Ever wonder what it takes to break into multifamily investing? Former school teacher, turned multifamily investor Todd Dexheimer joins Jonathan on this episode. Listen in to hear Todd explain how many rentals he needed to quit his job as a shop teacher, why he switched from single family to multifamily, why he gave up on smaller multifamily to focus on 100+ units, and how he overcame the prejudice multifamily investors have against single family investors looking to make the switch. This is an episode you won’t want to miss!
Market research is key
Knowing your market is vital to know where to invest in real estate. Todd began his market research by driving around neighborhoods. He saw the local businesses, knew trendy bars, and interacted with the people living there. Todd even ran through neighborhoods to get a closer look – to see the sights in slow motion, not from a protected car.
When the time came for Todd to invest in his first two deals, many people told him the properties were in bad areas. They advised him not to move forward. However, Todd had done his market research. He had visited the areas and seen the growth in local businesses. Because he knew the market, he knew it was wise to move forward. Hear Todd share more on market research on this episode.
Why Todd gave up buy and hold to invest in multifamily
Todd began his real estate investing career in rentals and flipping homes. However, he always had his sights set on multifamily. Several years into his real estate career, Todd realized flipping homes was a distraction and was not allowing him the time or money to build the portfolio he wanted. He saw that his ROI was better on rentals than his flips, so he stopped buying flips.
Todd moved from duplexes, to 10-20 unit buildings, to apartments, and then to syndication. On this episode, he notes many reasons to move to multifamily. He says that a 100 unit building is easier than a 20 unit building. Scaling makes running a larger unit easier and more efficient. You can purchase paint in bulk, service things in bulk, and you typically have a property manager. In single family, if you lose a tenant, you are 100% vacant. In multifamily, you are not likely to be 100% vacant.
How to get bigger brokers to trust you
Being a new player in multifamily investing, it is hard to get bigger brokers to trust you. You want brokers to bring you good deals, but how do you do it with little experience? Todd mentions several tips to gaining bigger brokers’ trust. He says to identify and tell brokers exactly what multifamily you’re looking for (age, number of units, price). Experienced brokers can sniff out a rookie quickly, so Todd advises to learn the terms and language of industry. He says you must understand how things operate. He suggests new multifamily investors hire a mentor to walk you through things you don’t know.
A good approach to deals in today’s market
Todd believes that in the current real estate market, things are closer to the top than the bottom. There is less room for the market to go up before it eventually crashes. This does not mean to stop buying multifamily, but it does cause Todd to approach deals conservatively. He no longer assumes that he can buy and sell an apartment in 3 years. Before purchasing a multifamily deal, he wants to be sure that he can hold for 15 years and still have cash flow. Todd suggests looking where the break-even point is and whether a down cycle can be endured. Looking at the past for the worst vacancy rates is helpful in knowing how a property could perform. Todd says to leverage based on what you would actually pay for a piece of real estate. He also reminds investors to make sure they are in a good place cash-wise, so they do not have to pay for things out of their cash flow. Be sure to listen in to hear more of his suggestions for investing in today’s market.
In This Episode Todd Dexheimer says…
- [3:04] Why real estate investing?
- [8:30] The benefits of market research and understanding neighborhoods
- [10:43] Todd’s first two real estate deals
- [14:08] Why Todd ramped up buying real estate when others sat out
- [22:33] Todd’s journey: from school teacher to multifamily investing
- [28:40] The importance of investors
- [35:22] How to get bigger brokers to trust a new multifamily investors
- [37:09] Where Todd sees the current market
- [40:35] How to approach deals with current market
Resources Mentioned In The Episode
- Jonathan (at) MultifamilyLaunchpad.com – Learn to be an asset manager and Investor
- Bellwether Enterprise (sponsor) – contact Will Oldham: Will (at) bwecap.com