Multi-family real estate investing is a great way to scale your real estate investment career. To get some deeper insight into the multi-family world, we recently spoke with Lucas Hall, founder of Landlordology. Lucas started his career at 24 years old with a rental property and has since developed a profitable real estate portfolio across three states. In addition to his properties, he teaches other property owners and managers how to successfully manage their rentals, build wealth, and keep their tenants happy.
What's the best thing about being in multi-family real estate investment? And what has been the most challenging?
Multi-family real estate investing has the economies of scale on it's side. With more units, you can typically yield more profit. When the roof needs replacing, you don't have to pay for 8 new ones, but rather only 1. It might be larger and more expensive, but it's not usually 8x the cost. One of the most challenging aspects of multi-family investing is raising the capital to afford the properties. 8-plexes are expensive, and 100-unit complexes are sometimes $15-20M.
What advice do you have for those just getting started (or thinking about getting started) in multi-family real estate?
If you're thinking about getting started in multi-family investing, I suggest you find a mentor. Find a local investor who is doing what you want to do and ask to follow them around. If necessary, offer to pay the mentor. You'll save thousands of dollars in mistakes if you learn from a successful investor who is actively investing in multi-family.
What kinds of returns can a new investor expect to see in multi-family?
There is no standard return for multi-family investments. Returns for an investment property will vary wildly depending on location, type, class, and condition. This is another good reason to connect with a local mentor. He or she can give you insights into specific properties and help set your expectations based on his or her knowledge of the market.
What do you look for when purchasing a multi-family investment property?
I consider the following factors when shopping for a new property:
- Age of property
- Location of property
- Tenant income
- Projected area growth
- Past job growth
- Rental income
Can you tell us more about how you got started and what you're working on now?
I got started by buying a single-family home that I converted to 6 separate units. I lived in one and rented out the others. The rent covered all my expenses and then some. I used the equity to buy my next property, and so forth. I'm currently looking for a large apartment complex in the Denver area - something over 60 units. I'm also the head of industry relations at Cozy, which is the leading online property management service in the United States for landlords and and renters. It's a great tool that allows landlords to market rentals, screen tenants, and collect rent all in one place.