Ideas for starting off 16 units or MORE with low capital?

Rental Property Investor · Salem, OR · Member since 2019 · 22 posts · 9 votes

So I'm wondering what are some good ideas if I wanted to start out with 16 units with $40,000 of capital. I'm looking to do the BRRRR Strategy. Very new at this but I just know for sure I want to start off no lower than 16 units if possible.

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Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

@Roddy Walker are you saying you want 16 units because of grant Cardone? If so I’d rethink your strategy

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Justin Goodin
Investor · Indianapolis, IN · Member since 2018 · 1k+ posts · 756 votes
7y
@Roddy Walker your capital will limit the size of your deal because of the downpayment needed.
1 Reply
Paul Choi
Rental Property Investor · San Ramon, CA · Member since 2017 · 350 posts · 611 votes
7y
Or partner up with a capital investor. Preferably someone with experience.
2 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
@Roddy Walker are you saying you want 16 units because of grant Cardone? If so I’d rethink your strategy
15 Reply
Daniel Tou
Los Angeles, CA · Member since 2019 · 6 posts · 3 votes
7y
Could you raise enough capital to do multifamily deals? I would start by asking your friends, family, and co-workers in order to raise more capital and considering to partner with someone who has done multifamily deals.
1 Reply
Bill Plymouth
Real Estate Agent · Philadelphia, PA · Member since 2018 · 416 posts · 396 votes
7y
@Roddy Walker there are many ways for you to do that.
1. Find an owner who will do owner financing
2. Partner up with someone experienced in larger units
3. Raise capital from investors who prefer to be silent partners.
Keep in mind, bigger isn't always better. If you have 40k, you can start BRRRR-ing with smaller units to get your money right and gain some solid experience while you're at it. Starting off with 16 units would be a cool story to tell, but there is a much higher risk of failure. Start small. Start smart and THEN get bigger. Sam Zell purchased entire blocks one SF house at a time. If he can start that way and grow his net worth up to 5 billion, you can start that way.
Don’t jump in with the sharks if you’re still learning how to swim.
5 Reply
Tom S.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
7y
@Roddy Walker I would start with 4 unit properties at a time. Easier to finance (conventional vs commercial), easier to insure, and to sell. Get your feet wet and make sure you like the business. It's not for everyone. You don't want to buy 16 unit apartment building, realize you hate the business, maintenance, tenants etc, and then be unable to sell it.
- Tom
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Alexander FelicePro Member
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
7y
you need other partners but certainly doable.
I just bought 24 units with $50,000 of my money injected, raised the rest from people I met on BP!
Also, there is zero chance I could have accomplished that if I didn't have both experience and a track record with SFR first.
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David AcostaPro Member
Wilmington, NC · Member since 2014 · 208 posts · 144 votes
7y
Hey, @Roddy Walker - it's certainly possible. Because of the capital requirements to complete (thinking you need to fund purchase and rehab) you'll need to bring on a partner. Ultimately you would be looking to purchase a property with low occupancy and more than likely heavy rehab needs, that you would then stabelize in order to refinance your money back out. Requires a bit of expereince to carry out the business plan on a reposition, so again I would look to find a seasoned operator who you can partner with.
Alternatively, you could look at bridge financincing options. Lenders will want to see a track record here as well. All the best moving forward!
2 Reply
Bryan Devitt
Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes
7y
@Roddy Walker so you have zero experience, $40k that gets you a grand total of a $200k commercial loan and you want to be into a 16 unit building ($10k/door ) for 80% ARV to BRRR it? Where do I sign up for one of those?
1 Reply
Naeem Boucher
Investor · Paterson, NJ · Member since 2015 · 71 posts · 22 votes
7y
Where was this 24 unit located?

Originally posted by @Alexander Felice:

