All Forum Posts by: Spencer Hilligoss

@Cole Cherryholmes - goals come first, asset type comes second. As @Jimmy Dang pointed out: "it depends on what your goals are." I recommend setting your goal(s) first, then circling back to decide which type of property to focus on. That said, here are some more thoughts..

we started with a duplex and I think it was a great way to start. I think anything in small multifamily (2-4 units) is the *ideal* strike zone for new investors. Btw, we also bought our duplex locally, which I don't think you need to. It's 100% do-able to buy sight-unseen, despite what some folks might say (you'll have to put in more work to overcome the lack of personal market knowledge though).

Why? Because a 2-4 unit property will serve as a forcing function to drive a multifamily deal with "training wheels," so to speak, before moving into larger multifamily deals (where folks should ultimately aim to focus in their bigger strategy, in my opinion). 

Here are a handful of things you get practice with: 

• deal analysis - in order to actually find a deal that meets your financial criteria, you will have to hustle and analyze dozens, if not hundreds of deals. By the time you are closing on the first property, you will have honed the fundamentals

• negotiation - it will feel like you have to think about a lot of things all-at-once, and it will all feel new. truth is, its not really that difficult, it's just the new-ness that can overwhelm folks at first. 

• networking - talking to folks in the business and finding your voice: agents/brokers, property managers, fellow investor

We own some SFR investments, as well... but we didn't learn nearly as much buying them, as when we purchased a duplex. We've since invested in much larger deals and I can confidently tell you that the learnings from the duplex were more applicable to the larger multifamily deals.

Then again, if you really really want to buy some single family homes... more power to you and best of luck! There is definitely something to be said for the ease-of-access and gentler learning curve. 

@Ray Lam - sounds like a great problem to have! 

sounds like you've created a few options for yourself. Here are a few suggestions, since you asked: 

• #1 - Identify what you're solving for and set clear goals to achieve it. Based on what you wrote above, it's unclear why you want to continue expanding your portfolio. Setting a clear goal can help inform you strategy

• #2 - HELOCs are great. I'm biased, because we've had an awesome experience opening one to tap the equity built up in our bay area home (we're in Alameda). A key advantage of this approach is that you'll leave your first mortgage in tact (with that great rate and cashflow). If you did a cash out refi, you might lose awesome rate (as @Aaron K. pointed out). Even though some of the investor tax benefits of HELOC have has been reduced in 2018, i think they are still excellent products. Just watch out for those variable interest rates as we're in a rising-rate environment in the coming year(s)

• Sidenote: Are you hard set on investing in multifamily in California, specifically? there's lots of opportunity elsewhere, as well. 

Alternatively, you can tap the equity in the form of a HELOC and invest as a Limited Partner in a handful of apartment syndications. That would require very little time, offer you geographical/market diversity and you'd still reap the benefits of apartment ownership on low/no income-tax, thanks to depreciation!

Hi @Account Closed - I recommend heading over to Michael Blank's website and leveraging the arsenal of amazing training resources he has available to learn commercial multifamily underwriting. His SDA (syndicated deal analyzer) is worth the $$$. I purchased it and would do so again, when I was first getting started analyzing commercial deals

@Ryan Picco - i meant to ask before: is going to be your first investment property, in general? read back through the post and I might have missed it if you mentioned it, or not

the reason I ask is because I think that it can be important, more than anything, to simply "get on base" with your first investment property. So much of the REI game is about mindset, goal setting, focus and self-motivation. I absolutely respect your goal of going 16+ units on your first (if this is your first)... but as @John M. pointed out, the learning curve on actual experience can be more reasonable if you go for fewer units.

We closed on a duplex for our first investment property and am so thankful that we did. If you intend to run your passive investments like a business, it gives you something real to build scale-able systems around. Additionally (and maybe, most importantly) you learn a lot about yourself in the process: how you'll react to hurdles, how you're fit the REI work into your day, how you want to build relationships in your network, etc.

Now, that said... if you're ready to rock and take down a 16+ unit plus, don't let us slow you down. Go crush it!

