As a single family investor, I was proud to have obtained cash-flowing single family homes in less than a year. Both rented immediately, generated instant equity and have proven to me that real estate is a real wealth building tool available to any average person like myself.
I enjoyed the idea of “having 3 homes,” as my family would remind me. All of my properties are in my same city and I have resources that can attend to them as needed. Great!
I felt like a success and that I could really make this real estate thing work…
So why don’t i keep buying more houses?
Ultimately, I decided to forgo continuous acquisitions of single family homes to focus on Multifamily investing.
Multifamily Best Supports My Financial Goals
If you are cash-flowing a few hundred dollars a month on a single-family house, that is awesome! Great job, you are an investor! However, many people after they start investing learn the following lesson very quickly:
Although wealth from real estate is a function of time, I found that it would take much too long, or way too many single family houses to obtain the cash flow that I desire to replace my income. Let’s use an example:
Let’s say after mortgage and accounting for expenses, one single family home cash flows $150 per month. If you are seeking to replace your earned income of $75K annually with the cash flow from real estate, how many single family homes will you need to acquire to meet that objective?
I will let you do the math…
That is 42 homes!
42 homes gets you to your cash flow goals. And while it is achievable and certainly possible (I know of people with this many single family homes), it is a lot of work! Maybe you have a job that you love and you do not want to be a full-time investor; 42 homes would be a turnoff from real estate.
If you are like me, you will realize that this does not work for you. As a husband and father of 4 little children, I do not have time to make 42 real estate transactions, market and lease 42 properties and keep track of the condition of 42 roofs. I invested in real estate not just because of the power of financial leverage, but to leverage my time by earning passive income and working less. That benefit could be lost with 42 homes.
From day one, the logical solution was to eventually get into multifamily housing. With one transaction, one could easily meet his or her financial goal in less time and with much less headache.
Multifamily Allows Me To Scale My Real Estate Portfolio
I know of many investors that are quite happy and content with their single family portfolio. It is certainly something to be proud of when you have created wealth through real estate. As someone with fewer single family homes, I regularly experience the awe and excitement of cash flow, debt pay-down and appreciation. However, this excitement causes me to desire to grow my rental business to a level where those benefits are further expounded.
Multifamily brings scalability in many ways. I will mention two:
1) Cost Efficiency – when you have multiple doors under one roof, you generally have lower property management costs per unit, less impact from vacancies and capital expenses can cover more doors for the dollar.
2) Income/Wealth Building – If one single family can create $150 dollars or more in cash flow, how much cash flow can a 50-unit produce? What happens if I raise the rent by $25 per door? Recognizing that multifamily properties of 5 or more units is considered commercial property, and as such is valued based upon income (and not comparable properties), one can exponentially increase the value of their property (and their wealth) in a short amount of time!
It is a beautiful thing!
Multifamily is the end game, the Major Leagues, of Rental Property Investing
And then one more thing hit me…like many real estate investors, from day one, I knew that I wanted to eventually get into multifamily to experience the above benefits, so why wait? I will tell you why I initially wanted to wait:
- I did not have the knowledge
- I felt I needed experience
- I did not have enough money
- Other creative excuses
Multifamily feels out of reach for many investors, let alone those who have not yet invested. However, when you learn about the power of leverage, partnership and other creative financing techniques, you discover that wealth building through real estate is very much possible to those who are educated.
Real estate is a game that has been played for centuries. Unfortunately, for many, they do not even know the game exists. That is why I want to help educate others so that they can invest and grow their wealth, meet their financial goals and create a legacy for their families.
Passive Investor Startup Guide
To find out more about what it looks like to invest as a passive investor in multifamily real estate, download our free Passive Investor Startup Guide here!
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Rodney Robinson II