by Theresa Bradley-Banta
One of the big lessons I’ve learned in the past years as a multifamily real estate investing speaker, consultant and mentor is that many novice real estate investors have unrealistic expectations about investing in multifamily properties.
I can’t help but think that the so-called multifamily investing “gurus” are at the heart of these real estate investing misconceptions.
They so often promise things like:
- “Real estate is a great way to get rich quickly.”
- “It only takes 30 minutes a day to find true prosperity.”
- “Anyone can do it.”
- “You can use other people’s money to put gobs of cash in your pocket.”
- “One killer deal can set you up for life!”
The truth is most anyone can become successful at multifamily investing but many are not ready to make the necessary sacrifices. So how do you succeed as a multifamily investor? What does it take?
Removing the barriers to multifamily investing
I’ve found that when new investors know in advance what to expect as a multifamily real estate investor, their chances of becoming successful grow exponentially.
- It starts with a great deal of education.
- Supported by solid mentorship.
Apartment building investing is not something you can—or should—do on your own. You can expand your capacity by putting a great team in place. It’s not as hard as you may think to surround yourself with talent. Take a look at my post The Best Way to Build Your Multifamily Real Estate Investing Team.
Some of the best successes I’ve seen in this business are from the people who network with successful apartment building owners and who truly understand that this is not a business for lone rangers.
What does it take to succeed as a multifamily investor?
Here are some of the things you’ll need. And there’s good news! There are people out there who will help you learn this. You’ll need:
- A plan. Multifamily investing takes time. You are not buying a single-family property with 2 or 3 bedrooms, fixing it up, posting it on Craig’s list and finding a quick renter. You must plan for income and expenses; annual budget forecasts; renovations and repairs; leasing and marketing; short and long-term financing; tax events; and exit strategies to name but a few.
- Time. You can be successful while holding down a full time job—but it won’t be easy. Get ready to give up your evening television programs and much of your weekends.
- Dedication. It will not be enough to give investing a whirl for the next couple of months. You’ve got to be prepared to spend the next one to three years working hard on finding deals, acquiring a property and then becoming an owner of an apartment building or other smaller multifamily property. You cannot be in a hurry and expect to succeed. That’s when big mistakes occur.
- Commitment. Like any successful athlete or professional you must be willing to put your trainers on and work hard every day—rain or shine. No excuses.
- Money. In order to attract partners (and money) to your deals you must be able to demonstrate superior knowledge about your prospective deal. When I put my first deal together I did so only after learning how to analyze deals from experienced investors. I also hired a mentor to educate me in partnership deal structuring and operating agreements.
- Your own money. Most lenders will want to see that you have “skin in the game.” This means that you have invested some of your own money. They want to know that you have as much at stake as everyone else. It’s also likely that your prospective partners will want to see that you have invested some of your own funds.
If you are new to multifamily investing I encourage you to read my book Invest In Apartment Buildings: Profit Without The Pitfalls. The more you understand about buying and owning an apartment building the less daunting the idea of becoming an apartment building owner will be. I work with people every day to help take away the fear of investing in multimillion-dollar deals. And I make sure my readers don’t fall for the so-called guru hype about multifamily investing.
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- What’s the Ultimate Key for Multifamily Investing Success? YOU! - October 17, 2019