Does anyone know about multifamily

Question

I’m wanting to know your thoughts on how difficult it’s been to raise money for deals, or any other challenges you’ve encountered while working in multifamily real estate.

Evan Polaski · Answer

This is a very broad question.How hard is it to raise money: anywhere from impossible to very easy.

The primary pieces of being able to raise money are a combination of your network of investors and a great deal.  If you have a list of willing investors that are ready to invest with you due to years of trust building, you can probably raise money on an average deal. If you are new, with no experience and no real investor to leverage, then even a home run deal will not get you money in the door, because no one knows and trusts you (and you likely won't get a deal anyways, since brokers won't award a newbie a deal without surety that equity is there).

Beyond those two (deal and investor network), you have all the operational challenges that will arise everyday. Management teams that under perform or withhold NTVs to get bonuses, construction teams that don't show up, material costs that never stop increasing, tenants that destroy your units and skip, tenants that falsify their income and employment and leasing teams that don't care because they just want the lease signed for their bonus, insurance companies that may push through a 20% premium hike in a single year, weather patterns (since you are in FL hurricanes), etc.

So, now that you have all the risks and issues: where do you start?  I recommend small.  Do a duplex with either personal money or one or two investors, and make your investors a lot of money.  Then you take your portion and reinvest in a quad with maybe 2-4 investors.  Make them a lot of money and go for an 8 unit.  Bring ins 6-8 investors, make them a lot of money, and then go for the 20 unit...  You get the picture.

Chris Seveney · Answer

To raise money in multifamily, it is more about the operator than the actual deal. Especially in today's environment, too many people have been burnt over the last five years investing in a deal where the operator was not sophisticated, and many have learned their mistakes. If you have no experience or never managed a multifamily deal or work in multifamily, it will be extremely challenging. Your best bet is to try and find a partner where you can learn from them.

Evan Polaski · Answer

@Antonio Velez, I am still not entirely sure if you are looking to invest as an LP in someone else's deal or try to find a property directly, where you are the GP.

Only you can determine if you trust someone.  I would generally look at experience in the industry (I will always go for the 25 yr veteran over the person that just attended a weekend seminar focused on mindset).  Is it someone you can see being in a long term relationship with?  Do you share similar visions of what you are looking to do and achieve?  Are they a specialist (focused on one asset type) or generalist (will pursue any investment that makes them money)?  (I don't like generalists in most areas).

Then, you just get a deal done and make your investors happy.  I have met other LPs that were happy making 7%/yr total, after sale, on a deal because they trusted and liked the sponsor.  I have talked to investors that have passed on deals that that project "only" an 18% IRR because someone else is marketing a deal that pencils to a 22% IRR, even though in my eyes both had their risks, but one had far more risks. So, ultimately, it is setting projections doing everything you can to live up to those, but ultimately, being available and accountable.  Most sponsors seem to get themselves in trouble not just because their deals may go south, but because they also seemingly run and hide when that is happening.

At the end of the day, there is no set way for success here.  Some groups are long term hold, some are short.  Some buy high quality deals, while others buy crap.  Some people want to control the whole process (i.e. source, raise, operate both as Asset manager and property management) and some want to raise capital for other groups and get a slice (this is a big grey area under SEC rules).  Of those capital raisers, some look for operators that are long time industry veterans while others are open to newer/scrappy operators.

The biggest piece of advice that seems to be universal is: find what you are good at and focus on that.  You will find almost all groups have a couple people running them.  Often one is the marketer and the other is the operator.  This is because it is rare that the skill sets needed to attract capital and be the sales guy are not the same as what makes a good analyst that can dive into the weeds of a deal (whether you are sourcing deals directly or sourcing operators to partner with)

Russell Cabus · Answer

Hi Antonio,

Multifamily generally refers to any residential property with 2+ units under one property—duplexes, triplexes, apartment buildings, etc.

From an operations standpoint, it’s quite different from single-family:

1. Scale changes everything
You’re not managing “a property”—you’re managing a system of units. Leasing, maintenance, and rent collection happen in parallel, not one-off.

2. Operations become process-driven
In single-family, you can improvise.
In multifamily, you need:

• Standard leasing workflows
• Maintenance ticketing systems
• Consistent tenant communication
Otherwise things break quickly.

3. Financials are portfolio-based
You’re tracking:

• Occupancy rate
• Turnover
• Unit-level profitability
• Maintenance cost trends

It’s less about one tenant paying rent, more about overall performance across units.

4. Tenant experience matters more
In multifamily, word spreads fast. Systems for communication, maintenance response, and renewals directly impact retention.I hope this helps!

Kiernan LaFaver · Answer

MFH is often more sought after by investors than single family, primarily due to the additional cash flow and added potential tax write offs for the secondary units. One of the bigger challenges with MFH housing, especially bigger units, is having some sort of an ideal tenant mix where the tenants coexist semi peacefully. From a house hacking perspective, you can get into a MFH with 5% down if you owner occupy for a year compared to the 20% down investment only route. One thing I would advise of, is having an extra capex reserve since there are now at least tow of the major mechanicals: multiple furnaces, multiple water heaters, multiple bathrooms etc.

Antonio Velez · Answer

This is great advice, too! Thank you. I agree, I will have to stash away much more because the probability of something going wrong increases with each door you add.

Antonio Velez · Answer

That’s actually amazing advice—so realistic and better than I’ve heard anyone explain it on the topic. Thanks, because I was wondering how to get started myself. I have enough money for me and a couple of other investors to go in on something.

When I’m getting my investors together, obviously when I start small I’d like to start with people I trust. Any recommendations on finding someone you can trust? How much time should we spend together beforehand, or what do you think I should look out for?

Sorry, there are a lot of questions, but that’s just what comes to mind. There are just so many avenues in real estate, and that’s what I like about the game. But when you say “make them a lot of money,” I assume you either refinance or have another group of investors take over the business. Which strategy do you think is the best for securing your investors' returns?

Again, thank you for your amazing advice.

Does anyone know about multifamily

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