HOW TO TRANSITION FROM SINGLE FAMILY INVESTING TO MULTIFAMILY INV

6 Replies

Straight to it:

First method is “stacking” and it’s gradual. First you buy a duplex, and then a quad, and then an 8-plex, and so on.

Joint Venturing - It won't be easy to sign on the loan when you are starting without any loan experience. You may then seek to partner with someone who has that loan experience. Even better if they have operational experience as well. This also may reduce your risk if your combined loan amount can exceed $1M. Loans in excess of $1M, can qualify as non-recourse debt, which means the lender cannot come after you personally.

Syndication option 1 is to leverage your earnings from your single-family investments into a multifamily real estate syndication deal. If you own five single-family properties, and each one cash flow $200 per month, you have $12,000 each year to funnel toward a syndication opportunity.

Syndication option 2 is to use your retirement account. I partnered on two duplexes by taking $110,000 out of my solo 401k. After making improvements and holding for 5 years, I exited with $250,000. While I profited pretty well, those properties gave me so many headaches that I decided to take all of it and passively invest in 5 different syndications. These are all still growing in my 401k today.

Syndication option 3 - do a 1031 exchange out of your single-family either into your small apartment or doing tenants in common (TIC Structure) into syndications. This structure is complex, but have no fear as the syndications attorney, and a qualified 1031 agent can handle the details. We had an investor just do this. Now he'll have himself a hefty income stream of $75,000 a year, plus he will share in the profits at the sale and have the option to do another 1031.

Originally posted by @Rick Martin :

Straight to it:

First method is “stacking” and it’s gradual. First you buy a duplex, and then a quad, and then an 8-plex, and so on.

Joint Venturing - It won't be easy to sign on the loan when you are starting without any loan experience. You may then seek to partner with someone who has that loan experience. Even better if they have operational experience as well. This also may reduce your risk if your combined loan amount can exceed $1M. Loans in excess of $1M, can qualify as non-recourse debt, which means the lender cannot come after you personally.

Syndication option 1 is to leverage your earnings from your single-family investments into a multifamily real estate syndication deal. If you own five single-family properties, and each one cash flow $200 per month, you have $12,000 each year to funnel toward a syndication opportunity.

Syndication option 2 is to use your retirement account. I partnered on two duplexes by taking $110,000 out of my solo 401k. After making improvements and holding for 5 years, I exited with $250,000. While I profited pretty well, those properties gave me so many headaches that I decided to take all of it and passively invest in 5 different syndications. These are all still growing in my 401k today.

Syndication option 3 - do a 1031 exchange out of your single-family either into your small apartment or doing tenants in common (TIC Structure) into syndications. This structure is complex, but have no fear as the syndications attorney, and a qualified 1031 agent can handle the details. We had an investor just do this. Now he'll have himself a hefty income stream of $75,000 a year, plus he will share in the profits at the sale and have the option to do another 1031.

 Thanks for sharing!!