EP226: If We Want to Start a Real Estate Business in 2024, This Is What We’d Do

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You know what’s really fun about a new year? Or any time of year, really – it’s that magical moment we take to reflect on the past, look forward to the future, and assess our current reality.

All of which we did recently, which led us to think about how we would do it i If we had to start all over again from square one and buy our first investment property before we built our multifamily apartment portfolio of 300 million dollars in 2024, would we?

So if we had to do it all over again in 2024, would we?

A lot has changed in five years, and today we are going to talk about what went well for us, what didn’t go so well, and how you can avoid making the same mistakes we did. So let’s get into it!

We’re sure you’ve heard it before; it’s a story we often hear across different generations: parents telling their kids, “You might not fully appreciate how easy you’ve got it. In my time, I had to trudge to school uphill both ways, through the snow, and without shoes.”

This tale tends to spark comparisons of hardships, whether it’s about launching a business, pursuing education, or facing life’s challenges. It’s not so much about one era being tougher than the other; it’s more about acknowledging the unique hurdles each time period presents.

Take, for example, the way business competition has evolved. Back in the day, a game-changing idea like introducing milk chocolate could revolutionize the market, with pioneers like Hershey leading the charge. 

Fast forward to today, and thanks to the internet, new ideas can be replicated and modified at lightning speed, amping up the competition. But that doesn’t mean success is out of reach; it’s just that the playing field has shifted.

The same holds true for real estate. 

Looking back on our real estate investment journey, we’ve often heard the same things over the years: “Finding good deals is a challenge, prices are through the roof.”

But you know, if we’d let those skeptics get to us, we wouldn’t be where we are today. 

And speaking up sticking around, this reminds me of our mom’s homemade yogurt recipe.  You see, nothing beats home made yogurt, with its lush, velvety smooth texture, it beats store-bought 1000X. 

Now, when the weather changes, she has to change up the cooking temp and time; however, the core recipe remains the same.  This is exactly what we think about our multifamily apartment strategy in 2024.

Sure, obviously if we were to start over, we might tweak a few things, but the core strategies?

They’d pretty much stay the same. Because, at the end of the day, the keys to success stick around, even as the specific challenges shift and change.As we step into 2024, tweaking strategies to fit new conditions is a given, but some things never change. 

The enduring principles of perseverance, innovation, and adaptability are still the MVPs. It’s really about finding a way to integrate these challenges into our game plan rather than letting them get us down. But some things have stayed the same, so let’s talk about that for a little bit.

The biggest constant is actually pretty straightforward: those 100-200 unit buildings are still top-notch real estate, thanks to their knack for generating income tied to a basic human need – shelter.

➡️ Not only that, broker relationships are still a big deal. You’ve got to come across as a pro when you chat with them, being crystal clear about what you’re looking for. The number one rule of thumb is that if you don’t have a clear game plan, you won’t get the time of day from them. 

And then there’s the deal structures.

Multifamily apartment properties still rely on loans and passive investors. The ‘passive’ part means less hands-on effort for you but potentially higher rewards – you invest, and others handle the nitty-gritty.

➡️ Let’s talk next about lenders.

You know how bell bottoms and baggy clothes made a comeback? Well, that’s kind of what’s happening in the lending scene in 2024. Back in the day, Fannie Mae and Freddie Mac were the go-to for stable, long-term loans, though they came with the catch of prepayment penalties. 

But then, things shifted. Post-2020, they tightened up, making loans a bit tougher to snag.

➡️ Next up are bridge loans. They’re flexible, but the rates can be a bit all over the place. Fast forward to today, and agency loans are making a comeback, offering stability in this chaotic market. 

But here’s the tricky part: getting a hold of these loans has gotten a bit tougher with stricter criteria and the looming risk of prepayment penalties if your exit plan is on the short side.

➡️ When you’re diving into serious multifamily apartment investing in 2024, there’s a key rule you can’t overlook – you need to ace the OPM game, using Other People’s Money. It’s pretty much déjà vu from five years ago; lenders are still covering 55-65% of the deal. But you’ll need to resist the temptation to get too greedy with higher leverage—it’s a risky move that can lead to trouble.

Look, you know we always want to keep it real with you guys. Five years ago, tackling the multifamily apartment scene in LA felt like navigating a confusing maze of laws. 

Local finds seemed impossible, so we decided to think bigger and move on to other states. We weren’t financial experts by any means,we just knew how to hustle with our strength, which was raising capital at that time. Because, as much as you might hate to hear this, it’s always about the money, right? 

Actually, we want to challenge your thinking here and encourage you to remember that we think it’s not just about the money; it’s about HOW you go after it.

You see, back then, it was all about those one-on-one connections. Fast forward to now, if you’re serious about making some serious money in multifamily, you need to find a way to relate to investors. 

You have to  speak their language, hit those pain points, and understand their struggles even better than they do. 

You have to be obsessed with solving their problems.  That’s the real way to bring in the big time investors without feeling like you’re running a marathon.

Not only that, but raising capital back then was an absolute nightmare for us.

The good news is that now we’ve got systems in place that help us plug and play.

If we need some cash, the system kicks in, and it’s smooth sailing. Look, the game’s shifted, and having these systems in your wheelhouse is an absolute necessity. 

Deal sizes have also blown up.

We’re not talking a few million; we’re in the big leagues with 40-60-70 million now. And relying on your rich uncle? Well, that might not quite going to cut it anymore. You need a system that turns you into a magnet for investors.

By contrast, something that hasn’t changed much is asset management; it’s pretty much the same strategy that it’s always been, which is keep a keen eye on the ball, and know your KPIs.

And if you see a dip in occupancy all you need to do is tweak a few things, and watch it bounce back like magic. That’s when you know that you really understand the game at a deeper level.

So what’s all this really mean for you? 

Listen, if we could give you just one piece of advice that we would have given to our younger selves starting out in multifamily apartments, it’s this: patience pays. We know you’re itching for your first good, solid deal, and that’s a good thing. But some of the deals you miss are going to be blessings in disguise. 

Yeah, when we look back, we are so grateful we missed out on some of the deals we lost because they are a sunken cost. 

You never want to overpay because not only do you miss profits, you run the risk of sinking both yourself and your investors who have trusted in you. 

The reality check here is that this venture you’ve begun is more of a marathon than a sprint.

You’ll witness individuals chasing after fleeting opportunities, constantly jumping in and out. 

But the real winners are those who remain steadfast, refusing to compromise their standards for a quick victory. You also have to reject the subpar, enduring through the good, and holding out for the exceptional.

That’s the strategic approach to navigating this game.

For anyone stepping into the multifamily arena in 2024, our advice is simple: Stick to your principles. Don’t lower your standards. Keep your investment criteria tight. 

This is how you construct a robust business that stands the test of time, attracting deals and cash flow effortlessly. It’s really not about chasing opportunities; it’s about opportunities coming to you.

Patience isn’t just a virtue; it’s your secret weapon.

Well, that’s it for us today. Thanks for tuning in – we are so excited for you to get started on your investing journey or to continue it if you’ve already started. 

No matter what, we hope that sharing some honest insight into how we would do things different helps shape your 2024 into a truly amazing and profitable year.