September 28, 2024 • 38 mins
Ready to transform your investment game? Unlock the secrets of multifamily real estate with Marcus Harvey as we unveil strategic insights and practical tips essential for getting started. Learn how to educate yourself effectively through podcasts, seminars, and online courses, and discover why multifamily properties offer unique underwriting advantages over single-family homes. We'll guide you through identifying the hottest markets like Texas, Tennessee, the Carolinas, and parts of Florida, where job growth and rental demand make multifamily investments especially lucrative.
Navigating the complexities of multifamily real estate requires thorough due diligence and a solid professional network. Our conversation covers essential inspections, from plumbing to roofing, and the financial distinctions between conventional and commercial loans. Marcus shares invaluable knowledge on maximizing your investment's benefits, from leveraging tax advantages to the merits of employing professional property management. Understand how maintaining well-kept properties can attract responsible tenants and why delegating management tasks can free you to focus on expanding your portfolio. Tune in for actionable insights that will elevate your multifamily investing prowess.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:11):
Welcome to the Professor's Real Estate
Investing Podcast with my guywho you know, property Relief.
Speaker 2 (00:17):
It's Marcus Harvey in the house.
Mr Marcus, how you doing today,bro?
Oh man, I can't call it.
I'm just trying to win, tryingto win, just trying to win, to
win yeah, it's been a minutesince we've been on together.
Speaker 1 (00:28):
I was like, oh, we gotta do.
We gotta do one becauseeverybody was loving the one
that he was on with the uh, thesection eight, oh yeah, yeah,
that was a really good one thatwas a good topic we did yeah, so
today's um topic is going to beabout the multifamily.
Reason why multifamily?
I was thinking that it wasgoing to be good.
I just had you pick between thetwo.
(00:48):
But I'm loving the multifamilybecause that's my thing right
there, because I went to aconvention last Thursday and it
was in Fairfield and my God, itwas so good.
Yeah, I was really hoping.
Speaker 2 (01:03):
I could attend that.
Speaker 1 (01:04):
I had some other endeavors to attend to, so, yeah
, I missed out well, we got itnext year because I got the
information so definitely I'mdefinitely going to be part of
part of that family that doesthe multi-family, because I mean
the more doors the better it is.
I remember you always told me Isaid would you rather have a
whole bunch of doors under oneroof or would you just have one
(01:25):
door under one roof?
I said many doors sounds great.
Right, right, exactly, allright.
So this is how to start inmultifamily, which is it can be
a quiet endeavor, how to do it,but you really want to team up
with somebody that knows how togo about doing it, because you
don't want to weigh yourselfdown with all the
(01:46):
responsibilities and everything,because there's a lot of pieces
to the puzzle that work withthis.
Speaker 2 (01:50):
Yeah, yeah, it's a lot to to take in, especially if
you're just starting andlearning about multi-family.
You got to start from thebeginning.
You know you educating yourselfis number one.
Just reading, learning, onlinepodcast seminars, online courses
.
Most of our family is such adifferent avenue than just
(02:15):
single family real estate, sothe way you do underwriting is
different than everything.
So, yeah, number one is justeducate yourself, definitely
educate.
Speaker 1 (02:27):
Yeah, there's.
There's some podcasts that dealwith it's exclusively just with
multifamily, and they havepeople who come out and they
talk about their experiencesbeing in syndications and, like
some of the seminars, I getactually a lot of invites for
that.
So that's why I had to take upthe one last Thursday, because
it was just rewarding,fulfilling.
I knew exactly everything thatthe gentleman was talking about.
(02:51):
He was there.
He would have knew the samething because the verbiage and
the way he was talking to theattendants yeah, it was.
It was just on point.
I knew everything.
So it wasn't a part where Ididn't feel uncomfortable
because I already knew about it,because I studied a lot of it
myself.
Right, with key terms, exactly,yes, and the whole vocabulary,
(03:12):
how it's used.
Yeah so yeah, educate yourself.
The next one to help you out isanalyze the market, so research
markets for a good growthpotential, looking for locations
with job growth, populationincrease, high demand for rental
properties.
This is definitely includedwith the seminar I was at also.
(03:34):
So they were talking about hotspots for multifamily.
Off the top of my head it wasTexas, tennessee, the Carolinas.
The Carolinas are a hotbedright now for multifamily.
Yes, sir, yeah, and Miami, well, florida, the Miami, the
(03:55):
Tallahassee, all the big areasthat are really good for
multifamily.
Speaker 2 (03:59):
Did they say Georgia too?
Or they didn't say Georgia?
I mean, I know it's the Southand there's some good deals out
there, it's cheap.
Speaker 1 (04:07):
But yes, they actually.
Yeah, they did say Georgia.
Yeah, you're, they said Georgia.
The one that they do not at alltouch is Illinois.
Speaker 2 (04:17):
Yeah, I've been hearing things about Illinois
that the laws and stuff arechanging just for like even just
whole, you know for wholesalingand stuff like that.
But I can dig it likemultifamily.
I bet you.
There's a bunch of stuffchanging in Illinois, so I see
why.
Speaker 1 (04:34):
And it's a lot of the place also too, with the laws,
the laws and the rent controland the rental of properties.
A lot of it plays with thestates of that going on with
those different areas too.
Speaker 2 (04:47):
Okay, yeah, yeah, I could see that yeah.
Speaker 1 (04:50):
Yeah, so basically the Midwest, the South, those
are hotbeds right now.
They really don't mess withCalifornia that much, because
California needs help.
Yeah, south and north, exactlyright.
And then Oregon.
Basically, like I said, youhave to push further to the
(05:11):
Midwest, to the south, and thoseare the good hot spots for when
it comes to multifamily.
Speaker 2 (05:16):
Right.
Speaker 1 (05:16):
Yeah, so how would you get your funding for
multifamily so secure financing?
So there's different ways.
You got the conventional loans.
Those are usually two to fourproperties.
So the conventional loans,that's basically like the loan,
like if you get a house, butthen when you get five or more,
(05:38):
that's when you deal with thecommercial real estate side.
That's the part where with theconventional loan they ask for
your tax return, but with thecommercial loans they want to
know how much money can youproduce out these properties.
Speaker 2 (05:55):
Right, right, exactly Because they just go off of a
different factor Single familyrentals.
They can be lucrative, but it'sjust not the same as
multifamily.
And then the way they calculatemultifamily is just totally
different than two to four units.
So because they consider two tofour units still residential,
(06:17):
you're going to still get aresidential loan, home loan,
instead of a commercial loan formore than five units.
Speaker 1 (06:26):
Yes, yes.
And then you have the FHA.
That's FHA loans.
It can help with multifamilyproperties if you live in one of
the units, and usually withliving in a unit, I think the
minimum is it was a one year.
Speaker 2 (06:42):
Yeah, I don't know if they've changed it, but you
have to think, be at least bethere at least one year.
Yeah, I don't know if they'vechanged it, but you have to
think, be at least there atleast one year.
I know I remember it being liketwo years for single family,
residential or something likethat, I think it was two years
but I think they might havechanged it for that also, if I'm
not mistaken.
I think I know some people thatbarely stay even six months.
(07:03):
They try to slide by it ifthey've changed the law, but I
think it might be still a yearIf I'm not correct or mistaken.
Speaker 1 (07:15):
If you want security, that's how you go about doing
it.
But this next one this is whereit gets a little bit better
situation, because a person,like I said, if you start off
with multifamily, a personstarts out with multifamily.
You have no experience, like Isaid.
I mean you got the weight ofthe world on your shoulders.
You're like all right, how do Igo about doing this?
Right?
The next one is partner up withothers, and that's where I just
(07:37):
use the word syndication alittle bit ago.
A syndication basically meansthat there's a group of
investors with you and a wholebunch of people that you'll help
get the funding that's leftneeded to get the multifamily
Exactly.
Speaker 2 (07:50):
Yeah, that's what it is right there Just partnering
up with others, doingsyndication deals on larger
deals, just because you probablycan't either get the financing
all yourself or you're just notexperienced enough to do it by
(08:11):
yourself.
