New to Real Estate · Bloomington, MN · Member since 2021 · 1 post · 0 votes
I am currently looking for my next real-estate move. I've been house hacking my current house and trying to weigh my options. I believe buying a 2-4 unity property would be an easy next move, but I was wondering if anyone has went straight into large 30 unit plus deals right after there first house hack? Of coarse my out of pocket cash wouldn't be large enough so i would assume i would need to do some creative financing (hard money etc). Do banks decline a lot of people who are not established in the industry? How big could i go? Is it better to just work my way up with smaller deal so i can finance the down payment?
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
5y
I did not take this route, but I have a few clients that I have mentored that went straight to 100+ unit multifamily. The secrets to their success?
1. They built a strong team - they found partners and used their strengths to add value
2. They became educated
3. They had a burning desire and took every step along the way necessary. When I gave them something to do, they did it and then went beyond that and did more.
As for the money needed, we do syndications to bring the required capital to close on the deal and renovate it.
Rental Property Investor · Northern Virginia · Member since 2019 · 793 posts · 620 votes
5y
@Brian Warren It is possible to get into larger multifamily after your first house hack, but the larger you go, the more the broker and lender wants to see if you can close. They are going to want to see someone with experience on your team. If you don't have the experience, you may not even be considered. It's a different game getting into multifamily.
I'd start with smaller multifamily properties and build your way up. Or, bring on an experienced partner and build a solid team where you can take down larger multifamily properties. With a solid, experienced team, the sky is the limit. It is just very competitive.
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
5y
I did not take this route, but I have a few clients that I have mentored that went straight to 100+ unit multifamily. The secrets to their success?
1. They built a strong team - they found partners and used their strengths to add value
2. They became educated
3. They had a burning desire and took every step along the way necessary. When I gave them something to do, they did it and then went beyond that and did more.
As for the money needed, we do syndications to bring the required capital to close on the deal and renovate it.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
5y
@Brian Warren as Todd mentioned, it can be done, yes. But also as Todd noted, it can be a challenge. The "experience" is normally easy to find if you are in a market with many large property management groups for hire. You interview and hire the team you wish to work with. Their experience will often cover the lender requirement.
Where you will have more issues is likely on the capital side, both loan and equity. Of course every asset is different, but to me 30 units sounds like you are likely in $1.2mm and up range. With a HML you are talking 10% down, minimum (and likely more) plus reserves and fees. And that is assuming the deal pencils with high interest rates.
Then you get the equity side and trying to get investors to put money up with little, to no, experience on your end.
But again, I have two friends that partnered and went from never having owned real estate (not even primary) to buying a 50 unit for $8mm and raising $1.8mm in equity on this deal.
Rental Property Investor · Coral Gables, FL · Member since 2016 · 199 posts · 266 votes
5y
@Brian Warren, it looks like you are off to a good start on your investing career. As others have stated, in order to acquire a larger multifamily, you'll certainly need at least one experienced partner who has a longer track record and you'll need (maybe the same person/company?) a strong financial partner. Lenders won't likely want to be involved unless your track record is stronger than you've described here.
The larger multifamily properties are treated differently by lenders and the lenders are typically different. Usually larger multifamily is funded by agency loans rather than local banks, so check around. A lender broker can help you understand the financing, which is a critical piece of any deal, and the broker may have investors he or she knows who might like to help you on your deal.
Go to local real estate meetups and see if you can find potential partners & lenders you know, like and trust, to help you understand the steps in acquiring, operating and disposing of larger multifamily properties.
Rental Property Investor · Rochester, MN · Member since 2017 · 224 posts · 323 votes
5y
@Brian Warren
My first deal (other than a primary residence)
Was a 12 unit apartment. Not huge by any means, but I was playing by commercial real estate rules, which it sounds like you are interested in. I honestly felt it to be less risky than buying a 2-4 unit, with more ability to increase the value because commercial stuff as you know is valued based on the numbers. One year in and I’m super happy with the decision to go big right away. I’ve been able to do a lot of renovations using just the cash flow…hard to do that with a duplex.
Investor · Lake Worth, FL · Member since 2016 · 233 posts · 140 votes
5y
@Brian Warren it's possible but hard as you need money for the equity part. So you'll need a patner and a great deal. The partner is easier to find than a great deal, both are doable but not easy. Say you find 30 units in a cheaper market, 50k/door, so 1.5m; you'll need 375k-550k downpayment plus closing and other fees, say 75k. Finding someone with that kind of capital not very hard, convincing them to trust you with it, with little experience harder. Seller financing is always an option but very hard to find, not impossible though.
Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes
5y
@Brian Warren - YES it's possible. We did it - went from very little RE experience to 173 units as our first acquisition. As many on this thread have said, it's a different world when you start looking at 100+ units - you need an experienced partner's track record and credibility to get the attention of brokers and lenders. We (my Dad and I) decided to hire a coach and leverage his experience and community to help us get deals closed. If you pay to play, you can get there much faster. A good solid team can help you raise capital, put up earnest money, KP, etc. You could certainly start smaller and work your way up...but if you're going to end up there eventually, why not skip all that and GO BIG. When we first started we didn't realize it was possible to acquire 100+ units so we started with a 6-unit and WHAT. A. HEADACHE. It's so hard to scale a portfolio and grow. When you work with a team of partners you can continue building your portfolio because you don't run out of resources. Best of luck!!