Real Estate Agent · Wichita, KS · Member since 2019 · 19 posts · 3 votes
Hello BP. I am wanting to get into real estate investing, more specifically larger multi family. I have book knowledge and from BP Podcasts but I don’t have any experience yet though and was wondering tips on how I should go about it. Should I start small with single families, small multis, or go straight ahead into 20+ unit multi families? In other words, will owning and operating smaller family homes translate into the larger multi families or is it a completely different game? I don’t want to waste much time in the smaller scale family homes/rentals if the skills don’t necessarily transfer & I’d have to essentially start over from scratch. Just really curious about other people’s thoughts and personal experiences. Thank you in advance!
I knew a guy that used to say go big or go home all the time. I used to say to him you mean go big or go bankrupt. Well, he went big and he went bankrupt. True story. Just know your risk and know what you are getting yourself into. Slow and methodical wins the race.
Warren Buffet was asked why no one ever copied his investment style and thesis. He told them because no one wants to get rich slowly. Lesson here.
What is your comfort level managing larger units and properties?
Are you financing this yourself or will you have partners? Part of the go big or go home problem is that many investors are not necessarily going to write a fat check to a newbie who has no track record. If you find people who will do that, great, but a lot of investors are going to ask about what you have done or can bring to the table before investing.
Also, banks may be reluctant to lend to someone with less experience on larger deals unless you have a proper team in place and they are comfortable with the management team.
@Maksim Easley This all depends on your financial position and comfort level but I always advise those who can to go as big as possible.
Single family is very difficult and time consuming to scale from a rental standpoint.
Several ways to get started are to invest passively with an experienced syndication, partner with an experienced operator or hire a mentor to help you.
@John Lenhart I don’t plan on managing them myself, I would hire a recommended property manager to do so. Financing wise, I would definitely bring a partner or so with more experience in for the first couple deals at least. I do need to build a solid team though and I feel like I could do that with a few smaller scaled properties/deals before moving up.
@Maksim Easley There are so many ways to invest in RE and people make and lose money at all of them. Have you decided what you want to do? Have you taken an inventory of what you bring to the table? Skills, money, access to money, partners etc? Whether you are buying apartment buildings or making widgets it is helpful to know the process, and have some understanding of the basics. Investors get into trouble when they invest without knowledge-how do I know if this underwriting makes any sense if I know nothing about underwriting?
@Greg Dickerson thank you for your suggestion! I’ll definitely have to look into that and network some more. I just feel like small scale rentals require much more time and work and I don’t want to spend a whole lot of time if there are other options. Plus in bigger deals, banks tend to look more at the investment than the investor. Seems like my best bet is with some mentor ship and experience with one, like you suggested! Do you have any advice for a newbie on how to find one such syndication or operator? (Besides the vague “network” answer”).
@Bjorn Ahlblad thank you for your reply! Currently I’m still in the learning process and trying to gain as much knowledge as I can while saving up some money to invest and networking. I’m a planner and trying to decide what the best approach for me would be to go about it and the next steps I need to take.
@Maksim Easley I would say go big or go home. Read @Michael Blank material. Best info in the industry. Go big because of economies of scale. These other guys sound like they are telling you to research for 10 years and then go big. No. You will learn so much if you just dive in and do something big. Smaller deals won’t even be worth it in the end. You will wish you would have gone bigger. Do you research.
If you’re going big, you must have a mentor or a heavily involved partner with the track record and experience. Otherwise, educate yourself and go small, learn as you go.
Ready, fire, aim!
Continue to learn everyday and read books, lots and lots of books. Several have recommended fantastic books already, make the time to read them.
@Hadar Orkibi thank you for that advice! I plan on starting in my market where I’m more comfortable and is a market of what I plan to do and then expand outward.
SFH and small multifamily properties are considered residential and are a different ball game than the commercial assets (5+ units). Which one you start with all depends on your comfort level and you can get there either way. I know a lot of people in the commercial space who started out in residential. For me, I went straight to commercial. My advice would be to find a good mentor if you choose to go this route.
I personally started with a SFH because at the time I did not have the capital to go bigger, or know anyone that could help me go bigger. Since then I have found a partner that is investing in a 6-plex with me. The SFH helped get the ball rolling and from that my circle of influence grew. If you do not have the capital to do big apartment complexes but you still want to try your hand at real estate, you need to start somewhere which may be SFH or small apartments. Just get the ball rolling and network as much as possible. If you know someone or your family knows someone who has done lending in the past then don't be afraid to ask them if you can buy them a beer and discuss what you are doing. Don't be afraid to go big but you better know what you are doing, especially if you are using other people's money.
I knew a guy that used to say go big or go home all the time. I used to say to him you mean go big or go bankrupt. Well, he went big and he went bankrupt. True story. Just know your risk and know what you are getting yourself into. Slow and methodical wins the race.
Warren Buffet was asked why no one ever copied his investment style and thesis. He told them because no one wants to get rich slowly. Lesson here.
@Maksim Easley I would start small and build up. Just like what Brandon turner talks about when he explains the stack method. Buy one house use that cash flow to buy another and buy another. Before you know it you will have a pretty good looking investment portfolio with multiple properties
Think big, start small. You don’t get a black belt after one class of karate. However, I wouldn’t start with single families if your goal is to scale. I’d focus on small multifamilies, get some experience, then jump into commercial.
Commercial real estate is far different than residential in a lot of ways. Start learning how commercial real estate industry works before diving in head first into a large investment. I have no doubt you can operate a 20 unit but I doubt the person selling it to you will be honest.
Unlike residential, there are very little consumer protection laws for a commercial transaction.
So if you get a lemon, it’s not the seller’s fault. Food for thought.
I started in RE investing by syndicating a 48 unit property in Texas.
I had zero experience so I decided to start at 40 units or larger because the people that were guiding me said that the rule of thumb for staff was roughly 40 units to support a PT manager and PT maintenance.
This allowed me to hire a manager that had experience so it wasn't me trying to figure it out on my own, I had a "partner" on-site that knew what they were doing.
This was absolutely the right move for me as it was a relatively conservative way to start and enabled me to scale nicely from there. Next 2 properties were 120 units and 256 units.
There are two foundational questions every investor needs to answer that will define the approach they take. First, how are you going to get money? What resources do you personally own or, through your connections (friends and family, banks, etc) have access to? Are you a Bezos or hang out with Jeff Bezos? Are you a schlump living on a friend's sofain a cold water flat in Scranton PA? Second, what do you bring to the table? In other words, why do you the guys with money and the guys with experience need you? What makes you relevant? Do you have superior analytical abilities? A better nose for finding deals? Some special access to sellers?
These are the kinds of questions newbies should be asking.