Getting Started in Multifamily Real Estate Investing

 

There are many ways to getting started on building your real estate career. Whether it’s flipping houses, buying land, or wholesaling, there is something you will like and feel comfortable doing.There are so many niches and asset classes to choose from.

At our live events, all people are interested in building a portfolio in multifamily. Some of them, however, when they hear the word “multifamily”, they get a little scared. They convince themselves that their lack of experience or resources would prevent them from getting into multifamily. The truth is, multifamily is no easier or difficult than doing any of the niches I just mentioned. I would even say that multifamily investing is one of the easiest ways for new investors to get into real estate.

Perhaps it’s because of the intimidating name, or the fact that there are rules and laws around landlording, but new investors should consider investing in multifamily deals to grow their net worth.

I’m not big on starting small, and by small I mean less than 16 units, but if you want to start with a fourplex, you can live in one unit and rent the other 3 units to cover the mortgage while still getting some additional income. If you live in a very active market, you could even live off the three other units while the mortgage gets paid down by the rents. You only have one roof, one HVAC, one yard and one foundation to worry about. All this while collecting multiple rents. When you do it correctly, you can reduce the amount of expected maintenance on a property.

For many people starting out, new investors are scared of multifamily for one simple reason: the price of entry. In most cases, a multifamily deal in good condition and in a good area will be much more than a single family home. And while it may be enough to scare some investors off, many people don’t understand that it is actually easier to get loans on multifamily deals. This is because lenders see multifamily as a cash producing asset. A cash flowing business.

If you want to scale into larger units, you can become successful in real estate by using mentorship, partnering with someone with experience, and aligning with a property management company.

Anyway, are you looking to get started in multifamily? What are you doing today to get rolling? Are you going to meetups to network with other multifamily people? Let me know in the comments. I’d love to hear from you.

If you are getting started in multifamily, check out the Bulletproof Cashflow podcast on iTunes or Stitcher, and subscribe to our YouTube channel. We are working on getting new content out all the time to help you build your success.

Be great.

How to Pick your Market

With a tight multifamily real estate and little inventory, knowing how to pick a market to invest in is crucial. Here are five things you should be looking at to select a market.

1. Demographics; Who lives in the area today? Is there a migration of people moving into the market? What is driving the movement?

2 Rent Rates; What are the average rents in the area? Is it a A, B, C or D area? How much are houses renting for (and competing for apartment dollars)?

3. Employment; Are there jobs in the area? Are companies moving in (or out) of the area?

4. Available Inventory; How many buildings are for sale? What is the average cost per door by class? How quickly do they move?

5. Exit; After you get a deal under contract, how many people are also chasing the deal? If you understand this, you just found the people that will buy the deal from you when you are ready to sell.

You can lose a lot of money in real estate if you don’t do your research. You need to learn all you can about multifamily real estate so you can become an informed investor or a master syndicator. It doesn’t matter if you are working on your first deal or your 100th – staying sharp is important and being engaged with the market is key! Know WHERE you are buying and WHY you are buying.

Another thing to note is that multifamily real estate investing is a team sport. Go to live events and network with others. Who knows…you may even find your next deal at your very next networking event!

3 Considerations for Hiring a General Contractor for your Large-Scale Project

As value-add real estate investors, we are looking for deals that need to be improved to increase the property’s value. I’d say one of the most difficult things to do is finding solid contractors that you can rely on to show up on time and do quality work, and won’t rip you off.

With more than 15 years of experience in real estate, I have run large commercial projects while working with other companies and have had to bring people on for our deals today. I’ve had to bring on general and sub-contractors to work on all sorts of deals.

Here are 3 considerations on how to best deal with contractors and reduce headaches and issues that may come up.

1) Don’t Hire the Cheapest Contractor
When you get multiple bids on a job, it may be tempting to go with the lowest offer. Often, the lowest contractor either left something out of his proposal and they will change-order the entire time they are on the job. If they don’t do that, they will realize partway through the job that they underbid and just up and quit on you. Worse than either these two things are that they will just order additional materials only to end up missing.

Instead, hire a contractor that is the right for the job. If they are a specialist at painting, don’t expect them to do an excellent job laying down marble tile. Ask for pictures of work they have done before. Ask for referrals. Don’t hire a single-story contractor to do major work on your three-story multifamily property. Get referrals and make sure to call them. Aside from phone calls, you can also check their ratings on websites you trust. and look at their Facebook page to see what others have said about them.

2) Look at Their Financials
Once you narrow down your list of contractors that are a good fit for the job, you will want to ask them if you can get a look at their balance sheet. You are looking for how they make their money, and do they have the cash to pay their employees and other overhead. If that contractor only has $15,000 in the bank, they are obviously not financially healthy. They won’t be able to hire enough people to keep the job on track. It also tells you that they do not have a pipeline of customers that want to use their services.

Getting your hands on their financials is even more important if you are doing a large-scale rehab or new development. The largest chunk of the project will be spent with this contractor – more than permitting and other costs. If you don’t get this info, you risk not only a delayed project but also legal issues and loss of rental income.

3) Check the Contractor’s History
All contractors must be licensed in the state they are working. As part of your due diligence, you need to make sure they are licensed by looking at their registration with the state. For many states’ websites, you can see the contractor’s history and background a well as problems and complaints. You can see if their license is up to date or if it’s lapsed or suspended. You can use those same resources to find any down payment limits as they vary from state to state.

As far as other considerations make sure they have General Liability, Worker’s Comp and property damage insurance before they step foot on your property. Also, always get a written contract that lays out how and when payments will be disbursed. (I would talk to your attorney for that document.) For larger projects, you can use a checklist that lines up to the contract which will help keep expectations for both you and the contractor. Speaking of payments, never pay cash. Use a check or credit card for small jobs and arrange financing for larger projects.

If you are looking to hire a handyman for several properties, ask them to do a small job to see how they perform. Do they show up on time? Did they perform the work as promised? Were they conscientious about the property and the neighbors? A test job is a quick way to find out.

Anyway, do you have any tips on hiring contractors? Let me know in the comments.

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