you need other partners but certainly doable.
I just bought 24 units with $50,000 of my money injected, raised the rest from people I met on BP!
Also, there is zero chance I could have accomplished that if I didn't have both experience and a track record with SFR first.
1 Reply
Jill F.
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
7y
@Roddy Walker Banks are going to want a personal financial statement and you're likely going to need some additional assets and/or income to meet the required debt service coverage ratio. Closing costs on a commercial loan for us typically run around $5000 including surveys and appraisals. The 'best' COC deal we have done is 12 units (2 deals on the same day) with $20k down. The deal included partial owner financing for the 12.5% of the 25% down payment. The total price for the 4 buildings was just under $220,000. Nine of the units were under $15k each. Major work is needed. We have very strong construction skills, very good credit and large Home Depot credit lines so we will be able to DIY much of the renovation. This deal wouldn't be worthwhile without doing it DIY.
So from personal experience, It is possible to do a large(ish) deal with that amount of money-- but it is hard and risky and requires the ability to manage and renovate low income properties. Good Luck.
We're still struggling along. We spent the last 2 days doing massive plumbing "repairs" to old galvanized supply lines with one shut off for 7 units. Good TImes!
3 Reply
Bjorik Mutize
Real Estate Broker · Minneapolis, MN · Member since 2016 · 530 posts · 398 votes
7y
@Caleb Heimsoth That was the first thing i thought of, Grant Cardone lol. He has scaled back on his recent's and if my ears were't broken i think he once gave advice on a 4 unit. I think my ears were broken though
But yea find a partner that can balance the equity you need, or find an investment you can leverage with your current position of capital.
2 Reply
Devon Webster
Vernon Rockville, CT · Member since 2017 · 14 posts · 6 votes
7y
@Caleb Heimsoth lol that’s what I was thinking
1 Reply
Michael H.
Rock Hill, SC · Member since 2015 · 104 posts · 209 votes
7y
@Roddy Walker so if someone gave you a deal on a 15 unit, you would say “naw, I’m good.”
Why 16?
1 Reply
Larry Jones
Member since 2019 · 5 posts · 2 votes
7y
@Tom S. Thats the best advice in here besides the actual answers to his capital problem. It seems brave to buy a property of that size right out the gate. Get the feet wet and move up.
1 Reply
Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
Just Ask grant for the other 50 grand . If he’s serious about 10x and partnering.. then he’ll go for it .
0 Reply
Ian WalshBusiness Member
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
7y
Buy really deep. If you are low on funds and decide to use a lot of leverage , it is a death trap.
0 Reply
Luciano A.
Developer · Houston TX · Member since 2018 · 423 posts · 400 votes
7y
@Roddy Walker
Not to be harsh but you need to learn to walk before you can run. If you are fresh to real estate and want to jump in and buy multi family without any experience is like my son wanting a Rolls Royce as his first car. Don’t get sucked into all this hoopla that RE is easy and passive. Educate yourself on how to analyze deals, find a partner with track record and start on small deals or go completely passive and go into someone else’s deal for a small return on your money.
2 Reply
Phil Beck
New to Real Estate · Sigourney IA · Member since 2017 · 29 posts · 4 votes
7y
@Roddy Walker, you should gain experience before managing such a big scale. I was advised to do single family homes and multi family to get experience. Learn from any mistakes and know how to manage. My plan even and numbers are planned with this in mind.
Learn first before getting so many units. Then with more experience the more potential there is.
A person doesn't jump in the water believing they will swim, they learn.
1 Reply
Paul Choi
Rental Property Investor · San Ramon, CA · Member since 2017 · 350 posts · 611 votes
7y
Originally posted by @Caleb Heimsoth:

@Roddy Walker are you saying you want 16 units because of grant Cardone? If so I’d rethink your strategy
My first MF property was a 16 unit acquired about a year ago. I was learning and binge watching BP, Kiyosaki and Cardone so I guess I drank the cool aid LOL!. In California, 16 units and up requires an on site manager, which is an extra cost but provides eyes and ears on the property and keeps it maintained. I do have MF properties in the 14-15 unit range and there is a slight difference in property management and maintenance.
That said, that first 16 unit was the best decision I made and am glad I listened to him a year ago. It was a value add play and with all the work complete, will be selling it soon. Cash flow is there but with nearly a $1 million to be made net before taxes, would like to trade up to larger deals. The power of the # of units multiplying the value is very true. Cardone has his style but alot of what he says has truths.
5 Reply
Johnson Best
Member since 2017 · 68 posts · 10 votes
7y
@Alexander Felice
What happen if some people want to sale early?
How you minimize disputes?
0 Reply
Alexander FelicePro Member
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
7y
Originally posted by @Johnson Best:

@Alexander Felice
What happen if some people want to sale early?
How you minimize disputes?
good question,
everyone knows the exit strategy going in. I don't have any partners who are hard up for the cash, and I wouldn't take on anyone who was relying on the cash flow for their well being. This was my first MF deal, everyone knows that, everyone on the deal has aligned long term goals.
Disputes I'm not too worried about, I'm good at managing expectations and I communicate clearly and frequently.
That said, the way the voting rights are set up ultimately everyone is along for the ride regardless if they start fussing ;) ;)
[email protected]Podcast Guest on Show #301
0 Reply
Dante Pirouz
Investor · Almont, MI · Member since 2015 · 360 posts · 302 votes
7y
I suggest starting smaller with a small amount of capital because to reposition at MF you will need cash to invest on rehab and upgrade of each unit. Figure at least $10K+ per unit and more if the systems (HVAC, roof, plumbing, etc.) need upgrading. Plus you should budget a contingency amount for emergencies, vacancies, moving out "pain in the a" tenants, etc.
0 Reply
Calvin OzanickBusiness Member
Property Manager · Janesville, WI · Member since 2017 · 707 posts · 297 votes
7y
Roddy,
Regardless of the sarcastic tone of many people in this thread, you need to realize that those numbers are pretty difficult to achieve in this day and age. Most banks, if not all, will want 20-25% down payment money. So, your $40,000 would get you roughly 160-200k worth of property. You are most likely best off starting small with something manageable. This would lead you into some bigger deals as you learn more about the business. Also, based on the model you projected, I am assuming you read Cardone's book. This is a great start. Before you buy anything, I would recommend reading Brandon Turner's "The Book on Rental Property Investing" this book will give you the steps and plan to get started investing in real estate from someone who started and built a very successful business. Best of luck, and should you need help analyzing deals or more information, always feel free to reach out.
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