While there’s ample complexities involved, the basics of how to make a fortune in multi-family property investing aren’t exactly rocket science. In this quick 3-minute article you’ll get the grander view to serve as more of a roadmap than specific directions to the buried treasure. Enjoy!
Fortunes come fraught with danger. The bigger the fortune, the more risk involved. With multi-family one of the perks is your risk is managed differently. Take this quote from the legendary apartment king, David Lindahl, who summarizes beautifully.
“The truth is that investing in multi-family properties spreads the risk of your investment without drastically increasing the costs and, in addition, allows you to create a built-in buffer against an apartment or two going vacant at some point (which is always a risk you need to be prepared for).”
More units means the risk is spread out, so for example if a few people leave you’re not completely footing the rent payments like you would if single-unit tenants bail. It’s a great market, but not a cakewalk to enter. Here are the most basic steps most people end up taking one way or another – not meant to be a comprehensive list.
The 7 Basic Steps to Multi-Family Investment Success
Keep in mind each of these 6 steps also has a number of steps, which themselves branch off and synergize with other aspects of this journey. Again, super-basic roadmap here folks.
- Step 1: Focus on location, and based upon it, overestimate costs and expenses (you iron out through extensive research) by at least a 10% margin.
- Step 2: Start with a small multifamily property, perhaps as small as 2-4 units under the same terms as a single-family property.
- Step 3: Have a strategic property management plan in place before signing any dotted lines or contracts.
- Step 4: In terms of making a purchase, there are a lot of financials, tax issues, and datasets to consider. If you aren’t a professional in this area without adequate experience sizing up multi-family properties, get some help or work with a specialized firm.
- Step 5: Based on the thorough analysis and inspections made before signing the contract, make renovations/upgrades to increase property value and cash flow and maximize space without exceeding earnings.
- Step 6: Build investment capital to increase your portfolio of smaller units until you can weigh into bigger multi-family properties by yourself, your personal network, or with niche investment firms like Virtus Property Group who focus on 15+ unit apartment buildings.
- Step 7: Continue building and scaling your portfolio into the sunset.
Start Studying & Don’t Stop
That you’re reading this article right now is a really good sign. How many other things could you possibly be doing right now other than increasing your knowledge base? Truth be told there’s a small library’s worth of knowledge to acquire when it comes to multi-family investing, so the sooner you start truly studying and don’t look back, the sooner you’ll generate opportunities.
Each of the 7 basic steps above is a school of thought! Location, property management, getting and making deals, analysis and inspections, etc., and the more you know the more effective you become.
Get These 2 Partners Immediately (Optional 3rd)
Maybe not immediately from Day 1, but as soon as possible.
Real Estate Lawyer
First and foremost, this is who you want to look over the details of the deal – contract review. By all means, study the legalities and jargon until you know them like a pancake recipe, but until then it’s not worth it to wing it here. On the other side of the deal, real estate lawyers help ensure proper closings.
Most people tend to assume this is all about avoiding negative financial outcomes. To successful real estate investors, a good accountant is there for all the amazing things they can get for you that’s very hard to get on your own without specialized knowledge and industry experience. These are related to lease and rental agreement, cost estimates, annual reports, and budgeting.
Niche Investment Network
For those who would rather not have to hire a small team, and devote hours every day to the practice, and become an industry expert…niche investment firms are an invaluable option. We specialize in 15+ unit apartment buildings and already have a team in place, making deals each year for a select group of people pretty much just like you.