So you might want to have acouple of partners or a partner
who's just more experienced topartner up with you.
Speaker 1 (08:18):
And I was thinking also too.
It can get overwhelming toowhen you deal with those dollar
numbers.
Oh yeah, because I mean aperson sees $5 million for a
multifamily, you know they'llget a little bit freaked out
Like hold on a second $5 million.
What do you mean?
Speaker 2 (08:33):
Yeah, how am I going to come up with this?
You know, so you might need topartner up with someone to help
you with that financingsituation.
You know Exactly, and Situationyou know exactly so.
Speaker 1 (08:42):
And then the next.
The next pointer is a start,small yes I give you, if you're
multifamily investing, consideryou know, start with the duplex,
triplex, fourplex, yeah, andthen just graduate yourself up
further, yeah, because the easy,the easy, the easy the steps is
, and then just keep ongraduating yourself up Right,
(09:02):
right, and then you'll hearonline a bunch of people's
opinions hey no, you don't haveto start small.
Speaker 2 (09:08):
And then other people will say start small.
But it's just like really up toyou.
And if you're really a beginner, I mean the good advice would
be to me is to start small,scale up to bigger deals and
eventually get those five ormore door type of deals, big
units and big complexes and soforth.
Speaker 1 (09:30):
Yeah, because you'll be more comfortable with what
you're doing from when youstarted to where you're going.
Right, it's a gap.
Speaker 2 (09:38):
Yeah, yeah.
If you've had some experiencealready, then I mean in some
form or fashion.
Then I mean, hey, go for it ifyou're ready for it.
But if not I mean in some formor fashion then I mean, hey, go
for it if you're ready for it.
But if not, I mean I agree,start small at first.
Get that experience, get thatproper training and management
under your belt, that way youcan scale it up to the next
level.
Speaker 1 (09:55):
Yes, Now, who's going to run these places?
That's the next one.
You definitely me, and youtalked about this for a while
ago.
You definitely need a credibleproperty management, you don't?
You just don't want to haveanybody like.
This is your investment, so youwant to make sure your
investment is properly takencare of.
Just right.
Speaker 2 (10:16):
Absolutely, absolutely.
Trying to choose the rightproperty manager or property
management company whichever oneyou prefer is like, really
crucial to this whole process,because if you're not going to
do the management and theday-to-day stuff.
You've got to have someonewho's on the same page as you,
that is able and willing to dothat stuff for your property.
(10:36):
Everything that needs to bedone on a day-to-day, yes indeed
.
Speaker 1 (10:40):
So yeah, and then conduct through thorough due
diligence.
Yeah, you want to make sureeverything is properly done,
right when you come to thistransaction.
Helping with this transaction amultifamily says all always
impact.
Always inspect the property andreview financials carefully
before purchasing.
(11:01):
Hire a professional inspectoris key key.
This goes with anything ininvesting.
You want to make sure thateverything's inspected just
right.
You want to make sure you'vetalked about this before.
My main thing, you want to makesure to check out that plumbing
Plumbing underground can bevery, very tricky when it comes
(11:21):
to things I don't need to cutyou off.
Speaker 2 (11:24):
I don't even remember what we were talking about that
day, but we had touched on allthese factors.
Speaker 1 (11:29):
Yes, we did the plumbing and roofing.
Yes, those are huge things.
I can't forget this other onebecause, just a little bit off
topic, I took a client to go seea house.
I think I told you before whatwas going on.
It was one of the things in theremarks was electricity.
(11:51):
Yeah, so you want to make surethe electricity?
Speaker 2 (11:54):
is even good.
Speaker 1 (11:55):
Like you want those.
Those ones are very, veryimportant, expensive, yeah, when
you come to the electric, whenyou come to the roofing, when
you come to the plumbing, and itdefinitely the plumbing.
The reason why I'm prettyadamant with the plumbing is
because we can't see it, yeah,and we don't know what's, what's
around it, especially if youhave trees that grow in sideways
(12:17):
, left to right, right to left.
Speaker 2 (12:19):
Yeah, the outside plumbing on on on how everything
is set up and then insideinterior plumbing.
You don't know what's behindthose walls, you don't know
what's underneath.
There's a basement.
You don't know what's been like.
You know switched around andtaken out, and you just don't
know Exactly.
Speaker 1 (12:39):
And that's just it's so hard and I was thinking too,
like even the other house thatwe was at, like I know that, the
trees.
I remember a gentleman.
We had a gentleman come and fixthe sprinkler and everything he
told me about the history ofthe trees that were in the front
yard.
He says you're moving out at agood time because these trees
(13:00):
are going to be a headache.
He says actually, these treesin the neighborhood, they're in
every house.
Because these trees are goingto be a headache.
He says actually, these treesin the neighborhood, they're in
every house.
So what they were doing was theywere pushing up the driveway
and then one of my neighbors itwas so bad that the roots, the
roots are wrapping around thepipes.
Yeah, yeah.
(13:20):
So you got to think that'sgoing to be thousands, beyond
thousands of dollars, yeah, andI was like, yeah, it's time to
sell.
Speaker 2 (13:24):
That actually happened to my parents' house
that they're still in today,where one of the trees because
we had two trees that like rightin front of the house, one of
them got so big they startedtheir roots and stuff started
lifting up the concrete and thenwrapping itself around like the
main sewage line and stuff likethat.
(13:44):
My dad had to call the city outthere to, you know, start
digging and try to figure it out, like, is it on my parents side
of the line or is it the cityside?
Oh, ok, ok.
So yeah, they had to deal withthat back in the day it was.
It was kind of frustrating.
Wow, yeah, yeah.
Speaker 1 (14:03):
Yeah.
So you want to make sure youconduct your thorough due
diligence when you're anyproperty that you want to get a
hold of.
Yes, sir, and the next one youwant to do too, which is what we
love doing is you got to builda network.
Build a network of people oflike minded heart, of people
that want to be into this.
It hard to people that want tobe into this.
You don't want to talk toanybody that wants to.
(14:24):
You know nothing wrong if theywant to do mobile homes or if
they want to do something else,but if they're concentrated on
doing multifamily ordiversifying their portfolio to
this, go ahead and network.
I mean, like I said, they saidyour network is your network.
Yes, yep, and that's the bestway of putting it right there.
Speaker 2 (14:46):
Yeah, just to add to that, I feel like if you're
going to be in real estateinvesting, then you want to
build the largest network ofpeople that you can as far as,
like you know, brokers, lenders,property managers, contractors,
landscapers, just otherinvestors, tapers, just other
investors.
You just want to be able tohave like a good, solid network
(15:07):
of people all the way aroundthat will be able to help you
build what you're building.
Speaker 1 (15:12):
Yes, indeed, so and then.
So the second part is that washow to start a multifamily
investing.
You know, educate yourself,analyze the market, secure
financing, partner with others,start off small and then just
gradually graduate up in time.
Speaker 2 (15:30):
Scale up.
Speaker 1 (15:31):
And then property management conduct thorough due
diligence and build a network.
The part I like is theadvantages of multifamily
investing.
Oh yeah, the first one would bethe economic scale.
It says the economic scale withit would be with the
multifamily would be expensessuch as maintenance Management
(15:52):
can be spread across multipleunits, lowering per unit costs.
Speaker 2 (15:57):
Yes, yeah, that is just like one main factor.
Like one main factor, if not oneof the main factors with
multi-family is just you knowyou can spread out those, the
the maintenance stuff and themanagement and and just having
more doors to be able to um gooff of, because just going off
(16:20):
of one door you're only gonnaget so much.
But if you, you know, spread,spread out the work and spread
out, like by having more doors,then that's more cashflow in the
end that you can be able toproduce, you know, cause you
have more units to be able tofill up and to go off of.
So that's the, that's thebeauty of it Just being able to
(16:40):
scale.
That you know yeah.
Speaker 1 (16:42):
Like you said that.
The next one about that highercash flow.
Would you rather want one doorunder one roof or would you want
several doors under one roof?
Speaker 2 (16:51):
Right, exactly, exactly.
And then it goes to the part oflike tax purposes too.
