This post complements the video I sent out this week. You can watch that very windy video by clicking here! I want to keep the videos as short as possible, so I will elaborate a little more on the competition in acquiring multi-family (MF) properties. Question: why do we actually have fewer people competing against us when acquiring our type of MF properties? The main reasons are listed below. Most are centered around a lack of knowledge in this specific area of investing.

  1. Assuming the acquisition process is more difficult than SFH
  2. Not enough capital to invest
  3. Lack of understanding of how to manage a larger asset
  4. Not competing against large companies, institutional investors, or investment groups.

When I was acquiring my first single family rental condo, I had already purchased my primary home. I knew that process, so I just duplicated that and acquired another one to rent out. It was simple. Most people know how to do this. I had no idea how to 1. Find larger commercial properties 2. Identify the expenses and project cash flow or 3. Actually acquire the property, meaning the process involved and qualification terms. These factors will keep a lot of potential investors from trying to acquire MF properties.

I think the main reason more people shy away from commercial investments is because they don’t have the capital or investment required to obtain these cash machines. Most new investors I have met want to do everything on their own. They want to own and run a rental property all on their own. The issue with that logic (aside from being completely ignorant on creating true wealth) is that most people do not have $300,000-$500,000++ kicking around to buy a commercial property. So instead, they save up smaller chunks of $20-$60,000 at a time and buy smaller properties …sometimes with the help of their own equity. I’m not sure if you’ve done the math yet, but this is an incredibly slow way to generate wealth in real estate.

If you’ve ever managed a rental property on your own, you’ve probably hated is at much or more than most real estate investors. I managed my own first rental property, and although I did a good job managing it, and always ensured it made money, it was such a pain in the butt to deal with each month! Can you imagine multiplying that experience by 10? or 20? or more, depending on how many units are in your apartment building? Commercial buildings can have pools, elevators, underground parking, balconies, boilers, storage facilities, communal areas, party rooms, individual hydro meters, fire escapes, etc etc that are not commonly found in single family properties. All of these things need to be managed properly. Updated. Replaced. Cleaned. Upgraded. Maintained. Certified as safe, inspected etc. The majority of investors do not know how to manage any of these things. Investors get scared off when they don’t understand a particular type of investment because they know they will probably lose a lot of money in miscalculations and simple ignorance.

The small to mid-range multi-family properties I focus on are not big enough for large companies, institutional investors or investment groups to buy, so I’m never competing against the big boys, which is actually much harder to do than competing against average investors. Why? These big conglomerates have a LOT of money and don’t always care to acquire the best deal. They just need a place to park their money (safely) and have it grow slow and steadily.

Summary: The types of MF investments I focus on produce above average cash flow with above average ROI’s, and do so with little to no competition from other investors or conglomerates.

Contact me at mark@perryinvestments.ca to learn about the MF properties we are currently analyzing and why they make great investments.

Stay hungry!

Mark