by Theresa Bradley-Banta
Multifamily properties and apartment buildings are the hottest real estate investing niche today. A recent Harvard University study on rental housing shows:
- Renter household growth set a new record in the 2000s: The number of renter households climbed by 1.0 million in 2011, the largest annual increase since the early 1980s. The 2000s as a whole already marked the highest decade-long growth in renter households in the last 60 years.
- A shrinking supply of low-cost rentals: Growing shares of single-family homes have shifted to rentals, especially where foreclosure rates are high.
- A widespread rebound in multifamily starts: With demand surging, multifamily rental construction has revived.
According to the survey,
“The aging of the echo-boom generation into young adulthood favors strong rental demand for years to come.
… Tighter rental markets make it increasingly difficult for lower-income households to find affordable housing. With rents on most newly constructed units well out of reach, the recent jump in multifamily production will do little to alleviate the shortage.”
We have the perfect supply and demand storm for the foreseeable future. It’s no wonder investors are flocking to multifamily investing.
So how do you get started?
When it comes to multifamily real estate investing education there is no “one size fits all” solution
This post will help you make a knowledgeable decision on the best educational path to pursue towards buying your first multifamily property or apartment building.
A decision that will assure success.
Here are your options:
- Home study courses and/or multi-day in-person seminars.
- Multifamily mentoring programs.
- Professional real estate investment consulting.
Let’s look at the pros and cons of each.
Home study multifamily real estate investing courses and/or multi-day seminars
Home Study: Apartment investing home study courses usually consist of a workbook with several instructional CDs. There is no interaction between you and the instructor. You read, listen and take notes. The course may well be one you purchase online or at a multi-day seminar.
Live Seminars: Multi-day investment seminars are usually more dynamic with time for questions and answers.
Both are geared toward the general real estate investing public.
- Gives you a good fundamental education—with a warning. The education is only as good as the source.
- Can raise your excitement level.
- The information is usually easily referenced.
- You receive a well-rounded overview of many of the basic elements of multifamily real estate investing.
- The excitement of other new investors can be contagious.
- Home study and in-person seminars are not likely to get you into action.
- Often only the very basics are covered.
- The education is not geared to your specific goals, market, deal or due diligence.
- The platform could be an upsell to a second- or third-tier program without which you’ve only received a portion of the education necessary to your success.
- Can keep you in analysis paralysis indefinitely.
Once you close on a multifamily property, you own it.
After you’ve signed the contract it’s too late to discover
- you’ve paid too much
- you bought a property that experienced investors would not buy
- you’re not sure how to operate the property
- you don’t have the right team, or skills, to make the property profitable
In order to accurately evaluate a deal, first-time multifamily investors must rely on the advice of more experienced investors. When you hire a multifamily investing mentor or consultant you will be certain that you’ve made a wise investment.
The differences and similarities between multifamily real estate investing mentors and consultants
A good multifamily investing mentor can also act as a paid real estate investing consultant on a fixed fee or hourly basis. For example, you can hire a consultant to help you look at a specific deal.
But please note: Not all mentors are experienced consultants and would prefer that their students or clients enroll in their pre-designed mentoring programs. Most pre-designed mentoring programs will walk you through the elements of finding, acquiring and managing properties.
Your mentor and consultant should have knowledge in managing multifamily properties; market analysis; negotiating the purchase and sale of investment properties; renovating and upgrading rental properties; and financing deals.
Multifamily real estate investing mentoring programs
- You’ll gain education specific to your goals and strategies.
- Gets you off the sidelines and into action.
- You can save tens of thousands of investment dollars through strategic negotiation and deal structuring. Often this can cover the cost of the mentorship program.
- You’ll receive warm leads and referrals so you can start building your team.
- You’re not a lone ranger. A mentor has a large resource base with expertise in multifamily investing, finance, management, and renovations.
- A mentor can instill confidence and remove fear.
- A mentor knows what you don’t even know you don’t know.
- You will accelerate your performance by following a proven leader.
- Having an experienced mentor on your side can prove your credibility with lenders, brokers and sellers.
- If you are an experienced real estate investor a formal mentoring program could duplicate some of the information you already know.
Multifamily real estate investing consulting
- You can decide if real estate investing is right for you before you commit to high-priced programs.
- You can hire a consultant to help you analyze a specific deal; conduct due diligence on a specific property; put a partnership together; review contracts and financing terms; and conduct multifamily market analysis.
- By hiring a consultant you will establish your credibility with multifamily lenders, sellers, brokers and managers.
- If you’re light on real estate investing experience consulting may be too specific or tactic focused.
When hiring either a mentor or a consultant ask about their personal experience as an investor in multifamily properties or in apartment buildings. They should have expertise as both a buyer and a seller of investment properties. In other words they should have ample experience on both sides of the investing deal making table. An investor who has bought and sold their own investment properties has a solid understanding of investment exit strategies.
Much depends on you. Real estate investing is a business. The very first thing you must do is decide if this is the business for you. Some of the new investors with whom I consult decide not to invest.
Decide whether or not real estate investing is right for you before you take the plunge by investing a significant amount of your time and money. Take some time and talk with experienced investors. Be cautious. You want to be certain that the person you’re talking to doesn’t have a vested interest in whether you proceed or not. Someone who is filling seminar rooms and hosting late night real estate infomercials might not be the best person to talk to.
Also be cautious when speaking with experienced investors. They may not be forthcoming about the less successful deals they’ve done. Or about their near misses.
If you are new to residential rental property investing I recommend that you enroll in a full mentoring program.
If you are a seasoned investor in rental properties consider hiring a consultant.
For the new real estate investor
Read a multifamily investing book or two. Speak to someone who already owns multifamily properties to help you determine if real estate investing is feasible for you.
Some of the beginning real estate investors I speak to are surprised to hear how much time is involved. Others believe you can buy an apartment building with no money down. Many of the so-called real estate “gurus” suggest that you will not be managing your own property—that may or may not be true. It depends on the size of the property.
Hire a mentor who will work with you throughout your investing career—a mentor who will be available to you after you purchase your first multifamily property. Consider partnering on a deal. Get your feet wet first. You might be able to partner on a deal for an investment as little as $20,000-50,000.
The bottom line: Get the best education you can before you jump into multifamily real estate investing. Hiring a multifamily investing mentor will pay dividends for years to come.
For the real estate investor with experience in single-family rentals
A static and pre-determined mentoring program might not be for you. You’ll want a program with some fluidity so that you’re not spending time studying what you already know. An experienced mentor/consultant should be able to tailor a program that covers less time and less material—and costs you less money.
Be clear that investing in single-family rentals is not the same as investing in multifamily properties. You are moving into a completely different world when you start buying multifamily properties and apartment buildings. Having the right education in a particular real estate niche is critical to your success.
And there’s good news! You definitely have an advantage over the beginner real estate investor. You possess a degree of sophistication with property investing. You know how to negotiate. You know how to network. You know how to build a team. You know how to raise money. You’re not afraid to make an offer—at least on smaller deals.
I would start by hiring a mentor/consultant to discuss your past experience to determine what you already know. Where is your expertise? Are you great at negotiating deals? Do you know how to study real estate markets? If so, researching multifamily markets will be easier for you than it will be for a beginner.
The bottom line: Hiring a multifamily mentor who can offer a tailored program around your strengths can get you to property ownership quickly.
The money you invest in a mentor or a consultant can come back ten-fold. The Theresa Bradley-Banta Real Estate Consultancy offers both mentoring and consulting to multifamily investors. We have programs that can be tailored to your needs and to your current level of expertise. Please contact us for more information.