Do you want one tax payment peryear on a building or do you
want multiple tax payments onmultiple properties, single
family properties, exactly Everyyear depending on.
Hopefully they're all in thesame area, but if they're all
spread out, all those singlefamilies are spread out and you
(17:12):
got different tax bills everyyear.
Speaker 1 (17:14):
Yes, you do.
And then easier financing, itsays.
Lenders often view multifamilyproperties as less risky because
of the potential for multiplestreams of income and making it
easier to secure financing.
And, like I said, thedifference between single family
is they go by taxes.
(17:34):
When it comes to commercialreal estate, five units or more,
they're going by.
How much money can you produceoff these units?
Right, right.
Speaker 2 (17:43):
They want to go off of NOI and that cash flow.
How much cash flow are youbringing in?
But yeah, they don't even.
There's no calculation of NOIin two to four properties.
They just say, hey, the rent isthis, this, this, and the
expenses are this, this and this, and that's it you know there's
no calculation real calculationof net operating income like it
(18:07):
is in a commercial state?
Speaker 1 (18:09):
Exactly, yes.
And then portfolio growth.
Well, as I was mentioning about, diversify your portfolio,
broaden it out, cause that'swhat a lot of people want to do.
They don't want to stick theirmoney in one thing, they want to
send different streams ofincome.
Right, yeah, I'm trying toremember who it was, but I
(18:30):
remember they told me this.
They told me never forget this.
They said that one stream ofincome is one stream of income
too close to being in poverty.
And I was like, yes, especiallynowadays, the way our economy
is and everything that's goingon, you need to have multiple
streams.
If you have a nine-to-five job,make sure that's not the only
(18:52):
way you're getting money.
Speaker 2 (18:53):
Yeah, yeah, you have the only way you're getting
money.
Yeah, yeah, you have to.
If you work in full-time,congratulations, because that's
awesome.
You know, keep doing your thing.
But nowadays it's sometimesit's not enough for families.
People have to uber, drive andlift and do delivery, drive-in
or some kind of side hustle, andthat's also great too, because
you're bringing in more money.
But you know, make sure you're,when you're bringing in that
(19:15):
money, that it's going to be forthe purpose that you want,
which is if you want to get intomultifamily.
You know, use that your fulltime job and your side hustle to
leverage into your firstmultifamily investment.
You know is that.
Speaker 1 (19:32):
So yeah, and what you were talking about?
I remember the statistic.
I was listening to Carlton,yeah, yeah, carlton, and he was
talking about taxes andeverything, and he said that
right now, it's like about 30%of people have some type of side
hustle or another job to help.
Speaker 2 (19:53):
Yeah yeah, you're either in a roommate situation
or you've got multiple, multiplefamily members helping you or
you know in your household orwhatever helping out with bills
and whatnot, or just you're byyourself and even with a
girlfriend, boyfriend, husbandor wife, you know you still
going to need a side hustle,second job to make it, because
(20:14):
just stuff is just going up rentand everything else, food and
everything else, so like it's somuch harder by yourself to do
that.
But uh, you know it can be doneit can be done you just have to
buckle down and really work andthen whatever you're making, you
have to like.
I leverage off of that ifyou're trying to do a
(20:34):
multifamily investment property.
And then once that gets going,then you have that as another
strength once it gets going and,as Fat Joe said, yesterday's
prices are not today's prices,which is so true.
Speaker 1 (20:54):
Everything's going, everything's going up.
You don't see nothing comingdown.
Speaker 2 (20:58):
Yeah, Like when they performed at the Superbowl this
last time or whatever.
Whoever it was, I forgot, butthe price for that went up the
next day for shows because youknow they just performed at the
Superbowl.
So you know shows that artistshows are going to be more worth
more money now.
Speaker 1 (21:17):
Yes, it is more before.
So.
And the next one, when it comesto the advantages, is the
appreciation.
So multi, multi-familyproperties can appreciate faster
due to the ability to generatecash flow.
Improvements you make canincrease the overall value in
rental income.
Another word that the gentlemanused at the seminar I was at
(21:42):
last Thursday he used forceappreciation.
Yes, so you got to think of itlike this.
So, for illustration, theybought a multifamily in
Morrisville, north Carolina, andthey said that it was over a
million dollars.
That was a purchase price.
(22:02):
Yeah, it was a little bit overa million dollars, and I think
it's a 40 plex, okay.
And what they did is theylooked for the occupation was
like between the 60 and 90percent.
The reason why you don't wantreally 100 percent is because
there's places where you canactually start doing updates on
(22:23):
everything and then you can keepon going about doing each
apartment.
Speaker 2 (22:28):
Yeah, because even though you lose a little bit of
rent on vacancy, you still areable to force appreciation on
taking care of the property,making improvements and stuff
like that.
Of course you want close to100% occupancy but at that point
, if you're trying to buy, it'sreally hard to try to force
(22:49):
appreciation on the unitsthemselves if everything's
already occupied.
Like trying to forceappreciation on the units
themselves if everything'salready occupied, you might be
able to do some exterior stuffand landscaping and making the
property look better outside inthe meantime, but you got to get
inside those doors.
You got to get inside the unitsto upgrade the units, the
flooring, the, everything, thekitchens and bathrooms and
everything you know.
Speaker 1 (23:08):
So, yeah, and so when they they talked about the
force, the force appreciation,and that was a, that was a huge
step, because that forceappreciation, that's what they
use when they found the property.
Like, how can we go aboutmaking you know, getting more
using our money?
What we have at using more isleverage and get into these
(23:29):
doors and boosting it up.
Because when it comes tomulti-family, also, when you
deal with these, uh, thesyndication and um, go about,
say, if you have to deal withyourself, yeah, you, you want to
know what's your exit plan,because a lot of, absolutely
because a lot of the exit plansthat they do have, they go
between anywhere between threeto five years.
They'll have actually aportfolio of like, here we, this
(23:52):
is how much everything's goingto cost this is what we're
looking at, and this is our exitplan to go about, so they
already have an exit plan.
Speaker 2 (23:58):
Yeah, these are our projections of where we're going
to be when this date comesExactly.
Speaker 1 (24:03):
So, yeah, so that's how they go about it, but that
appreciation it's huge when itcomes to multifamily.
Speaker 2 (24:09):
You don't get it.
Speaker 1 (24:10):
You don't get it really much in single family,
but it's a beautiful thing withus multifamily.
Speaker 2 (24:16):
Yeah, and just appreciation in general, like
over time as propertiesappreciate, just because time
passes and stuff.
That's good.
But there's nothing like forcedappreciation where you can be
able to force appreciate aproperty, improve it, increase
the rents make the necessarychanges that you need to do to
(24:38):
get the full potential andbenefits off the property.
Speaker 1 (24:41):
Yes.
And then the next one, which Ialways love the T-A-X word tax
benefits.
Yes, it says you can takeadvantage of various tax
deductions, such as depreciation, mortgage interest, mortgage
interest and maintenanceexpenses.
Cost segregation, such as canfurther optimize tax benefits.
(25:02):
Yeah, yeah, the costsegregation, the depreciation,
like that is huge.
That's, that is huge.
That is definitely like when itcomes to multifamily.
Those two right there are huge.
Speaker 2 (25:17):
Yeah, yeah, you can't really even evaluate a deal
properly without having to evenbring those topics up.
Because you know, because youknow, cost segregation is is
(25:38):
what you can use to reallyevaluate your property and you
can use that as a tool to beable to prove why the numbers
are the way they are.
Sure, yes, through costsegregation, you know that's,
that's one way.
Speaker 1 (25:50):
And then another one after the tax benefits is how,
like to we were talking aboutthis low risk of vacancy?
Speaker 2 (25:57):
Yeah, yeah, after improvements and stuff, yes,
yeah, and get done that forceddepreciation.
Speaker 1 (26:02):
I mean, I tell you, you take care of the property
and you take care of it.
I'm going to tell you yourtenants they're definitely going
to take care of it because theycan see everything that you're
doing for them.
You want good tenants.
Yes, you don't want thosetenants that are just busting
down walls and making holeseverywhere.
As long as you I mean I tellpeople like it goes both ways.
