Multi-family rental properties
For those into multi-family rental properties, how did you first get into it? Did you partner with one or more people with experience in it or did you procure your own financing using your own cash, hard money lending, or traditional bank financing? Thanks so much!! -Kristie
mattpayne Matt Payne last edited by
Kristie Sullivan I started by buying a few multi-family units on my own. Nothing big, just duplexes and quadplexes.
Eventually, I partnered with my uncle who is a doctor and had a ton of cash sitting around. I got him to take a chance on me and it worked out. we bought a 40+ unit apartment complex and flipped it within a few years after making a lot of improvements, expanding it and increasing the rents.
I was the one with experience finding deals, running the numbers and making sure the property managers did their job, so the job wasn't really hard, I just needed the money behind me so I could do the work.
What are you trying to do in this space? If you want to get the money so you can buy more, it helps to have a track record and show that you've really done your homework on each deal you present to a potential money partner. Have a good, well thought out answer for every possible question that might come up, and have some healthy skepticism about the deal so they can see you're not looking at everything with rose-colored glasses.
You can make A LOT of money in this kind of business model, but there's a lot to juggle as well.
I bought all my properties with traditional bank financing, but I also stuck to much smaller stuff than what Matt Payne is talking about. The problem with banks is that you'll eventually hit a cap on how much you can borrow this way, and if you want to keep going, you'll have to find alternative ways to finance deals.
I did deal with short term seller financing on one property I bought, but I had to refinance it within 3 years, so it wasn't a long-term solution to the financing problem.
I would like to figure out ways to negotiate long-term financing though. That would be the ticket, because you wouldn't be limited in how many properties you can buy, but only by how many sellers you can convince to do seller financing with you.
Matt Payne Hi there! I really appreciate you sharing your experience. To follow similar to you, it makes sense for me to start with smaller deals and work my way up. I unfortunately don't have a rich uncle with boatloads of money sitting around (haha) but I totally get what you're saying. I just wasn't sure how people typically get started but assumed people don't come out of the gates with a 200-unit facility! I thought maybe some people are well connected and learn the ropes by partnering with seasoned investors they know on bigger deals.
I makes sense for me to deploy some cash into something smaller like a duplex or quad to get some experience and track record. I find the idea of buying, improving, and re-selling multi-family is fascinating and would ultimately like to work my way up to bigger deals. I honed my analytical skills from my 20+ yr accounting/finance background. Also, my parents owned a construction company while I was growing up so I have a strong interest in real estate. These two things are driving me towards taking the next step.
Thanks again for your thoughts!! All the best to you, Kristie
Charlotte Irwin Hi Charlotte! Thank you so much for sharing your thoughts and experience. Like I told Matt, I just wasn't sure how most people get started. It sounds like starting small with your own money and snowballing yourself into bigger deals makes the most sense. In your case, it sounds like you were able to find some financing. Using other people's money is always a great way to get exponential returns but sounds complicated for a newbie like me!
I suspect after getting some experience and establishing a good track record, it becomes easier to find investors through connections and/or bank financing. I would ultimately love getting some experience in putting together real estate investor syndicates and such but feel like I need to crawl before I can walk and walk before I can run! Again, thank you for sharing your thoughts. All the best, Kristie
Kristie Sullivan absolutely! I think what it comes down to is just getting busy doing things, making offers, analyzing numbers, talking to other active investors and making mistakes.
If you look at the people who are making progress, they're usually the same people who are making lots of mistakes.
Charlotte Irwin Great advice! It's funny cuz sometimes it feels like I'm the only one making mistakes and everyone else has it all figured out!! HAHA! Thank you!