I get this question a lot, “How big should I aim for my first multifamily deal?”
In order to answer an important question, one needs to dig a bit deeper. You can’t just answer this question with 8,10 or 30 units without knowing about the investor. Here we will discuss factors that are critical to making a decision on “how big you should aim for”. After reading this, an investor can decide which way to go.
Here are the factors that may influence the decision and help the investor choose the property that suits him/her best.
Expertise
Mindset
Funding
Partners
Plan
Expertise
Real estate investing business is a vast field. Investors can choose from a variety of options and start their investing journey. But that does not mean one should try each and every option if they know they have to switch to multifamily property investments.
Experience plays a vital role in your multifamily investment journey. And that is the reason it is not recommended to wander around flipping houses, buying and fixing, and real estate property wholesale. The only thing that may help you in multifamily property investments is to buy and hold. If you have been buying and holding previously, you are having little experience in holding properties.
Mindset
The majority of people confuse comfort with one’s expertise. Investors jumping to multifamily property investments already have rented out single-family homes. They are comfortable with dealing with small properties like single homes. This makes them think that dealing in multifamily would be tougher comparatively.
Funding
Beginners are limited by their finances. Since they don’t know techniques of financing their deals by getting loans from private money lenders and owner financing, they often get caught in a difficult situation.
As a result, new investors find it a bit hard to get a good-sized property in the beginning.
Partners
It can not be ignored how important it is to have a real estate investing network. And by partnering with another investor, one can expand the network to capable professionals that can help in multifamily real estate investing.
Multifamily investing businesses need capital and one can get a better property by joining forces with other investors and combining resources. It does not only increase the capital you need for the deal, but it also minimizes the risk involved.
With that being said, partnering with a savvy investor will not only help you in better deal analysis but will also help you in solving any problem you face in starting a multifamily investment business. Two minds are always better than one.
Plan
Can a ship that has no direction reach its destination?
You may have made a decision and might be enthusiastic about multifamily investments but if you don’t have a plan, you are not going anywhere with any business.
There are investors who invest in a single multifamily property and then quit investing. This is just because they had a bad experience with their first property. This means they did not do their homework and had no plan.
Chances are they had arbitrary goals. And they could not achieve what they wanted to achieve in the first quarter or six months and they got disappointed.
The Bottom line is, only long-term planning can help you figure your short-term goals. This way, you pick only realistic goals and tend to achieve them to read that bigger long-term goal.
We will sum it up with, a quote from bill gates.
Most people overestimate what they can do in one year and underestimate what they can do in ten years.
Conclusion
So, it is hard to answer that question with a precise answer as there are so many variables involved and they change from person to person. with all these factors involved, one needs to evaluate his/her situation and find out which kind of property suits them best.
No matter why you are coming to multifamily property investment, you need to make the decision and then apply these factors to your situation. When you study these essential variables, you will be able to choose the biggest possible property and start your multifamily property investing journey.
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