Over the past year, my partner and I have completely shifted from purchasing single-family rental homes to multifamily apartments. It’s a move I know many others are considering. So, what’s involved? How do you make the change successfully?
There are many reasons residential real estate investors are looking to shift to multifamily today. Competition levels, financing, and finding value are some of them. One of the main reasons we made the switch was due to the economies of scale. It’s easier to manage one 203-unit complex versus 203 individual single-family homes. And it is more profitable.
How do you get started in multifamily property investing?
How to Invest in Real Estate While Working a Full-Time Job
Many investors think that they need to quit their job to get started in real estate. Not true! Many investors successfully build large portfolios over the years while enjoying the stability of their full-time job. If that’s something you are interested in, then this investor’s story of how he built a real estate business while keeping his 9-5 might be helpful.
The first step I took was educating myself. There are different terms and lingo in the commercial real estate sector, such as NOI, cap rate, cost segregation, etc. You want to understand these comparisons and sound educated when talking to others in the business.
I read multiple books, one being Multi-Family Millions by David Lindahl, read through forums on BiggerPockets, and watched hours and hours of material on YouTube (mostly by Grant Cardone). It also helped that my previous mentor was involved heavily in the industry. So I learned from him. There are a lot of misconceptions and myths about stepping up to multifamily investing. Get to know the truth, and it may be a lot easier than you think.
Leap of Faith
There comes a moment in time when you just have to be courageous and make the purchase. There is no way to learn everything related to multi-family investing from education. The same applies to single-family investing. It’s a trap many fall into, and an excuse never to get started. Even when you think you know it all, things change. Other factors you’ll only master as you do it for real. Most of what I have learned was through actual experience and could not have been covered in a book.
We laid the groundwork within our management company to be able to handle an acquisition first. We jumped from single-families straight to a 46-unit apartment complex. It only took as much work as purchasing four to five single-families. If you do not plan to self manage, then it is best to start interviewing property management companies early. Like right now; today.
We prepped our partners and investors too. We let them know in advance that we’d be shifting to multifamily. This reduced any concern, mades them feel valued, and helped to get commitments in advance. That way, when we spoke with sellers, we’d be ready to pull the trigger once we got something under contract — and wouldn’t be held back by access to capital or having the right team in place to handle the acquisition and takeover.
There are many benefits to switching from single-family rental properties to multifamily investing today. It doesn’t have to be as hard as you think. Take the time to learn, but be ready to learn in action too. Talk to your vendors, lenders, investors, and partners, and make sure you have the team and framework to streamline the process in place. Then commit to taking the leap of faith. There are only so many tomorrows, and neither time nor the market is going to wait for you.
Once you get started you may find that multifamily investing is far easier and more profitable than you knew. Try one deal. Improve your processes, then move on to the next, and scale it.
Do you have any tips to add for making the switch to multifamily?
Share your ideas and experiences below!