What's going on, everybody?
So in today's video, I'm going to be going over the pros and cons of multifamily real
estate investing.
As a multifamily investor myself, I own a few apartment buildings, I have direct experience
with this, but I've also learned from some of the top multifamily investors out there.
So in this 10 minute real estate video, I'm going to go over the pros and cons, as well
as stories for each example that I give, so you can have just almost like direct experience
with what I'm bringing up.
And of course, if you have any questions whatsoever, just drop them in the comment section below,
and let's jump into it.
So the first benefit of multifamily investing is that there's going to be less competition.
Most people, when they're looking for investment properties or rental properties, and by most,
I mean like 99% of people, they're almost always looking at single family houses, condos,
townhouses.
If you even bring up multifamily investing, they kind of look at you funny.
There's not that many people out there that are actually looking for multifamily deals.
Now, that's not to say that there's just no competition out there.
Look, everything is competitive, but just generally speaking, if there's 100 people
looking for rental properties, probably 95 or 99 of those people are going to be looking
for single family house rental properties, which leaves more opportunity for you as the
multifamily investor.
The next benefit to multifamily investing is that it can become easier and more passive
than other types of real estate investing, like flips, for example.
I was listening to a podcast by a very well known commercial real estate investor, who
started by only doing flips.
And he ended up buying I think it was like a 10 or 15 unit, and it kept paying him every
single month, as a multifamily property should.
And eventually he realized that, hey, he's getting paid every single month by this one
property, and he's not really doing too much.
I mean, he has like a part-time property manager.
Whereas these flips, he might be working 50, 60, 70, 80 hours a week on different flips,
and it takes a ton of work.
And then the money goes away after you sell the property.
Whereas the multifamily building, the money keeps coming every single month.
So he basically said, you know what, I'm going to do more of that, more of the multifamily,
and really scale this thing up.
And now I don't think he would even consider a flip, unless he was flipping an actual multi-family
building.
But once you get to like a 20 unit, a 50 unit, a 100 unit, and you set it up and you make
sure that repairs are done, management's set up, the property is stabilized, that's when
you can really just start, I don't want to say sitting back and counting your cash, but
it becomes a lot more of a smoother process.
The next benefit is the scalability.
So a lot of people when they get into real estate investing, it's because they want to
quit their job.
They want to buy enough rental properties so that the cashflow can basically replace
their W2 income.
The cashflow.
And while I think that's a great idea, you should strive for financial freedom, passive
income, it's going to take a lot of single family rentals to actually replace your job's
income, unless you just have some massive down payments or you're just paying complete
cash for all these different properties.
A lot of people will say that $300 a month in cashflow is like a great rental property,
and that's a pretty good rental property.
But do you know how many of those $300 a month rental properties you would need to actually
replace your job's income?
It's quite a bit.
It's going to be much more strategic and probably a lot easier to purchase one really large
multifamily building, as opposed to 50 single family houses.
If you buy one 50 unit, that's one loan, it's probably one property manager, one roof, one
location, versus 50 different rental properties, where you're driving all over the place, driving
yourself crazy, driving your property manager crazy.
It's going to be a lot easier if everything's under one roof.
You don't hear about too many people owning like 1000 single family rentals, because it's
just, I don't want to say it's not possible, but it's just extremely difficult to do that.
Whereas you do hear about people that own 1000 units, and they're not single family
rentals.
They're usually like 100 unit buildings, 50 unit buildings, 75 unit buildings, spread
out across the country, because with a building of that size, you can typically have an in-house
property manager, maybe raise some money for it and get a loan for it, but you're not going
to need 50 different loans and 50 different property managers and just all types of craziness
going on.
So there's much more scalability with multifamily.
The next benefit is that you just make more with multifamily.
There's some multifamily investors that might only do one deal a year.
However, that deal might be like a $20 million deal with 200 units.
The cashflow is let's say 500,000 a year, or whatever the cashflow is, but it's going
to be significantly more profitable than doing like 20, 30 or 40 little single family houses,
where maybe you make $300 a month or maybe you make 20,000 flipping it, or whatever it
is.
Just about all the wealthiest real estate investors in the U.S., as well as the world,
do it through, you know, some do it through new construction, but most of them do it through
multifamily acquisitions and development and owning large scale types of projects, as opposed
to owning just single family houses.
There's also typically less risk with multifamily investing, if you purchase the property correctly.
And let me explain.
So if you have a single family rental and the person stops paying their rent, which
actually happened to me in my first rental, the person stopped paying their rent, painted
the house some weird color, painted the condo some weird color, and I basically had to evict
them, and I wasn't getting any cashflow for maybe it was like three or four months.
