3 Steps for Beginning Multifamily Investors
Today we’re going to discuss the top three steps for beginning multifamily investors. And by the way, these are the three steps that the seasoned guys already have in place way ahead of time. Step one - you need to have your debt and equity sources in place and ready to go. What does that mean? The debt, or the folks you're borrowing money from like the bank, mortgage brokers, those guys, they need to have all of your personal and business financials in their possession. They need to know you and your financials very well. That way when you bring them a deal, they don't have to do all the other personal stuff they’d have to do with a new borrower. They can just start looking at the deal for you right away, which allows you to react quicker, which in turn will help you do more deals. On the equity side, that's the money you put down on a deal, your own money that you need to have that’s liquid and ready to go immediately. You don't want to waste time selling stocks or pulling money out of your estate, or whatever in order to get your hands on cash. Have your debt and equity factors in place first. Step two, you need to have crazy market knowledge in whatever market you're working in, as well as the submarkets surrounding it, even down to a neighborhood you may be concentrating on. I should be able to ask you at any time what deals are trading for per unit, per square foot, gross rent multiples, cap rates, etc. Five resources I tap into every single day, seven days a week, include the county’s property appraiser’s website, Real Capital Analytics, LoopNet, Costar, and REIS. I study these websites daily to keep my game sharp. I’m constantly learning and improving my game; learning what assets are trading for, learning what market rents are, what's coming on the market, etc. I highly recommend subscribing to at least a couple of these if not all of them if you're serious about multifamily investing. The best players in the game are on these websites. Step three, you need to have your whole team in place; it’s so important. And in some cases, you should have multiple options available in each category in case your first option isn’t available. Team members include your CPA, a real estate attorney, property managers, site assessors, surveyors, and your mentor. In detail, property managers are really important folks. They do what I call a FRAT analysis. The F is for financials. They're going to review the financials with you. Get them involved early. R is for the rent analysis. They're going to tell you what the market rents are and whether or not the current in-place rents is under or above market. The A is for abstracts. They’ll do lease abstracts for you in the due diligence phase. They’ll review all the leases and tell you the lease end dates, who is paying or not paying rent, what the deposits are, and a bunch of other information to make sure everything is in place before you close. And the T is for Tours. They should go with you on tours and walkthroughs because they'll notice things that you won’t because they're in this every day at the property level. You need to have two or three environmental folks. These environmental folks will do what I call a ramp analysis our R is for radon, A is for asbestos, M is for mold, and P is for phase one. Now not all properties need to have all four of these things done, but the environmental focus will tell you what needs to be done. The site Assessor is kind of like a home inspector. These are the people who are going to be doing the full walkthroughs.
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