What’s the secret to successfully making the jump from single-family to multi-family properties?
Chris Urso here, and I can tell you that after being involved in numerous multi-family property deals, I’ve discovered 3 simple rules that will help you win at apartment investing: build reserves, invest in your investors and engage your managers.
Are you ready to learn these 3 rules and discover success in your next multi-family project?
Let’s get started.
Rule #1: Always Have Enough Reserves
Whether you’re buying a 4-unit building or a 204-unit building, you have to plan for the unexpected. It’s really important to plan for repairs and updates, whether it’s a new roof, boiler system or windows.
First, build a reserve account going into the first year. Then, put aside money every month to cover the cost of any future improvements or fixes.
For example, for a 100-unit building, you might allocate $300 per unit for the first year. That means you have a $30,000 reserve cushion going into year one.
And every month after that, allocate $25 per month per unit (or $2,500 per month, for a total of $30,000 per year). Put those dollars into an escrow account for that property and eventually use them for improvements.
But where does that initial $30,000 come from? That’s where rule #2 comes in.
Rule #2: Invest in Your Investors
Private money is key in these multi-family property deals. So many people are interested in investing in multi-family deals; I’ve raised over $7 million in less than 4 years for various residential and multi-family projects.
But it takes time and energy to find those investors. I met a potential investor at a seminar and approached him about a particular deal, but it just didn’t work for him at the time. Then, a year and a half later (!), he invested almost 20% of the funds we were raising for a 23-unit project.
How did this happen?
I stayed in touch with him over those 18 months. Follow up, friends. I have a system to track my investors, and I make it my business to know what they’re interested in investing in and why they invest or don’t invest in certain projects.
If you don’t have a system like this you will miss out on a significant amount of investor capital.
So keep track of your investors and possible investors. You never know when the time might be right, and you want them to invest in your project, not someone else’s.
Rule #3: Engage Your Project Managers
Investors aren’t the only people you need to keep track of…
Both before and after you purchase a property, it’s really important that you engage your property management team and your project managers. This is especially true if the property needs an extensive amount of rehab.
After you close, you need a plan to maintain effective communication with your team on the ground. If your properties are out of state, you’ll need to be especially intentional.
I like to do a weekly call with our property manager and our project manager. We go through our renovations and leasing plans. We address any issues that come up. Because the calls are weekly, we’re able to address issues in a timely fashion.
Plus, this holds our managers accountable and helps us make sure the project will be successful. I encourage you to do the same thing, whether those meetings are in person, over the phone, or video chats.
With these 3 critical rules, you’ll be finding apartment investing success in no time.
Whatcha Think?
Got any other apartment investing tips? Comment below!
1. Build a reserve for multi-family projects.
2. Follow up and check in with your investors and potential investors regularly.
3. Communicate with your managers before and after closing deals.
Christopher Urso
is the founder of URS Capital Partners and National REIS. Chris has been investing in real estate since 2001. Over the years he has been involved in all aspects of real estate, from single-family fix and flips, buy and hold cash flow houses, and finally to apartment buildings. His real estate investment career only took off when he purchased his first apartment building 3.5 years ago. He now controls over $15,000,000 of apartments and has raised over $8,000,000 of private money in just over 3 years. He now structures investment partnerships to acquire large apartment complexes and also private coaches investors helping them purchase their own apartment buildings.