Interested in getting started with multifamily investing but can’t find any good deals? If so, chances are you’re not making enough offers.
Most real estate investors who have done some single family house investing are a bit spoiled with regard to finding their next house. While good deals aren’t just laying around, with some persistence you could fairly easily pick up a new rental property every few months without too much trouble.
Single family houses are plentiful, and they’re fairly easy to value if you know the comps in an area. So it’s not too difficult to make lots of offers in a short period of time. As a result, you can get deals done consistently.
With multifamily investing, the principle is the same — the more offers you make, the more deals you do.
The problem is that there are fewer of them, and they’re harder to analyze.
Multifamily real estate is a numbers game like any real estate. When I first got started, it took me four hours to answer the question, “What is the most I should pay for this building and why?” That’s way too much time. Now it takes me 10 minutes to analyze a deal and make my first offer.
The problem is that if it takes you too long to analyze a deal, you’ll make less offers and get less deals done. Or worse, you’ll feel so overwhelmed that you never get started.
The Solution: Get Good at Analyzing Deals
That’s why I advise newbie multifamily investors that the number one thing they should do early on is to get good at analyzing deals quickly.
Yes, there are other things to work on, such as identifying where you’re going to buy apartment buildings, raising money, and building your time. But if you put a gun to my head and asked me what the FIRST thing one should do to get started with multifamily investing it’s to start analyzing deals.
Follow these two steps to get GREAT at analyzing deals:
- Have a good analysis tool.
- Analyze as many deals as you can.
Step #1: Get a Good Multifamily Deal Analyzer
To help with Step #1, you could build an analysis tool yourself, but this will take you a long time. It’s probably better to purchase one (just search the BiggerPockets Forums for “Multifamily Deal Analyzer” to get some recommendations).
Having a good analysis tool will cut down on the process immensely. Don’t embark on this journey without one.
Step #2: Analyze as Many Deals as Possible
The next step is to find deals to analyze. Start with www.loopnet.com and search for the kind of deals you’re interested in. Contact the broker and request the marketing package and financials.
Then model the financials using the deal analyzer to determine what the TRUE value of the property is and how much you can offer.
In the beginning, it might take you a while to get the hang of it. But after a couple of dozen times, you’ll get faster and more accurate.
After a while, you’ll start using phrases like, “What do you think the building will trade at?” and “What is the prevailing cap rate for buildings like this?” You’ll start sounding less and less like a newbie, and your confidence will skyrocket. Brokers, sellers, and even potential investors will start to take you seriously.
The Key to Doing More Deals
The rule of thumb is that you’ll need to analyze about 100 deals to get one to close.
So you can work backwards from that to give you an idea of how long it will take for you to do a deal.
If you want to do a deal within a year, then you’d have to analyze at least two deals per week. If you want to accelerate that timeline, then you’ll have to analyze more deals.
A lot of newbies want to do their first deal in the first three months of getting started but are only dedicating a few hours per week. Deals aren’t just going to fall into your lap. You’re going to have to work for it. Multifamily is like any other real estate strategy; it’s a numbers game.
So get out there, get yourself a good deal analyzer, and start analyzing deals. Not only will your confidence soar, but you’re more likely to get that first deal done sooner!
Newbies: How many deals do you analyze in your average week? Any question about how to get started in multifamily analysis?
Leave your questions below!