“The Multifamily Millionaire” by Brandon Turner is one of many BiggerPockets book releases I have read. This book explicitly covers “small” multi-family homes and properties.
In this instance, the word “small” means anywhere from 2-20 units. The bank considers any property having 1-4 units as a residential property. Thus, lenders consider a property with over five units as a commercial entity.
There are pros and cons to staying with residential property, mainly lower down payments and easier management. The advantages of commercial properties are how the bank values them.
The bank doesn’t use the comparison method to appraise commercial properties; it uses the cash flow method. This means the more cash flow your property generates, the higher the price value. This means you can increase income and decrease expenses to grow the value of your property.
1) You can make much more cash flow from multifamily residences versus single-family. You’ll build even more wealth if you live in one unit while renting the rest. This is called house hacking.
2) You can find great deals by finding under-monetized properties. Before buying the property, you envision ways to increase income and decrease expenses. Some examples are lowering the cost of property management, rising rents, and pushing utility costs back to tenants.
3) Exponential growth is growth that increases by percentages, not by fixed numbers. This means growing your units by 25% every year (just an example). So instead of saying you want to add one property a year (linear growth), you’ll say I want to increase my units by 25% each year (exponential growth).
4) Ensure you calculate “true cash flow” numbers. Many people want to sound smart by throwing out large cash flow numbers. However, they do not account for vacancies, major maintenance, and capital expenditures. Once you add these items to your numbers, you’ll receive your accurate cash flow.
5) There are many types of multi-family properties like “single story side-by-side,” “up-and-down,” “cottages,” “monster homes,” “starter apartments,” “garden apartments,” and “accessory dwelling units.”
The Stack method utilizes exponential growth to grow your multi-family portfolio swiftly. The goal is to become “level one” financially free within five years.
You would set the percentage you want to add every year, say 100% or double. You may add two units, four units, eight units, 16 units, and 32 units each successive year. In total, you would have 62 units. You can imagine how fast you can accumulate wealth.
It may seem intimidating to grow so fast, but your mind pushes itself to succeed (if you allow it). You make new connections, attend meetings, and read books to help you reach your goals. It’s part of the learning process.
This book has everything a future real estate investor needs for success. Even if you are looking to start with single-family residences, this book has enough details to assist you.
I highly recommend this book to entrepreneurs and real estate investors. The topics this book covers will help anyone change their circumstances and, by extension, their lives.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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