(26:23):
If you want good people inthere, yeah, hey, clean it up
yeah, you have to look nice,presentable.
Speaker 2 (26:29):
People want newer features and amenities and
exactly we're looking for acertain just a way certain stuff
looks now, because you know youlook at a rental or whatever
online or a unit online and seesomeone else's building and then
they've got you know everythinglooking nice and clean and airy
.
They got the flooring right,all the colors are together, the
(26:50):
fixtures are up-to-date.
People gonna want to move inthat building.
You know they don't want tomove in those units because it's
just more appealing.
Speaker 1 (26:57):
Yeah, the vibe, the aura, yeah, just living there,
yeah, and then you take care ofit.
They take care of it.
You have a tenant for a longtime.
Yeah, yeah, you don't have toworry about anyone leaving,
right.
Speaker 2 (27:09):
Right, yeah, exactly.
Speaker 1 (27:11):
I agree.
And then, the last but notleast, professional management.
So large properties can affordto hire professional management
companies, reducing the burdenof self-management.
Yeah, yeah, you don't need thatheadache, but you always want
to find a professionalmanagement.
Yeah, you want to do your duediligence on that.
(27:32):
You just don't want to go withanybody.
You want to go with people thatare credible, that other people
are working with.
Word of mouth goes a long ways.
Speaker 2 (27:39):
Oh, yeah, yeah for sure.
And for me to add to this topicfor professional management, I
want to say that the largeproperties they can afford,
obviously property managementcompanies, large properties they
can afford, obviously managedproperty management companies.
Um, even if you're like some,you know, have a couple of two
to four uh units of like, likemaybe you have a couple of
(27:59):
different ones or whateverdifferent properties, um, you
it's it's hard to like self evenmanage those sometimes because
you know you have to take thetime to tend to the tenants and
everything and you've got tohave that time there to be able
to do it and you know it'salmost like having a full-time
job.
Yes, it is Basically so.
(28:20):
My recommendation is like, Iguess, if you're starting out,
kind of like, get familiar withproperty management and kind of
know it, but if you want to saveyourself some time, man, hire a
company.
Yes, right, exactly, I mean thebigger the properties from what
I'm hearing, multifamily thebigger the properties I mean,
the less you can kind of givethem every month if they're
(28:45):
managing multiple properties foryou.
So if you're like 300, 500doors, you rent Cardone and he's
probably giving companies two,3% every month.
But if you're just got onebuilding and you know you got a
bunch of doors in that onebuilding.
Then what is it like?
10% yeah, like 10% at least toto manage the building and all
(29:07):
the units and do the trash outsand the vacancies and you know
dealing with all that and youknow the day-to-day stuff.
That's a full-time job rightthere.
So you know just my opinionlike you might want to be
familiar with propertymanagement, especially if you're
at the two to four unit stage,but then once you get to that
(29:28):
bigger property, you're going tohave to just delegate that
because I mean, unless that'ssomething you like to do manage
properties, then that's fine,but you know.
And you have your own propertymanagement company, that's fine,
you know, but still you don'twant to be doing this stuff day
to day like a normal job man.
You want to delegate that tosomeone who will take care of
(29:50):
your property just as good asyou would if you were managing
it.
Speaker 1 (29:53):
And I was going to say this too you got a property
management.
Speaker 2 (29:57):
That's a tax deduction right there, yeah,
yeah, yeah and find a reallygood property management company
that's not going to have itwith you on every little thing
that's going on with theproperty.
Speaker 1 (30:09):
You know, just find oh, you can nitpick all day.
Yeah, any, anything especially.
Yeah, you can nitpick all youwant yeah.
Speaker 2 (30:17):
So, like you don't want them emailing you, calling
you, the company's supposed todo everything for you, but you
don't want them emailing you andcalling you about every little
thing, about what happened withthis tenant or this problem, or
you know you just want them tobe able to take care of it.
You know you make, you make thebig decisions as a property
owner, but you let them know Ineed you to do your job and
(30:39):
manage this thing.
Speaker 1 (30:40):
That's right, yeah.
So yeah, when it comes toproper, uh, multifamily, start
off, start small.
Yeah, start off small, or see,because, like with my situation,
I'm just going to, I'm going todive in.
I'm going to dive into asyndication because, because you
(31:00):
know, you and I we've studied alot about this and everything.
That's why everything Thursdaywas so familiar with me.
With the verbiage, thevocabulary he was using, the
illustrations that he was using,I was like like I was right
there, I knew exactly what hewas doing.
Yeah, so I'm basically gettingmyself ready for syndication
because I know exactly how itgoes about it.
(31:21):
Right, but then that's where.
But the thing about it is yougot to learn about syndication
Also, if you're in a big poolsyndication, that you're going
to know exactly everythingthat's basically going on.
Speaker 2 (31:33):
Yeah, yeah, you're going gonna know all the details
about the deal.
You're gonna know who'sinvolved.
You're gonna know how muchmoney you got to put up what I'm
sure what everybody else isputting up to to make it.
You know fair for for the group.
And yes, indications could becould be lovely, because you
really don't have to do anythingyourself but put in your money
(31:55):
Investments.
Speaker 1 (31:55):
So that the money worked for you exactly.
Yeah, so this is how to startmultifamily investing.
It can get complicated, butwhatever you do, start off and
you know baby steps are allsmall.
Speaker 2 (32:08):
Start off with, you know, the duplex, the triplex,
the fourplex if you feel likeyou can step up with the big
boys to the bigger complexes andthe bigger multifamily
properties.
Hey, go for it.
But for the most part, ifyou're just getting started in
multifamily, you might want totry a two to four, see how it
works out, kind of get theproperty management skills under
(32:34):
your belt so you kind of knowwhat's going on.
Even when you hire a companyyou'll know what they're doing,
because you've already educatedyourself kind of in a way on
being a property manager.
Speaker 1 (32:44):
Yeah, and then, like the number one out of everything
, educate yourself.
That's basically what I've done,I've educated myself as to
going about with a multifamily.
Whatever niche you want to do,you definitely want to do your
education, do your due diligenceand, if you don't know, talk to
(33:05):
someone who's in that field.
Learn everything you can.
Learn everything you can.
You can that feel and learneverything you can.
Learn everything you can andthen, like, if I have any
questions, like I'll google itor sometimes you know what I'll,
I'll even go in as far as I'llgo to a.
You know I can't go wrong withbigger pockets.
They're the, the biggest realestate investing platform that
(33:26):
we have.
So I I go there and I, before Ianswer, ask a.
I go and see if that questionhas already been asked and it
has an answer to it.
Speaker 2 (33:38):
Right now, I can't Not to cut you off.
I have to learn from right now.
Grant Cardone oh yeah, Grant'sbeen here.
And then there's other peopleout there besides him that are
very successful in multifamilycommercial real estate,
residential real estate, youknow, besides him.
(33:59):
But you know he gets a lot ofyou know notoriety right now
nowadays and stuff like that.
He's kind of popping right nowas far as multifamily commercial
real estate investing.
But there's other guys.
Oh yeah, just, I just beenfollowing him a lot, especially,
especially with the, the kindof deals he's doing, cause
eventually we're going to get tothat day where we'll be able to
(34:21):
underwrite those big deals thathe's doing Exactly.
Speaker 1 (34:25):
And then I deal with it.
Oh, definitely grant.
And then I deal with a rockleaf rock leaf yeah, with Rod
Khalif.
Speaker 2 (34:32):
Rod Khalif, yeah, another multifamily yeah, he
loves some multifamily too.
Speaker 1 (34:34):
I've been one of his workshops also.
But yeah that was it for thehow to Start a Multifamily.
So Brad and Nat.
Anything else you want to say?
Speaker 2 (34:48):
Not really.
It's been a good episode.
I'm glad we covered this topic.
We're going to have another fewtopics coming and more episodes
coming.
This is, like you said it'sbeen a while since we did one
because we've both been kind ofjust busy and stuff trying to
connect our schedules.
But we're coming more with moretopics, more episodes.
You know, get in on multifamilyany way you can, whether you
(35:13):
think you want to just go aheadand run with the big dogs or, if
you want to just start, smalltwo to four units.
