All Forum Posts by: Jack Zhuang

@Jack Zhuang

Good that you are looking at expanding your portfolio!  I've done similar research as you have and also listened to Cardone.  First property bought was a 16 unit MF.  In California, any MF property 16 units and up require an on-site manager, which lives in one of the units for a discounted rent and a small salary.  Good part about this is that a good on-site manager can keep eyes and ears on the happenings on the property.  Then have a general property management company that manages the on site manager as well as other properties in the portfolio.

Soon after the 16 unit, acquired 2 more MF properties with similar # of units.   these are all value add.  Value add properties can yield excellent returns.  I plan on going bigger in terms of unit count for next acquisitions because as many have said before, economies of scale really does put the numbers in your favor.

Loopnet typically does not have any quadplexes because it is a commercial property listing site. Those are listed on the MLS typically. In general, you can get better debt terms on 4 units or less because they are residential. Network with commercial brokers and see what deals they have in the pipeline or not even listed on loopnet. There may be 2-6 deals they have for every 1 deal they list on loopnet.

go big or go home! you need to find people to partner with on bigger deals! you are young, ambitious so go for the pathway to scale!

@Jack Zhuang, it seems like you are trying to justify how a “small fry” can participate in the larger deals as opposed to being “stuck” with smaller multifamily.  I struggle with this too but what I came to realize after talking with some other MF guys is it’s probably more difficult  to manage multiple smaller properties than it is one bigger assuming the number of units is the same, the economies of scale.

As for the financial aspect, unless you have GC money burning a hole in your pocket looking for a place to hide from uncle same working with a team and getting involved in syndications May be the way to go.  Heck, GC preaches syndications and MF all day long!

That said, moving from SFH to big MF is scary, and that is where smaller MF units can come in. Maybe not 4-pieces, but more like 12,16,20 unit properties.

If you like I have a contact that lives in the Bay Area who does syndications, I can reach out and put you two in touch, he’s done small and is now doing large, think he’s closing on a 608 unit in the next 30 days.

You’re best route if you really want to get into BIG multifamily quickly may be from the LP side of a syndication, or as somebody who can add value to the GP side AND still toss some passive funds into the deal.

Long winded, hope that helps 

@Jack Zhuang I'm not sure I get the distinction... I have 3 four-plexes next door to each other on separate tax lots. I bought them together and likely will sell them together as a 12-plex. Even when I look at much larger apartment complexes they generally come as clusters of buildings. For instance a 96 unit apartment is 12 8-unit buildings or 24 four unit buildings.

These days you will actually pay quit a bit more to buy a '96 unit apartment complex' than 12 closely located 8 units.... so my advice would be to buy them as 8 units and sell them as 96 units and arbitrage the difference...

Economies of scale come in to play pretty quick after you get into commercial properties.  4 4-plexes = 4 roofs, four sewer systems, 4 water/garbage bills, etc. as with larger multifamily you’ll save some of those hassles and costs.  You should still be conservative on your underwriting and use about 50% for your expense ratio until you have systems in place to reduce that.

Since you are considering out of state you’ll need to take PM costs into account as well, 4 4-plexes would likely be 10% management fee per versus maybe 8 percent of a larger single complex.

Some say LoopNet is where deals go to die, I believe you can still find good deals but you either need to be quick or lucky.  With the market as hot as it is most good to great multifamily deals never see the open market, they are pocket listings and only the “proven operators” usually see those deals because of their relationships with the broker.  That can be hard to overcome but if you search BP or find a book or two about doing syndications you can find great advice on creating those relationships, Id suggest Joefairless.com as a starting place.