Buying a multi family apartment deal

Multi-Family and Apartment Investing
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Buying a multi family apartment deal

Jesus Orbea
Rental Property Investor · Member since 2019 · 7 posts · 6 votes

Rookie investor here. I am 34 years old with 3 little girls. No debt besides my mortgage and the mortgages of my two rentals. I own 2 single families already that I rent out and have saved the last few years to invest in a larger deal.

I have explored single family turnkey with Spartan Invest and MidSouth Home Buyers and that route seems decent. However, the more I read and listen I believe that my strategy wants to be to invest in a 16+ unit apartment complex.

I have the cash for the down payment and asking BP if you were 34 again and had the opportunity to buy a larger deal or buy multiple smaller deals (100-120k SFH turn key deals) what would you do?

My goal is buy and hold. Any advice here would be much appreciated. Thank you.

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Chris Levarek
Real Estate Syndicator · Phoenix, AZ · Member since 2018 · 903 posts · 1k+ votes
6y

@Jesus Orbea A great question! This one is asked actually quite frequently and typically the answer from experienced investors is go for the bigger deal. As many have pointed out already, there are some great economies of scale and benefits with larger deals.

However! Most if not all those experienced investors started in the same place. It is the rarity that a new investor jumps into a 50 unit and runs the project without some help. Just doesn't happen. Now a new investor can passively invest into large 50+ units and gain knowledge/experience definitely. But, actively running the project usually requires some ramp up and a mindset shift. 

The only reason I say this, is because although it will be recommended to go large, it is the growth on smaller deals and/or passive investments that creates the mindset shift. That mindset shift that you can knock down bigger and better. 

Momentum builds and all of the sudden YOU are telling new investors they should go big first as you see the benefits. This has been my experience. It does not mean it has to be yours however, I thought I would share my take on it.

You might be able to swing a 50+ unit out of the gate! 

Either way consistent action and networking relationships will get you there. Reach out if I can help.

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  • Charles Seaman
    Apartment Syndicator · Charleston, SC · Member since 2017 · 519 posts · 631 votes
    6y

    @Jesus Orbea If I was 34 again (I'm 35 now), I'd take the larger deal over multiple smaller deals, but it really comes down to personal preference.  Multiple single family homes will likely give you a better return, but larger deals will give you the benefits of scalability and ease of management.  I personally prefer the latter.  Decide which you prefer and go after it.

    2Reply
  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    6y

    @Jesus Orbea In my market it is impossible for SFR and duplexes to give you the cash flow per purchase dollar you can get with a 12-20 unit. The per door price of the MF is impossible to beat. The singles are easier to sell and may appreciate more so consider your goals as you decide. If I were 34 again I would definitely go with the MF.

    2Reply
  • Jesus Orbea
    OP
    Rental Property Investor · Member since 2019 · 7 posts · 6 votes
    6y

    @Bjorn Ahlblad @charles

    Thank you gentlemen for you input here!

    0Reply
  • Joseph CacciapagliaBusiness Member
    Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
    6y

    I prefer multifamily properties for the scalability as well. I also like that you can force significant appreciation without necessarily needing a huge renovation. However, I'm curious why the need for 16+ units specifically?  I've heard some investors say that's the level they need to switch to an on site manager. Is that your reasoning? I've found we can often do better with offsite management until you get closer to 50+ units.

    [email protected]979-218-2286
    Joseph Cacciapaglia powered by Morty
    WebsiteView Page
    0Reply
  • Ruche Khu
    Member since 2019 · 1 post · 0 votes
    6y

    Hi,

    I am a newbie but have been following BP for a long time and keep coming back for advice/ recommendations. I have been following the news about people leaving larger cities to move to suburbs due to pandemic which may drive the prices of condos/MF housing down. So does that create any opportunities for someone like me who has never invested in MF before? Also how would you time it as there are conflicting news where some are saying now is the good time while others suggest waiting till the year end to see the full impact of Covid and then start looking to buy. Can someone provide any guidance here? 

    0Reply
  • Jesus Orbea
    OP
    Rental Property Investor · Member since 2019 · 7 posts · 6 votes
    6y

    @Joseph Cacciapaglia Thanks Joseph. One of the Grant Cardone books I read recommended nothing smaller than 16+ units, that is really is the only reason why. If you have a different opinion please share! Thanks again!

    0Reply
  • Joseph CacciapagliaBusiness Member
    Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Jesus Orbea:

    @Joseph Cacciapaglia Thanks Joseph. One of the Grant Cardone books I read recommended nothing smaller than 16+ units, that is really is the only reason why. If you have a different opinion please share! Thanks again!

     I've heard that a few times. I'm sure it's probably true in some market somewhere, but it's certainly not universal. It may be true that somewhere close to 16 is what you need in order to afford on-site management, but I think you need significantly more before it actually makes sense to hire on-site management. We're typically able to provide better more affordable off-site management for clients until they get over 50 units. You just don't actually get the economies of scale you need until then. That means operating properties with anything from 5 to 50 units in my market is pretty similar. However, the financing may change, due to $/unit once you get past 20 units. That's about where you need to be for agency debt here. For more expensive markets, you could get there with far fewer units.

    [email protected]979-218-2286
    Joseph Cacciapaglia powered by Morty
    WebsiteView Page
    0Reply
  • Steve Chan
    Investor · Houston, TX · Member since 2019 · 50 posts · 23 votes
    6y

    @Jesus Orbea invest as a limited partner with sponsor that you’ve vetted. This will allow you to earn some really nice returns while learning the multi-family business from an experienced operator.