Get familiarized with theprocess, all the the ins and
outs of trying to manage aproperty or running a property
and making sure those numbersare right at the end of the
month, all right.
Speaker 1 (35:34):
Well, that's it.
Everyone, Everybody maintainhave a great weekend or a great
day, or whatever day it is toyou.
What is it Friday?
Speaker 2 (35:43):
It's Friday here.
It's Friday, so have a greatweekend.
We'll see you guys soon.
All right then.
Welcome to the Professor's Real Estate
Investing Podcast with my guywho you know, property Relief.
Speaker 2 (00:17):
It's Marcus Harvey in the house.
Mr Marcus, how you doing today,bro?
Oh man, I can't call it.
I'm just trying to win, tryingto win, just trying to win, to
win yeah, it's been a minutesince we've been on together.
Speaker 1 (00:28):
I was like, oh, we gotta do.
We gotta do one becauseeverybody was loving the one
that he was on with the uh, thesection eight, oh yeah, yeah,
that was a really good one thatwas a good topic we did yeah, so
today's um topic is going to beabout the multifamily.
Reason why multifamily?
I was thinking that it wasgoing to be good.
I just had you pick between thetwo.
(00:48):
But I'm loving the multifamilybecause that's my thing right
there, because I went to aconvention last Thursday and it
was in Fairfield and my God, itwas so good.
Yeah, I was really hoping.
Speaker 2 (01:03):
I could attend that.
Speaker 1 (01:04):
I had some other endeavors to attend to, so, yeah
, I missed out well, we got itnext year because I got the
information so definitely I'mdefinitely going to be part of
part of that family that doesthe multi-family, because I mean
the more doors the better it is.
I remember you always told me Isaid would you rather have a
whole bunch of doors under oneroof or would you just have one
(01:25):
door under one roof?
I said many doors sounds great.
Right, right, exactly, allright.
So this is how to start inmultifamily, which is it can be
a quiet endeavor, how to do it,but you really want to team up
with somebody that knows how togo about doing it, because you
don't want to weigh yourselfdown with all the
(01:46):
responsibilities and everything,because there's a lot of pieces
to the puzzle that work withthis.
Speaker 2 (01:50):
Yeah, yeah, it's a lot to to take in, especially if
you're just starting andlearning about multi-family.
You got to start from thebeginning.
You know you educating yourselfis number one.
Just reading, learning, onlinepodcast seminars, online courses
.
Most of our family is such adifferent avenue than just
(02:15):
single family real estate, sothe way you do underwriting is
different than everything.
So, yeah, number one is justeducate yourself, definitely
educate.
Speaker 1 (02:27):
Yeah, there's.
There's some podcasts that dealwith it's exclusively just with
multifamily, and they havepeople who come out and they
talk about their experiencesbeing in syndications and, like
some of the seminars, I getactually a lot of invites for
that.
So that's why I had to take upthe one last Thursday, because
it was just rewarding,fulfilling.
I knew exactly everything thatthe gentleman was talking about.
(02:51):
He was there.
He would have knew the samething because the verbiage and
the way he was talking to theattendants yeah, it was.
It was just on point.
I knew everything.
So it wasn't a part where Ididn't feel uncomfortable
because I already knew about it,because I studied a lot of it
myself.
Right, with key terms, exactly,yes, and the whole vocabulary,
(03:12):
how it's used.
Yeah so yeah, educate yourself.
The next one to help you out isanalyze the market, so research
markets for a good growthpotential, looking for locations
with job growth, populationincrease, high demand for rental
properties.
This is definitely includedwith the seminar I was at also.
(03:34):
So they were talking about hotspots for multifamily.
Off the top of my head it wasTexas, tennessee, the Carolinas.
The Carolinas are a hotbedright now for multifamily.
Yes, sir, yeah, and Miami, well, florida, the Miami, the
(03:55):
Tallahassee, all the big areasthat are really good for
multifamily.
Speaker 2 (03:59):
Did they say Georgia too?
Or they didn't say Georgia?
I mean, I know it's the Southand there's some good deals out
there, it's cheap.
Speaker 1 (04:07):
But yes, they actually.
Yeah, they did say Georgia.
Yeah, you're, they said Georgia.
The one that they do not at alltouch is Illinois.
Speaker 2 (04:17):
Yeah, I've been hearing things about Illinois
that the laws and stuff arechanging just for like even just
whole, you know for wholesalingand stuff like that.
But I can dig it likemultifamily.
I bet you.
There's a bunch of stuffchanging in Illinois, so I see
why.
Speaker 1 (04:34):
And it's a lot of the place also too, with the laws,
the laws and the rent controland the rental of properties.
A lot of it plays with thestates of that going on with
those different areas too.
Speaker 2 (04:47):
Okay, yeah, yeah, I could see that yeah.
Speaker 1 (04:50):
Yeah, so basically the Midwest, the South, those
are hotbeds right now.
They really don't mess withCalifornia that much, because
California needs help.
Yeah, south and north, exactlyright.
And then Oregon.
Basically, like I said, youhave to push further to the
(05:11):
Midwest, to the south, and thoseare the good hot spots for when
it comes to multifamily.
Speaker 2 (05:16):
Right.
Speaker 1 (05:16):
Yeah, so how would you get your funding for
multifamily so secure financing?
So there's different ways.
You got the conventional loans.
Those are usually two to fourproperties.
So the conventional loans,that's basically like the loan,
like if you get a house, butthen when you get five or more,
(05:38):
that's when you deal with thecommercial real estate side.
That's the part where with theconventional loan they ask for
your tax return, but with thecommercial loans they want to
know how much money can youproduce out these properties.
Speaker 2 (05:55):
Right, right, exactly Because they just go off of a
different factor Single familyrentals.
They can be lucrative, but it'sjust not the same as
multifamily.
And then the way they calculatemultifamily is just totally
different than two to four units.
So because they consider two tofour units still residential,
(06:17):
you're going to still get aresidential loan, home loan,
instead of a commercial loan formore than five units.
Speaker 1 (06:26):
Yes, yes.
And then you have the FHA.
That's FHA loans.
It can help with multifamilyproperties if you live in one of
the units, and usually withliving in a unit, I think the
minimum is it was a one year.
Speaker 2 (06:42):
Yeah, I don't know if they've changed it, but you
have to think, be at least bethere at least one year.
Yeah, I don't know if they'vechanged it, but you have to
think, be at least there atleast one year.
I know I remember it being liketwo years for single family,
residential or something likethat, I think it was two years
but I think they might havechanged it for that also, if I'm
not mistaken.
I think I know some people thatbarely stay even six months.
(07:03):
They try to slide by it ifthey've changed the law, but I
think it might be still a yearIf I'm not correct or mistaken.
Speaker 1 (07:15):
If you want security, that's how you go about doing
it.
But this next one this is whereit gets a little bit better
situation, because a person,like I said, if you start off
with multifamily, a personstarts out with multifamily.
You have no experience, like Isaid.
I mean you got the weight ofthe world on your shoulders.
You're like all right, how do Igo about doing this?
Right?
The next one is partner up withothers, and that's where I just
(07:37):
use the word syndication alittle bit ago.
A syndication basically meansthat there's a group of
investors with you and a wholebunch of people that you'll help
get the funding that's leftneeded to get the multifamily
Exactly.
Speaker 2 (07:50):
Yeah, that's what it is right there Just partnering
up with others, doingsyndication deals on larger
deals, just because you probablycan't either get the financing
all yourself or you're just notexperienced enough to do it by
(08:11):
yourself.
So you might want to have acouple of partners or a partner
who's just more experienced topartner up with you.
Speaker 1 (08:18):
And I was thinking also too.
It can get overwhelming toowhen you deal with those dollar
numbers.
Oh yeah, because I mean aperson sees $5 million for a
multifamily, you know they'llget a little bit freaked out
Like hold on a second $5 million.
What do you mean?
Speaker 2 (08:33):
Yeah, how am I going to come up with this?
You know, so you might need topartner up with someone to help
you with that financingsituation.
You know Exactly, and Situationyou know exactly so.
