What would you do with this situation?

Question

What approach would you take with this situation?  Looking for someone to give me an example of how they would start into building a large long-term multifamily rental portfolio.

Current available liquid ready to invest $100k plus an available $250k in equity that can be pulled out of current home. Current income is very stable as I have been in the same business for almost 10 years. I currently have an income range of $400k-$500k. I have ZERO debt besides my current mortgage and a few auto loans.

Keep these in mind when responding:

1. I ONLY want to invest in the area I know which is most of Wisconsin.

2. Open to managing personally with my fiancé OR hiring a management company (beyond 10 units wouldn't consider managing personally)

3. I do not consider myself handy

4. I am in no position to spend much of my time rehabbing.

5.  I am open to some sweat equity with landscaping and cleaning (a few long days of work).

Thank you in advance if you take the time to respond!  Any and all advice welcome!

Drew Sygit · Answer

If you buy Class A, maybe Class B buildings, you can properly self-manage. BUT you're going to pay top dollar for them!

Buying Class C and some Class B buildings will require you to make renovations - which you'll need to hire out.

If you're making $400-500k annually, why would you invest sweat equity in landscaping & cleaning? These are under $50/hour jobs when you make $200+/hour!

So, sounds like you also may also need to change your perspective of valuing your time.

Lucas Musil · Answer

Appreciate your response and insight.  I'd need to understand more about buying the type of property your talking about.  When referring to the land scaping and cleaning I was specifically referring to getting a property ready to be rented after a purchase.  I have no problem hiring out to do that also though. I wasn't referring to a weekly thing, more of a situation where I need to get something ready to be rented after purchase.  I was also trying to put in perspective as to what I am willing and not willing to do, as well as what I am and am not capable of.

I do see where you are coming from with just hiring out to do it anyway, even if I would be willing to spend the few hours.  Some of it has to do with pride in what I am doing and wanting to have a hand in bettering the property.  Maybe it doesn't make sense to think that way and just look at everything from a spreadsheet stand point.

Thanks for getting me thinking more I value your response.

Jasmine Delves · Answer

Regarding point 2, if you do decide to manage personally, I would definitely recommend using a property management app to help with this. It will be the best way for you to track your income and expenses, collect rent, automate late fees, screen tenants, etc. It will also be easier to manage as your portfolio grows as everything is in the same place.

There are lots of different software options out there so do your research to find the right one for your portfolio.

Hope that helps!

Lucas Musil · Answer

Instead of saying the only area I know, I should have said I wanted to be close to the property I own.  I am in Waukesha county (SE,WI).  Being new I feel that it might be important to see what's happening and know someone to help with a situation if it comes up.

3. I do not consider myself handy - I am willing to pay to have something fixed or updated over doing it myself.  My thought process behind this is I'd rather it be done right and handled immediately, then me trying to figure it out.

4. I am in no position to spend much of my time rehabbing - My current career is very demanding of my time throughout the week, I understand buying property, managing property, looking for property, ECT. is demanding of my time also.  However, the things I mentioned I would be able to do while still in my office.  If anything was needing rehab or fixing like the response above I would rather hire a professional.

5.  I am open to some sweat equity with landscaping and cleaning (a few long days of work) - I usually take off 2 days a week depending on what my schedule is.  I could spend this time making a properties curb appeal nice when just buying it as well as deep clean it and get it ready for rental.

My financial goals are to keep growing a portfolio of multifamily units as of now.  Are you asking for a number of what I want to make per year?  Are you asking if this is just a retirement fund and I just want to build equity with no cash flow?  Are you asking for a 1-10-20 year income plan?

Again, I appreciate your time and help with this.  You seem to be a big part of this community and a master of your craft.

Lucas Musil · Answer

Thanks for taking time to respond Joe I appreciate your help!  Any advice on how I could better ask the question to get a response from you that I could use?

Joe Villeneuve · Answer

Based on the limitations you have given, and the lack of any statement of goals, my suggestion for your situation would be.....

What would you do with this situation?

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