multifamily you get those. So why would I start with something that I don't need and doesn't help me with my end goal? Many do purely because of limiting beliefs. Now by all means I didn't just jump right in and try to buy a large complex right away. I was methodical. Took me over 6 months to find the right coach. Took me another 6+ months to invest passively in an opportunity. Shortly thereafter I took a GP role in a syndication. In 2018 my firm was apart of 650+ units over 3 assets. The first deal was a two property portfolio of 388 units.
Surround yourself with the right people and get properly educated before taking action and working with other people's money. If your in the business for the right reasons you will be successful.
Thanks for sharing @Scott Morongell and congrats on your success. I am definitely a cautious but active researcher in most be decisions in life. Don't be afraid to take action and move forward while also educating yourself for sure.
@Andrew Neal Our first investment property that we just closed on in August ‘18 was a fourplex. We bought it because we believe in the area and live next door, which is good 80% of the time!! We were able to get owner financing to get us in the game. Looking for our next adventure now.
I went into MF pretty fast out of state for cash flow purposes. I do believe commercial is the direction to go in for cash flow and have been in involved in a small shopping center syndication. I'm more interested in SFR for rehab projects or long term appreciation plays.
First deals were a few duplexes for about 70K each, worth Est. 100-110K each, and rent out for 825 a unit.
I closed on my first RE investment just before Thanksgiving. It's a duplex with long time renters, one has been there for over 10 years. It's an older home but has great cash flow and little maintenance.
My story is a replica of @Sam Grooms story. Started as an equity partner in a syndication. After a few deals, decided to become active and took action to be on the GP side of syndications.
I think it doesn't really matter what you start with: SFH or MFH, as long as you take action on a deal that makes sense to you. You can move from one asset class to another down the line. It's a lot easier than taking an action overall which a lot of people never get to do.
Went straight to commercial properties, so 5 or more. I did so because I am here to build wealth and single family didn’t do that for me mathematically. Plus having 1 unit or 2 units empty means I can still pay the mortgage via a tenants rent and not come out of pocket.
I started small and slow. I felt I needed to learn the business first. Buying an apartment building is a business. And one of the more complicated part is understanding the physical structure - how to maintain and repair it. How to renovate apartments.
You can move up the learning curve fairly quickly though.
A side note - Apartment opportunities these days are scarce in many markets because of high pricing. I expect to do no more than one new deal this year... if I can find it.
My first was an 8-plex that I bought in 2017. I just couldn't see myself jumping into the small beans and liability of a single family. One major repair and there goes 2 years of income. I found a great deal in my new small town and dove right in. He had recently paid off his rural development loan and went off the program. Tenants were still just paying their share of the rent, some as low as $150.00. It was a mess but I had no problem moving them onto their new locations and getting the units cleaned/remodeled and filled up at market rents. Others had tried to buy it but the financing fell through because his financials were so bad. I offered his asking price $175,000 on a contract for deed with $10,000 down, $10,000 in 6 months, and $10,000 at 12 months, plus $850 per month. Just before the last $10,000 was due I was able to get a loan and get it paid off. I have had no regrets. I have 8 properties under one roof, with one lawn, one location, one tax bill, etc. I completely remodeled 2 units, partially remodeled 2 more, and did some landscaping. When they appraised it for the loan it was appraised at $300,000! I'm also going to be starting a flip in a couple of weeks, but I will sell that when I'm done. I got a pretty sweet deal there too. We have done live and flips 3 times and that was very profitable for us, but we intended on living in them for a few years anyways and just worked on them as we could. This will be the first one that I'm not living in, so it will be MUCH easier and faster.
Our oldest will be graduating in 2020 and I'm going to get her started in a duplex or 4 plex for college once she's ready. I'd rather she earn her keep that way than work full time while going to school. I only wish I had started at her age!
I started with a duplex and have focused on 2-4 unit opportunities in my portfolio for a couple of reasons.
1-Fannie mae loans on these sort of properties were very competitive, even for investment properties. I have 8 loans at under 5% with 30 year locked rates.
2-In Texas, I could find cash flowing duplexes for relatively low amounts of money down--20K or so for the one I started with. In DFW, there seem not to be much in the way of cash flow at that price any more.
3-I didn't know about Fannie Mae small loans at the time. Knowing what I know now, when I was aggressively expanding my portfolio one year, I might have just gone after one commercial building instead.
I've also done some passive deals as an LP. Those work out well until they don't--as an LP, if the GP decides to screw you there are means of recourse, but they are expensive.