Speaker 1 (08:42):
And then the next.
The next pointer is a start,small yes I give you, if you're
multifamily investing, consideryou know, start with the duplex,
triplex, fourplex, yeah, andthen just graduate yourself up
further, yeah, because the easy,the easy, the easy the steps is
, and then just keep ongraduating yourself up Right,
(09:02):
right, and then you'll hearonline a bunch of people's
opinions hey no, you don't haveto start small.
Speaker 2 (09:08):
And then other people will say start small.
But it's just like really up toyou.
And if you're really a beginner, I mean the good advice would
be to me is to start small,scale up to bigger deals and
eventually get those five ormore door type of deals, big
units and big complexes and soforth.
Speaker 1 (09:30):
Yeah, because you'll be more comfortable with what
you're doing from when youstarted to where you're going.
Right, it's a gap.
Speaker 2 (09:38):
Yeah, yeah.
If you've had some experiencealready, then I mean in some
form or fashion.
Then I mean, hey, go for it ifyou're ready for it.
But if not I mean in some formor fashion then I mean, hey, go
for it if you're ready for it.
But if not, I mean I agree,start small at first.
Get that experience, get thatproper training and management
under your belt, that way youcan scale it up to the next
level.
Speaker 1 (09:55):
Yes, Now, who's going to run these places?
That's the next one.
You definitely me, and youtalked about this for a while
ago.
You definitely need a credibleproperty management, you don't?
You just don't want to haveanybody like.
This is your investment, so youwant to make sure your
investment is properly takencare of.
Just right.
Speaker 2 (10:16):
Absolutely, absolutely.
Trying to choose the rightproperty manager or property
management company whichever oneyou prefer is like, really
crucial to this whole process,because if you're not going to
do the management and theday-to-day stuff.
You've got to have someonewho's on the same page as you,
that is able and willing to dothat stuff for your property.
(10:36):
Everything that needs to bedone on a day-to-day, yes indeed
.
Speaker 1 (10:40):
So yeah, and then conduct through thorough due
diligence.
Yeah, you want to make sureeverything is properly done,
right when you come to thistransaction.
Helping with this transaction amultifamily says all always
impact.
Always inspect the property andreview financials carefully
before purchasing.
(11:01):
Hire a professional inspectoris key key.
This goes with anything ininvesting.
You want to make sure thateverything's inspected just
right.
You want to make sure you'vetalked about this before.
My main thing, you want to makesure to check out that plumbing
Plumbing underground can bevery, very tricky when it comes
(11:21):
to things I don't need to cutyou off.
Speaker 2 (11:24):
I don't even remember what we were talking about that
day, but we had touched on allthese factors.
Speaker 1 (11:29):
Yes, we did the plumbing and roofing.
Yes, those are huge things.
I can't forget this other onebecause, just a little bit off
topic, I took a client to go seea house.
I think I told you before whatwas going on.
It was one of the things in theremarks was electricity.
(11:51):
Yeah, so you want to make surethe electricity?
Speaker 2 (11:54):
is even good.
Speaker 1 (11:55):
Like you want those.
Those ones are very, veryimportant, expensive, yeah, when
you come to the electric, whenyou come to the roofing, when
you come to the plumbing, and itdefinitely the plumbing.
The reason why I'm prettyadamant with the plumbing is
because we can't see it, yeah,and we don't know what's, what's
around it, especially if youhave trees that grow in sideways
(12:17):
, left to right, right to left.
Speaker 2 (12:19):
Yeah, the outside plumbing on on on how everything
is set up and then insideinterior plumbing.
You don't know what's behindthose walls, you don't know
what's underneath.
There's a basement.
You don't know what's been like.
You know switched around andtaken out, and you just don't
know Exactly.
Speaker 1 (12:39):
And that's just it's so hard and I was thinking too,
like even the other house thatwe was at, like I know that, the
trees.
I remember a gentleman.
We had a gentleman come and fixthe sprinkler and everything he
told me about the history ofthe trees that were in the front
yard.
He says you're moving out at agood time because these trees
(13:00):
are going to be a headache.
He says actually, these treesin the neighborhood, they're in
every house.
Because these trees are goingto be a headache.
He says actually, these treesin the neighborhood, they're in
every house.
So what they were doing was theywere pushing up the driveway
and then one of my neighbors itwas so bad that the roots, the
roots are wrapping around thepipes.
Yeah, yeah.
(13:20):
So you got to think that'sgoing to be thousands, beyond
thousands of dollars, yeah, andI was like, yeah, it's time to
sell.
Speaker 2 (13:24):
That actually happened to my parents' house
that they're still in today,where one of the trees because
we had two trees that like rightin front of the house, one of
them got so big they startedtheir roots and stuff started
lifting up the concrete and thenwrapping itself around like the
main sewage line and stuff likethat.
(13:44):
My dad had to call the city outthere to, you know, start
digging and try to figure it out, like, is it on my parents side
of the line or is it the cityside?
Oh, ok, ok.
So yeah, they had to deal withthat back in the day it was.
It was kind of frustrating.
Wow, yeah, yeah.
Speaker 1 (14:03):
Yeah.
So you want to make sure youconduct your thorough due
diligence when you're anyproperty that you want to get a
hold of.
Yes, sir, and the next one youwant to do too, which is what we
love doing is you got to builda network.
Build a network of people oflike minded heart, of people
that want to be into this.
It hard to people that want tobe into this.
You don't want to talk toanybody that wants to.
(14:24):
You know nothing wrong if theywant to do mobile homes or if
they want to do something else,but if they're concentrated on
doing multifamily ordiversifying their portfolio to
this, go ahead and network.
I mean, like I said, they saidyour network is your network.
Yes, yep, and that's the bestway of putting it right there.
Speaker 2 (14:46):
Yeah, just to add to that, I feel like if you're
going to be in real estateinvesting, then you want to
build the largest network ofpeople that you can as far as,
like you know, brokers, lenders,property managers, contractors,
landscapers, just otherinvestors, tapers, just other
investors.
You just want to be able tohave like a good, solid network
(15:07):
of people all the way aroundthat will be able to help you
build what you're building.
Speaker 1 (15:12):
Yes, indeed, so and then.
So the second part is that washow to start a multifamily
investing.
You know, educate yourself,analyze the market, secure
financing, partner with others,start off small and then just
gradually graduate up in time.
Speaker 2 (15:30):
Scale up.
Speaker 1 (15:31):
And then property management conduct thorough due
diligence and build a network.
The part I like is theadvantages of multifamily
investing.
Oh yeah, the first one would bethe economic scale.
It says the economic scale withit would be with the
multifamily would be expensessuch as maintenance Management
(15:52):
can be spread across multipleunits, lowering per unit costs.
Speaker 2 (15:57):
Yes, yeah, that is just like one main factor.
Like one main factor, if not oneof the main factors with
multi-family is just you knowyou can spread out those, the
the maintenance stuff and themanagement and and just having
more doors to be able to um gooff of, because just going off
(16:20):
of one door you're only gonnaget so much.
But if you, you know, spread,spread out the work and spread
out, like by having more doors,then that's more cashflow in the
end that you can be able toproduce, you know, cause you
have more units to be able tofill up and to go off of.
So that's the, that's thebeauty of it Just being able to
(16:40):
scale.
That you know yeah.
Speaker 1 (16:42):
Like you said that.
The next one about that highercash flow.
Would you rather want one doorunder one roof or would you want
several doors under one roof?
Speaker 2 (16:51):
Right, exactly, exactly.
And then it goes to the part oflike tax purposes too.
Do you want one tax payment peryear on a building or do you
want multiple tax payments onmultiple properties, single
family properties, exactly Everyyear depending on.
Hopefully they're all in thesame area, but if they're all
spread out, all those singlefamilies are spread out and you
(17:12):
got different tax bills everyyear.
Speaker 1 (17:14):
Yes, you do.
And then easier financing, itsays.
Lenders often view multifamilyproperties as less risky because
of the potential for multiplestreams of income and making it
easier to secure financing.
And, like I said, thedifference between single family
is they go by taxes.
