I ask this question all the time at our three-day Multifamily Investor Weekend:
What is the one thing that you can’t buy more of?
That’s right. Time. Even the most efficient person only gets 24 hours in his or her day.
It makes sense that we want to maximize our results with our limited time. Because we buy apartment buildings that have multiple units under one roof, this efficiency is baked-in. While we evaluate multiple apartment properties, we purchase one at a time.
Here’s an example that illustrates the efficiency of buying apartments. Let’s consider a 5-year time frame.
Let’s meet Jim and his 5-year real estate investment plan:
- Year one – Buys single-family rental
- Year two – Buys a duplex
- Year three – Buys a four-family
- Year four – Buys a six-unit
- Year five – Buys another six-unit – has trouble finding financing for this deal.
So in five years, Jim owns 19 units. He has to deal with 5 roofs, and because he has no critical mass, he needs to self-manage, running from unit to unit, trying to collect rent and plunging toilets. Jim is now a multi-unit owner just like he wanted.
Right?
So let’s meet Jane and her 5-year real estate investment plan:
- Year one – Educates herself, surrounds herself with the right team and mentors, spends some time mastering her chosen apartment market, developing broker relationships and analyzing deals.
- Year two – Buys a 20-unit building. Once a week spends 30 minutes with her property manager reviewing her statements and going over vacancies.
- Year three – With her property stabilized, she reviews her statements with her property management team once a month; collects cash flow and her tenants start to pay down her mortgage.
- Year four – Continues to build equity, while looking at other opportunities. Year five – Purchases a 36-unit property down the block increasing her economies of scale, further reducing expenses.
So in five years Jane owns 56 units, and is constantly collecting cash flow and building equity. She has professional property managers to take care of the day-to-day maintenance and tenant relations. With her track record established, she looks at bigger deals, continuing to cultivate investor relationships as she brings investors into her next 80+ unit deals.
So which strategy saves more time? Even if Jane takes more time educating herself on multifamily real estate at the outset, she is INVESTING that time not SPENDING it. If you want to get started in real estate investing and think that you have to start with single-family rentals, I urge you to think bigger and make that investment in yourself.
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