If that happens in a multifamily building, you might have three, four, five, 10, 20,
50, 100 other people that are still paying their rent every single month.
So one person not paying the rent is not the biggest deal in the world.
And actually, Grant Cardone talks about this.
He said the first investment he ever did was, I think it was a single family house, and
he didn't have to evict the people, but they moved out after six months.
And then he had to find new renters and it took a while and he just wasn't making any
money during that time period.
So after that, he said, look, I'm only doing multifamily from here on out, because if someone
moves out, it's not that big of a deal.
You have other people paying the rent.
The last benefit of multifamily investing, before we get into the cons, is that with
multifamily properties, you can control the value a lot more so than with residential
properties.
Residential properties, you're more looking at the comps and just the neighborhood and
how the landscaping looks, and what is the kitchen, what do the bathrooms look like?
And you can influence the value, to a certain extent.
However, with multifamily investing, it's much more so just based on the income of the
property.
Basically, someone's like buying a franchise or buying a couple of franchises.
I mean, because you could have two multifamily buildings.
If one is sitting on one block and it's completely vacant, and then another one is just a complete
cash cow and all 50 units are filled, but in all other aspects, they're basically the
same building, the one that has the cashflow and maybe lower expenses, that one is going
to sell for an extreme premium above the vacant one that needs to be turned around and everything
like that.
So you can have a lot more influence over the value and the ultimate sales price.
And I mean, if you have a big building, just increasing the rent by $10 per month, it's
going to have a drastic impact on the value, as well as just your monthly cashflow.
So just like little numbers like that.
And that's why, again, why the scalability factor when you have a 50 or a 100 unit building,
it's going to be a lot easier to build your wealth and build the value of the property.
Now, as far as the cons go, number one, it's going to be more expensive to purchase a multifamily
building.
I mean, obviously.
You're going to typically need 25% down and that's if the building is already running
and stabilized.
However, if you're just getting started in multifamily, like I was a year or two ago,
I purchased a four unit building with an FHA loan.
So you can always do that.
That's only three and a half percent down.
So you can really get your foot in the door with a smaller down payment.
However, once you start going to the 10 unit, 20 unit, 50, 100 units, it's going to be obviously
more expensive, more of a down payment, but you can also raise money from investors.
What's popular with multifamily investing is just, is syndicating, doing syndications,
where you raise money from different investors and maybe each person puts in 25, 50 or 100
thousand, and then together you can purchase some of these larger scale assets.
I'd recommend starting smaller and work your way up to that.
But some people just jump into the 100 unit buildings.
The next con to multifamily investing is the competition.
So I know I said there's less competition.
However, the competition that you will have is going to be savvier.
People that are buying even a four unit or a 10 unit, a 20 unit, or especially like 100
unit buildings, that's going to be, it's not necessarily going to be like some Wall Street
CEO.
Sometimes it might be, if it's a 100 unit building, but it's going to be a savvier type
of purchaser.
So again, that's why you really want to just build up your experience with some of these
smaller deals and work your way up to ... Maybe you start with the four unit, then you do
a 10 unit, then you do a 40 unit.
And then maybe from then on out, maybe you just only do 100 units, but build up your
experience, build your dream team, so you can have like every little advantage when
you start to go against some of these sharks in the multifamily world.
The next con is location.
So because there's just less multifamily apartment buildings, there's not going to be a multifamily
apartment building on just every block that you can purchase in your own neighborhood.
Typically, multifamily investors go nationwide.
You might focus on an area, and when you're getting started, I'd recommend that you start
kind of in your own backyard just to get the kinks out and everything.
But eventually you're going to probably expand to looking at Texas, Hawaii, maybe not Hawaii,
but Florida, Oklahoma, Maryland, all across the country.
And so a lot of times, these multifamily investors are managing properties almost like absentee.
They probably live a couple of states away and they're still managing the property.
Maybe they go down to visit it once a month, once every couple of months, just to make
sure everything's running.
But once you get the experience, you can set up systems and property managers and really
get it rocking and rolling.
So there you have it.
Those are the pros and cons to multifamily investing.
And if you have any questions about multifamily investment, just drop them in the comments
section below, and I'll be sure to personally respond.
And then if you have any deals or you want to partner on deals or you want to invest
in any of my multifamily deals, just reach out to me on Instagram.
Or you can also reach out to me on my website, and I can send you an investor sheet, an FAQ,
and you can fill that out, and we can just kind of continue the conversation from there.
Thanks a lot for watching, and I'll see you in the next video.
Bye.