(17:34):
When it comes to commercialreal estate, five units or more,
they're going by.
How much money can you produceoff these units?
Right, right.
Speaker 2 (17:43):
They want to go off of NOI and that cash flow.
How much cash flow are youbringing in?
But yeah, they don't even.
There's no calculation of NOIin two to four properties.
They just say, hey, the rent isthis, this, this, and the
expenses are this, this and this, and that's it you know there's
no calculation real calculationof net operating income like it
(18:07):
is in a commercial state?
Speaker 1 (18:09):
Exactly, yes.
And then portfolio growth.
Well, as I was mentioning about, diversify your portfolio,
broaden it out, cause that'swhat a lot of people want to do.
They don't want to stick theirmoney in one thing, they want to
send different streams ofincome.
Right, yeah, I'm trying toremember who it was, but I
(18:30):
remember they told me this.
They told me never forget this.
They said that one stream ofincome is one stream of income
too close to being in poverty.
And I was like, yes, especiallynowadays, the way our economy
is and everything that's goingon, you need to have multiple
streams.
If you have a nine-to-five job,make sure that's not the only
(18:52):
way you're getting money.
Speaker 2 (18:53):
Yeah, yeah, you have the only way you're getting
money.
Yeah, yeah, you have to.
If you work in full-time,congratulations, because that's
awesome.
You know, keep doing your thing.
But nowadays it's sometimesit's not enough for families.
People have to uber, drive andlift and do delivery, drive-in
or some kind of side hustle, andthat's also great too, because
you're bringing in more money.
But you know, make sure you're,when you're bringing in that
(19:15):
money, that it's going to be forthe purpose that you want,
which is if you want to get intomultifamily.
You know, use that your fulltime job and your side hustle to
leverage into your firstmultifamily investment.
You know is that.
Speaker 1 (19:32):
So yeah, and what you were talking about?
I remember the statistic.
I was listening to Carlton,yeah, yeah, carlton, and he was
talking about taxes andeverything, and he said that
right now, it's like about 30%of people have some type of side
hustle or another job to help.
Speaker 2 (19:53):
Yeah yeah, you're either in a roommate situation
or you've got multiple, multiplefamily members helping you or
you know in your household orwhatever helping out with bills
and whatnot, or just you're byyourself and even with a
girlfriend, boyfriend, husbandor wife, you know you still
going to need a side hustle,second job to make it, because
(20:14):
just stuff is just going up rentand everything else, food and
everything else, so like it's somuch harder by yourself to do
that.
But uh, you know it can be doneit can be done you just have to
buckle down and really work andthen whatever you're making, you
have to like.
I leverage off of that ifyou're trying to do a
(20:34):
multifamily investment property.
And then once that gets going,then you have that as another
strength once it gets going and,as Fat Joe said, yesterday's
prices are not today's prices,which is so true.
Speaker 1 (20:54):
Everything's going, everything's going up.
You don't see nothing comingdown.
Speaker 2 (20:58):
Yeah, Like when they performed at the Superbowl this
last time or whatever.
Whoever it was, I forgot, butthe price for that went up the
next day for shows because youknow they just performed at the
Superbowl.
So you know shows that artistshows are going to be more worth
more money now.
Speaker 1 (21:17):
Yes, it is more before.
So.
And the next one, when it comesto the advantages, is the
appreciation.
So multi, multi-familyproperties can appreciate faster
due to the ability to generatecash flow.
Improvements you make canincrease the overall value in
rental income.
Another word that the gentlemanused at the seminar I was at
(21:42):
last Thursday he used forceappreciation.
Yes, so you got to think of itlike this.
So, for illustration, theybought a multifamily in
Morrisville, north Carolina, andthey said that it was over a
million dollars.
That was a purchase price.
(22:02):
Yeah, it was a little bit overa million dollars, and I think
it's a 40 plex, okay.
And what they did is theylooked for the occupation was
like between the 60 and 90percent.
The reason why you don't wantreally 100 percent is because
there's places where you canactually start doing updates on
(22:23):
everything and then you can keepon going about doing each
apartment.
Speaker 2 (22:28):
Yeah, because even though you lose a little bit of
rent on vacancy, you still areable to force appreciation on
taking care of the property,making improvements and stuff
like that.
Of course you want close to100% occupancy but at that point
, if you're trying to buy, it'sreally hard to try to force
(22:49):
appreciation on the unitsthemselves if everything's
already occupied.
Like trying to forceappreciation on the units
themselves if everything'salready occupied, you might be
able to do some exterior stuffand landscaping and making the
property look better outside inthe meantime, but you got to get
inside those doors.
You got to get inside the unitsto upgrade the units, the
flooring, the, everything, thekitchens and bathrooms and
everything you know.
Speaker 1 (23:08):
So, yeah, and so when they they talked about the
force, the force appreciation,and that was a, that was a huge
step, because that forceappreciation, that's what they
use when they found the property.
Like, how can we go aboutmaking you know, getting more
using our money?
What we have at using more isleverage and get into these
(23:29):
doors and boosting it up.
Because when it comes tomulti-family, also, when you
deal with these, uh, thesyndication and um, go about,
say, if you have to deal withyourself, yeah, you, you want to
know what's your exit plan,because a lot of, absolutely
because a lot of the exit plansthat they do have, they go
between anywhere between threeto five years.
They'll have actually aportfolio of like, here we, this
(23:52):
is how much everything's goingto cost this is what we're
looking at, and this is our exitplan to go about, so they
already have an exit plan.
Speaker 2 (23:58):
Yeah, these are our projections of where we're going
to be when this date comesExactly.
Speaker 1 (24:03):
So, yeah, so that's how they go about it, but that
appreciation it's huge when itcomes to multifamily.
Speaker 2 (24:09):
You don't get it.
Speaker 1 (24:10):
You don't get it really much in single family,
but it's a beautiful thing withus multifamily.
Speaker 2 (24:16):
Yeah, and just appreciation in general, like
over time as propertiesappreciate, just because time
passes and stuff.
That's good.
But there's nothing like forcedappreciation where you can be
able to force appreciate aproperty, improve it, increase
the rents make the necessarychanges that you need to do to
(24:38):
get the full potential andbenefits off the property.
Speaker 1 (24:41):
Yes.
And then the next one, which Ialways love the T-A-X word tax
benefits.
Yes, it says you can takeadvantage of various tax
deductions, such as depreciation, mortgage interest, mortgage
interest and maintenanceexpenses.
Cost segregation, such as canfurther optimize tax benefits.
(25:02):
Yeah, yeah, the costsegregation, the depreciation,
like that is huge.
That's, that is huge.
That is definitely like when itcomes to multifamily.
Those two right there are huge.
Speaker 2 (25:17):
Yeah, yeah, you can't really even evaluate a deal
properly without having to evenbring those topics up.
Because you know, because youknow, cost segregation is is
(25:38):
what you can use to reallyevaluate your property and you
can use that as a tool to beable to prove why the numbers
are the way they are.
Sure, yes, through costsegregation, you know that's,
that's one way.
Speaker 1 (25:50):
And then another one after the tax benefits is how,
like to we were talking aboutthis low risk of vacancy?
Speaker 2 (25:57):
Yeah, yeah, after improvements and stuff, yes,
yeah, and get done that forceddepreciation.
Speaker 1 (26:02):
I mean, I tell you, you take care of the property
and you take care of it.
I'm going to tell you yourtenants they're definitely going
to take care of it because theycan see everything that you're
doing for them.
You want good tenants.
Yes, you don't want thosetenants that are just busting
down walls and making holeseverywhere.
As long as you I mean I tellpeople like it goes both ways.
(26:23):
If you want good people inthere, yeah, hey, clean it up
yeah, you have to look nice,presentable.
Speaker 2 (26:29):
People want newer features and amenities and
exactly we're looking for acertain just a way certain stuff
looks now, because you know youlook at a rental or whatever
online or a unit online and seesomeone else's building and then
they've got you know everythinglooking nice and clean and airy
.
They got the flooring right,all the colors are together, the
(26:50):
fixtures are up-to-date.
People gonna want to move inthat building.
