Should You Invest In Multifamily Now?

Should You Invest In Multifamily Now?

If you’re involved in real estate, you may be wondering, “Why invest in multifamily now?” Once you learn about the benefits, it may be time to begin. Charlie Dobens can help!

Multifamily attorney Charles Dobens founded The Multifamily Investing Academy to teach people to invest properly. He provides insight and tools in an objective way, and doesn’t seek to keep a cut of your future deals. For his mentorship program, he’s recorded over 1000 hours of training videos.

Be All In

So how do you know when to pursue a new project like multifamily investing?

Charlie says you have to be all in to this business — you can’t dabble. However, everyone has a different path to the goal. If you know that your future is in multifamily, you need to work every day toward that goal. If you’re not passionate, don’t do it. Multifamily is a way more labor-intensive project than fix & flips.

If you’re trying to figure out if this is for you, do your research online and talk to people. He also recommends reading the book Big Shifts Ahead to understand the shifting demographics in the United States. When you decide that you’re definitely into multifamily, join Charlie’s forum. 

He’s creating a new, improved academy with an attorney who specializes in securities law. They’re teaming up to create The Multifamily Forum, a holistic approach to the business. Build, design and create every aspect of your multifamily business. It’s a turnkey program that he describes as almost a franchise model to get the business structured properly and up and running on day one. 

The key: As much as you’re looking for deals, you need to also be looking for money. 

The Power Of Your Network and Business Structure

Regardless of your network size, you have to educate them as to why multifamily is the best business to be in. Stay in communication with your database of friends and family and keep them informed of every step. Then, when it’s time to ask for investors, they’re already involved. Build the infrastructure from the beginning so there are no surprises.

You’re not necessarily putting pressure on people to invest, just asking them to be in the database and receive updates. Share your success, your progress, and all the ways you’re working toward your multifamily goal. Gradually, those in your network will learn what’s happening and decide whether they want to contribute and become part of that success.

In the real estate investment world, you may hear the terms GP (general partner) and LP (limited partner) used frequently. The GP is the sponsor of the deal and individuals are limited partners who don’t want as much involvement. However, Charlie recommends setting up an LLC, making all investors members rather than partners. You will be essentially syndicating the investment and offering tiers of membership like Class A, Class B, etc. 

An LLC is ultimately less dangerous for the investors. They may think being called a GP will give them points for their next deal, but it opens them up to risks like general liability. Also, in an LLC, you define the terms for class A and class B members. For example, you may have Class A members sign personally for the mortgage and then get more return in exchange for that bigger risk. There are lots of ways to set it up, and you control the entire process. 

At the end of the day, don’t just take a shot in the dark on your business structure. Join Charlie’s training program to learn all the details.

Why Multifamily?

FYI: The capitalization rate, or cap rate, is the ratio of Net Operating Income (NOI) to property asset value. Basically, it’s your return on investment. 

  • Home ownership doesn’t have the benefits it used to have, and people are renting more. Therefore, multifamily is where it’s at for property investment because apartments are in such high, constant demand. 
  • The cap rate is a powerful tool for making money. Purchase price equals the NOI divided by cap rate. So, if the NOI increases by $1 on a 4-cap property, your net worth increases $25. Building wealth in this industry is very efficient, and unlike any other business model.   
  • There are 5 ways to make money with multifamily: 
    • Cash flow (profit)
    • Appreciation 
    • Mortgage paydown and acquisition costs
    • You become the property management company, so you get paid a salary. With multifamily, you’re building income and assets simultaneously

Post-COVID

Charles predicts no return to normalcy until January of 2021. Yes, the changes are creating opportunities, but the effects are drastic and widespread. This is unprecedented, and as the pandemic continues, we’ll see what works and what doesn’t. You have to continue making offers, but organize all aspects of your business and keep on track. 

Connect with Charlie for coaching, his podcast, academy and more at Multifamilyinvestingacademy.com.