    0Reply
  • Greg Dickerson
    Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Jesus Orbea:

    Rookie investor here. I am 34 years old with 3 little girls. No debt besides my mortgage and the mortgages of my two rentals. I own 2 single families already that I rent out and have saved the last few years to invest in a larger deal.

    I have explored single family turnkey with Spartan Invest and MidSouth Home Buyers and that route seems decent. However, the more I read and listen I believe that my strategy wants to be to invest in a 16+ unit apartment complex.

    I have the cash for the down payment and asking BP if you were 34 again and had the opportunity to buy a larger deal or buy multiple smaller deals (100-120k SFH turn key deals) what would you do?

    My goal is buy and hold. Any advice here would be much appreciated. Thank you.

    It all depends on your goals, resources, experience and comfort level. If you want to scale faster and build serious wealth larger multifamily is definitely the way to go. You want to use agency small balance loans so you can get agency experience which you will need as you scale up. Single family can be goos as well but is a slower path and less efficient especially in the beginning but there are some great strategies there as well.  

    1Reply
  • Gregory SchwartzBusiness Member
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    @Jesus Orbea whatever you decide keep posting so we can follow your journey. I can empathize with your dilemma, my first rental was a duplex, now a 4 plex. I feel comfortable with sub 5 unit properties but would like the scalability and growth that comes with larger syndicated deals. 

    [email protected]443-812-0357
    Schwartz Realty Group5117 Reviews
    WebsiteView Page
    1Reply
  • Jesus Orbea
    OP
    Rental Property Investor · Member since 2019 · 7 posts · 6 votes
    6y

    @Gregory Schwartz thank you all for the feedback. This is the first time I have posted anything on BP and the responses have been excellent.

    0Reply
  • Jay Helms
    Rental Property Investor · Gulf Breeze, FL · Member since 2014 · 1k+ posts · 733 votes
    6y

    @Jesus Orbea - If I could back 6 years, I'd buy more doors per transaction vs. less. Congrats on your success so far!

    1Reply
  • Jeff Greenberg
    Real Estate Consultant · Camarillo, CA · Member since 2010 · 2k+ posts · 1k+ votes
    6y

    @Jesus Orbea as others have said, it depends on your goals, but here are a few points.

    1. 100+ Sfh’s are another job

    2. Difficult to scale and finance 100+ SFH

    3. Difficult to get good quality PM

    4. 5+ MFH are valued on income stream, not comps allowing you to increase value by operating efficiencies.

    5. You can also invest passively in syndications.

    6. You can legally pool other peoples money and purchase larger properties and hire professional PM.

    You will find many different opinions on this forum.

    Good luck and stay healthy.

    1Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    6y

    Buy multi family in your local market.. economies of scale is great.  Be aware that you will need a commercial loan and the metrics are different.  Suggest contacting a commercial loan broker so you understand what you are in for :)

    0Reply
  • Chris Levarek
    Real Estate Syndicator · Phoenix, AZ · Member since 2018 · 903 posts · 1k+ votes
    6y

    @Jesus Orbea A great question! This one is asked actually quite frequently and typically the answer from experienced investors is go for the bigger deal. As many have pointed out already, there are some great economies of scale and benefits with larger deals.

    However! Most if not all those experienced investors started in the same place. It is the rarity that a new investor jumps into a 50 unit and runs the project without some help. Just doesn't happen. Now a new investor can passively invest into large 50+ units and gain knowledge/experience definitely. But, actively running the project usually requires some ramp up and a mindset shift. 

    The only reason I say this, is because although it will be recommended to go large, it is the growth on smaller deals and/or passive investments that creates the mindset shift. That mindset shift that you can knock down bigger and better. 

    Momentum builds and all of the sudden YOU are telling new investors they should go big first as you see the benefits. This has been my experience. It does not mean it has to be yours however, I thought I would share my take on it.

    You might be able to swing a 50+ unit out of the gate! 

    Either way consistent action and networking relationships will get you there. Reach out if I can help.

    2Reply
  • Alina Trigub
    Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes
    6y

    @Jesus Orbea

    Many great responses here. The simplest answer is: it depends. A lot depends on where you're at right now personally, financially, what your motivation is, how strong is your why, where do you see yourself down the road. 

    Instead of repeating myself, I'll share a few articles I wrote. Hopefully they'll give you some sense of direction: 

    https://www.biggerpockets.com/member-blogs/10850/87253-should-i-scale-my-investment-from-single-family-homes-to-multifamily 

    https://www.biggerpockets.com/member-blogs/10850/86621-six-steps-approach-to-getting-started-in-real-estate


    https://www.biggerpockets.com/member-blogs/10850/80091-you-cannot-force-a-rain-but-you-can-force-a-property-to-appreciate

    1Reply
  • Adrian Fajardo
    Rental Property Investor · Killeen, TX · Member since 2017 · 337 posts · 100 votes
    6y

    @Jesus Orbea "it depends" really is the most accurate answer. I noticed most experienced investors have the same answers. So I would listen to them. The answer "it depends" is because of goals and that we all have different starting points. Start where you feel comfortable and if your goals are aligned with what everyone is saying then you already know where you're working towards.

    I wish you the best in your investing journey!

    1Reply
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