@Hunter Ambos for what it's worth: your title for this discussion got my attention! I had to click and find out "getting tased" was relevant to multifamily real estate investing

In all seriousness, you have a leg up on all of us. There is only 1 asset in the world that none of us can buy more of: time. You have more of it than most. That is an enormous advantage. 

Personally, I think the strategy that @Account Closed mentioned is step #1 if you are 18. House hack on the right deal as soon as possible. If i could turn back the clock, that is the first thing I would do. B and C multifamily will be there for you, when you're ready... the first step is to get your basic balance sheet in order. Cut expenses down as low as possible and start building up some financial wherewithal. You're already in the right job to build capital. That's my 2 cents.

Good luck!

@Matt Gorman - sounds like a great plan, but one thing that jumped out at me right off the bat was that you seemed to refer to residential (townhouses, 1-4 units) and commercial multifamily (apartments, 5+ units) interchangeably. These deals warrant two different types of financing and are underwritten differently, as well. 

If you're just now diving in the learning-curve on large multifamily financing , i'd strongly recommend the Old Capital podcast, specifically.  They've got to be one of the most substantive and helpful shows on the podcast circuit, when it comes to apartment financing. Recently, I think they've also been putting out "101" level webinars specifically on multifamily financing. 

Best of luck!

Becoming a father, twice over. It brought great clarity to setting our "big why"

As cliché as it sounds: REI provides a proven path to financial freedom. 

With that freedom, I can be more...

• ... available and energetic to my wife and kids
• ... philanthropic, more often (and more generous when I do it)
• ... physically healthy (would train for a marathon right now if I had the time!)
• ... creative. My guitar is dusty and i'd love to take a crack at writing book
• ... available to catchup with old friends on different schedules

Everything about getting into REI comes down to goal setting. It's fine if you want to jump in without a goal, but it's a marathon... not a sprint... and your "big why" will pick you up on the days when you need it.

What's your "why" @Jared Baker?

thank you for sharing such a real story @Dennis M.. Often, i draw inspiration from my younger brother who passed away to cancer, years ago.  These losses inspire us to make the most of the time we have, since it was taken from them. 

@Joe M. - huge congrats, Joe! 1st one is the toughest. 

We purchased our 2nd, 3rd, 4rd, 5th, and 6th properties within 6 months of purchasing our first. That said, we were confident doing this because it aligned with our 1) Goals and 2) Strategy

The big leg up you have now relates to your credibility. You're a little less of a 'rookie' and each next step you take will continue to build on that track record. best of luck in the search

@Michael Swan - we own a handful of Section 8/HAP properties in C class areas, most of which we purchased out-of-state, and sight-unseen. 

There are a couple ways to vet the sub-market remotely. None of these were creative ideas. We simply followed the timeless advice: "be a thief of good ideas."

• team vetting - we built a local team of competent folks: inspection company, insurance agent, property manager, etc. We followed the advice of @David Greene and used each team member's evaluation to triangulate and compare against the other. Example: our insurance agent drove by the properties and gave a different opinion than the seller vs. the inspection company. great approach

• WeGoLook.com - can't remember where we heard about this option, but there's a company called WeGoLook that you can pay to drive to a property+neighborhood... they'll take pictures, video and do a simply 2 page PDF summary of their observations. The best part is, they can do this before you even enter due diligence it can help with negotiation, pre-PSA if you want to

• Crime reports - this has been thoroughly mentioned on this thread already, but you absolutely must read crime reports before you pull the trigger on purchasing

I'm a believer in investing in C class neighborhoods, as long as you solve for the financials, management needs of the property and the submarket fundamentals support the investment for years to come. That said, D/F is a stretch. 

@Will Crayger - cool idea. a couple thoughts...

• financials - if you underwrite the deal such that you can cover all of these expenses... and it still shows you strong returns, more power to you! But, it brings me to the second point...

• tenant screening - if you can legally/appropriately find the right tenants to live in that unit, and not take advantage of these wonderful 'easy living' benefits, than i'd say go for it!

Here's the catch: both of these^ things are challenging to solve for, in this market. The first step, as @Sai T. pointed out, is to find the opportunity. Best of luck implementing your strategy!