(3 Steps) Transition from Single-Family into Multi-Family InvestingSep 06, 2019
As a kid playing monopoly, I remember feeling sad when I had to give up all my little greenhouses and exchange them for a single red hotel. It didn't make sense to me! How could one big building make me more money than 4 individual homes?
My young and naive perspective didn't understand the genius of multifamily cashflow. Even as adults, when it comes time to scale our investment portfolio, the transition from single-family into larger multifamily investments can seem intimidating.
In the back of your mind, you may know that multifamily is a smart move. Yet single family can be hard to transition out of since an understanding of its risk/value tends to come more naturally. In many ways the process seems simpler.. but is it? Think of the time it's taken to scale to 4 single homes vs. the time it might take you to purchase one individual fourplex. The benefits of multifamily are absolutely worth it. So how do you get started?
Step 1: Educating Yourself
At FIG we're strong believers that education fosters confidence and limits risk. While there are plenty of books and podcasts out there--ranging from hyper-specific to the macro--a good place to start would be a starting here: Top 5 Investor Podcasts You Need to Follow in 2019
Depending on where you live, there's most likely a multifamily meetup group nearby. If you're planning on investing or already have, can you think of a good excuse not to attend? Go at least once and bounce ideas off other people. Often the best thing about local groups is the opportunity to learn from their mistakes and thus avoid them yourself.
Step 2: Leverage Experience
Think back to your first year dabbling in real estate: it's an entirely new language, isn't it? Even if you're getting to that point where you feel competent, you've likely admitted to yourself it's impossible to be an expert at everything.
When it comes to big multifamily projects--don't be afraid to use the experience and expertise of others. That's the only way these big developments get done. While giving up control is scary at first, it can soon become your biggest sigh of relief. Assuming you've learned the numbers and assessed the risk, certain deals allow you to sit back and let delegation run its course (whether that's a paid property management company, a builder, or a real estate adviser.)
Step 3: Network
If you're looking for a new multifamily project to jump on board with, you'll see that it's a lot different than shopping the MLS for a single-family home.
This is where networking is key. Word of mouth is the fountain of almost all deals that end up coming together. Like I mentioned before, attend local groups, talk to investor friends, and seek transparent and honest advice from companies who find and start projects.
We realize that goals vary. That's why it's important to seek advice from someone who's willing to focus on your needs. If you're looking to bounce ideas/plans off someone who will give realistic feedback on how to accomplish your goals. Feel free to email us at [email protected] or schedule a time to chat at fig.us/consult (it's all complimentary)
In the end, multifamily investing is very doable. For everyone. All it takes is a systematic approach and the guidance of those who have done it before.