Making the jump to multi-family

In a past comment on The Large Multi-unit Apartment

Another Investor Says:

“You think that by partnering, you will somehow leapfrog into more wealth faster. The reality is that what you get back largely depends on what you put in. The ROIC must be significantly higher than it is on smaller deals to gain any advantage. The additional risk added by losing control of the property outweighs the advantage of the larger deal in my experience. Is there a risk premium incorporated in your analysis?

You seem to want to skip the steps needed to learn the more intricate business of multi-family and commercial/industrial properties before you dive in. That’s not wise, in my view. With your lack of experience, you could be one of those people RealOG wants to leverage. Take your time and learn from the smaller deals and you will get where you want to go.”

My response is, what type of jump is too large of a jump?  Can I go from 10 SFH to a 16 unit?  To me, that’s not even a skip to commercial?  Can I go from 10 SFH to a 50 unit?  Why would a 100 unit be too big.  I guess I don’t understand what steps I am skipping by going to a 100 unit.  Maybe it’s the partnership aspect that he’s talking about and not the actual building size.

There are many reasons that this is the path my partners and I have chosen.  While it’s true that we ourselves do not have large multi-unit turnaround experience.  We have surrounded ourselves with a team of people who have successfully done this multiple times.  The fact is that we’re looking at a mere 100 unit building while our team is purchasing well over 1000 units in the same area.

As for a progress update, we have not come across any properties that fit our criteria yet.  I’m having a lunch meeting with my property management company today.  Their office just happens to be less than 6 blocks away from my house!  I also spoke to an attorney who recommended that we go with a limited partnership instead of a TIC.

About Kenric

My blog about living life to the fullest by generating passive income through real estate, business and online investments.
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