You know they don't want tomove in those units because it's
just more appealing.
Speaker 1 (26:57):
Yeah, the vibe, the aura, yeah, just living there,
yeah, and then you take care ofit.
They take care of it.
You have a tenant for a longtime.
Yeah, yeah, you don't have toworry about anyone leaving,
right.
Speaker 2 (27:09):
Right, yeah, exactly.
Speaker 1 (27:11):
I agree.
And then, the last but notleast, professional management.
So large properties can affordto hire professional management
companies, reducing the burdenof self-management.
Yeah, yeah, you don't need thatheadache, but you always want
to find a professionalmanagement.
Yeah, you want to do your duediligence on that.
(27:32):
You just don't want to go withanybody.
You want to go with people thatare credible, that other people
are working with.
Word of mouth goes a long ways.
Speaker 2 (27:39):
Oh, yeah, yeah for sure.
And for me to add to this topicfor professional management, I
want to say that the largeproperties they can afford,
obviously property managementcompanies, large properties they
can afford, obviously managedproperty management companies.
Um, even if you're like some,you know, have a couple of two
to four uh units of like, likemaybe you have a couple of
(27:59):
different ones or whateverdifferent properties, um, you
it's it's hard to like self evenmanage those sometimes because
you know you have to take thetime to tend to the tenants and
everything and you've got tohave that time there to be able
to do it and you know it'salmost like having a full-time
job.
Yes, it is Basically so.
(28:20):
My recommendation is like, Iguess, if you're starting out,
kind of like, get familiar withproperty management and kind of
know it, but if you want to saveyourself some time, man, hire a
company.
Yes, right, exactly, I mean thebigger the properties from what
I'm hearing, multifamily thebigger the properties I mean,
the less you can kind of givethem every month if they're
(28:45):
managing multiple properties foryou.
So if you're like 300, 500doors, you rent Cardone and he's
probably giving companies two,3% every month.
But if you're just got onebuilding and you know you got a
bunch of doors in that onebuilding.
Then what is it like?
10% yeah, like 10% at least toto manage the building and all
(29:07):
the units and do the trash outsand the vacancies and you know
dealing with all that and youknow the day-to-day stuff.
That's a full-time job rightthere.
So you know just my opinionlike you might want to be
familiar with propertymanagement, especially if you're
at the two to four unit stage,but then once you get to that
(29:28):
bigger property, you're going tohave to just delegate that
because I mean, unless that'ssomething you like to do manage
properties, then that's fine,but you know.
And you have your own propertymanagement company, that's fine,
you know, but still you don'twant to be doing this stuff day
to day like a normal job man.
You want to delegate that tosomeone who will take care of
(29:50):
your property just as good asyou would if you were managing
it.
Speaker 1 (29:53):
And I was going to say this too you got a property
management.
Speaker 2 (29:57):
That's a tax deduction right there, yeah,
yeah, yeah and find a reallygood property management company
that's not going to have itwith you on every little thing
that's going on with theproperty.
Speaker 1 (30:09):
You know, just find oh, you can nitpick all day.
Yeah, any, anything especially.
Yeah, you can nitpick all youwant yeah.
Speaker 2 (30:17):
So, like you don't want them emailing you, calling
you, the company's supposed todo everything for you, but you
don't want them emailing you andcalling you about every little
thing, about what happened withthis tenant or this problem, or
you know you just want them tobe able to take care of it.
You know you make, you make thebig decisions as a property
owner, but you let them know Ineed you to do your job and
(30:39):
manage this thing.
Speaker 1 (30:40):
That's right, yeah.
So yeah, when it comes toproper, uh, multifamily, start
off, start small.
Yeah, start off small, or see,because, like with my situation,
I'm just going to, I'm going todive in.
I'm going to dive into asyndication because, because you
(31:00):
know, you and I we've studied alot about this and everything.
That's why everything Thursdaywas so familiar with me.
With the verbiage, thevocabulary he was using, the
illustrations that he was using,I was like like I was right
there, I knew exactly what hewas doing.
Yeah, so I'm basically gettingmyself ready for syndication
because I know exactly how itgoes about it.
(31:21):
Right, but then that's where.
But the thing about it is yougot to learn about syndication
Also, if you're in a big poolsyndication, that you're going
to know exactly everythingthat's basically going on.
Speaker 2 (31:33):
Yeah, yeah, you're going gonna know all the details
about the deal.
You're gonna know who'sinvolved.
You're gonna know how muchmoney you got to put up what I'm
sure what everybody else isputting up to to make it.
You know fair for for the group.
And yes, indications could becould be lovely, because you
really don't have to do anythingyourself but put in your money
(31:55):
Investments.
Speaker 1 (31:55):
So that the money worked for you exactly.
Yeah, so this is how to startmultifamily investing.
It can get complicated, butwhatever you do, start off and
you know baby steps are allsmall.
Speaker 2 (32:08):
Start off with, you know, the duplex, the triplex,
the fourplex if you feel likeyou can step up with the big
boys to the bigger complexes andthe bigger multifamily
properties.
Hey, go for it.
But for the most part, ifyou're just getting started in
multifamily, you might want totry a two to four, see how it
works out, kind of get theproperty management skills under
(32:34):
your belt so you kind of knowwhat's going on.
Even when you hire a companyyou'll know what they're doing,
because you've already educatedyourself kind of in a way on
being a property manager.
Speaker 1 (32:44):
Yeah, and then, like the number one out of everything
, educate yourself.
That's basically what I've done,I've educated myself as to
going about with a multifamily.
Whatever niche you want to do,you definitely want to do your
education, do your due diligenceand, if you don't know, talk to
(33:05):
someone who's in that field.
Learn everything you can.
Learn everything you can.
You can that feel and learneverything you can.
Learn everything you can andthen, like, if I have any
questions, like I'll google itor sometimes you know what I'll,
I'll even go in as far as I'llgo to a.
You know I can't go wrong withbigger pockets.
They're the, the biggest realestate investing platform that
(33:26):
we have.
So I I go there and I, before Ianswer, ask a.
I go and see if that questionhas already been asked and it
has an answer to it.
Speaker 2 (33:38):
Right now, I can't Not to cut you off.
I have to learn from right now.
Grant Cardone oh yeah, Grant'sbeen here.
And then there's other peopleout there besides him that are
very successful in multifamilycommercial real estate,
residential real estate, youknow, besides him.
(33:59):
But you know he gets a lot ofyou know notoriety right now
nowadays and stuff like that.
He's kind of popping right nowas far as multifamily commercial
real estate investing.
But there's other guys.
Oh yeah, just, I just beenfollowing him a lot, especially,
especially with the, the kindof deals he's doing, cause
eventually we're going to get tothat day where we'll be able to
(34:21):
underwrite those big deals thathe's doing Exactly.
Speaker 1 (34:25):
And then I deal with it.
Oh, definitely grant.
And then I deal with a rockleaf rock leaf yeah, with Rod
Khalif.
Speaker 2 (34:32):
Rod Khalif, yeah, another multifamily yeah, he
loves some multifamily too.
Speaker 1 (34:34):
I've been one of his workshops also.
But yeah that was it for thehow to Start a Multifamily.
So Brad and Nat.
Anything else you want to say?
Speaker 2 (34:48):
Not really.
It's been a good episode.
I'm glad we covered this topic.
We're going to have another fewtopics coming and more episodes
coming.
This is, like you said it'sbeen a while since we did one
because we've both been kind ofjust busy and stuff trying to
connect our schedules.
But we're coming more with moretopics, more episodes.
You know, get in on multifamilyany way you can, whether you
(35:13):
think you want to just go aheadand run with the big dogs or, if
you want to just start, smalltwo to four units.
Get familiarized with theprocess, all the the ins and
outs of trying to manage aproperty or running a property
and making sure those numbersare right at the end of the
month, all right.
Speaker 1 (35:34):
Well, that's it.
Everyone, Everybody maintainhave a great weekend or a great
day, or whatever day it is toyou.
What is it Friday?
Speaker 2 (35:43):
It's Friday here.
It's Friday, so have a greatweekend.
We'll see you guys soon.
All right then.
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