My business partner and I are both newbies, but he can bring substantial funds to the table such that buying a larger apartment complex could be possible (upwards of a $1MM purchase price). We were under contract on a 4plex, then looking at some SFHs, and now we're entertaining a larger investment. So we've been all over the map and are really suffering from analysis paralysis at this point. We had started out with BRRRRs in mind, but perhaps that wouldn't necessarily be required if we had a larger, strong cash flowing property. Our initial goal is pretty modest; looking to replace our current incomes about 12 years from now (much sooner in a perfect world) and work if/when we want to from there on. Hoping the BP community can share some insight on whether or not starting with a larger investment is a wise move, is it better to buy 5 10-unit properties instead (for example), etc. Thanks.
Buy what you can find a good deal on. Good deals are kind of hard to find right now. We started three years ago, we are up to 33 units in 4 deals. The one thing we did that made scaling up quickly easier was/is to pay for full-featured property management software. We use Buildium; it's not the cheapest thing out there and the customer service department all think they're "rock stars" but the software has features that make the entire management process easier: including move-in/move out inspections, e-leases, on-line e pay, maintenance tracking, and back end accounting. We are in the process of setting up "paynearme" through Buildium so that we'll be able to accept cash at 7-11 (and other stores) with no charge backs possible and all the same conveniences of automated accounting entries that on-line e-pay provides.
Buy what you can afford - the larger the better. However before you get to this step, take some time to educate yourself on the asset class (I'm assuming commercial MFH?) and the market. Start looking for a property while building your team simultaneously. Then only take action.
I agree with Alina, if you can buy bigger, then do it. It really depends on the market and the asset though. You'd have to make sure the numbers work for you. But the larger, the more income potential. I would definitely focus on 5 - 10 units. In addition, financing for 5 + units is much easier because 4 and under are not strictly commercial financing and have different loan programs.
I'm a commercial mortgage broker so have a lot of experience with this type of thing. PM me if you want to chat more! Happy to answer any questions.
Thanks, everybody. Really appreciate the thoughts. While SFH are 2-4 unit MFH are great for some folks, it sounds like most folks end up migrating to larger MFH deals once they're more comfortable and able to do that. That said, I think we need to bypass that phase and get into commercial MFH out of the gate here so long as we approach it correctly.
In agreement with @Alina Trigub as well. Educate yourself on the market you plan to purchase in. Build a list of potential motivated sellers. Find a deal. Run the numbers. And buy the thing.
Once you do it, you will learn more than any book or what anyone on here can tell you. Document your process. Right down the lessons learned. And then go do it again.
@Drew Leonard starting small isn't a bad thing. But if you can acquire a 50 unit in one transaction instead of having 5 transactions of 10 units, more than likely would be more feasible for you guys to take on. Most importantly you have to narrow your focus down to just one asset class whether its SFR or MFR. I'm a big advocate for MFR as the economies of scale tend to work more in your favor and the financing is much easier to attract. Good luck on your journey