digest
Short Summary
Main recommendation: Set a narrow, county-specific buy box and an income-linked return target, then build the liquidity, deal flow, and lender relationships to acquire rental doors at volume, as the speaker did to reach 157 units in 2022 and set a 300-door goal for 2023. The speaker's team paired this with a positioning as a reliable buyer rather than a commission-seeking broker, which they say increased deal flow.
Key Points
- Liquidity came from saving and reinvesting at least 10 percent of net income each year for 18 years, plus budgeting purchases from projected fee income.
- Equity in existing two-to-four unit properties was audited each year and could be traded for more doors without adding new cash.
- Syndicating larger multifamily deals to long-time investor relationships expanded purchasing capacity, letting the team acquire about 50 percent more doors than capital alone would allow.
- Deal flow improved when the speaker told brokers and wholesalers they were a buyer who did not expect a commission, and when buyers pulled back as interest rates rose.
- Building relationships with local banks, offering them deposits in exchange for loan appetite, gave access to the capital needed for the door count goals.
Details Worth Noting
- Concrete instructions:
- Define a buy box for each county you target, including minimum expected return. The speaker used 7 to 8 percent expected return in King County (high growth) and 10 percent cash-on-cash in Pierce County (slower growth).
- Estimate capital needs from price per door. Seattle apartment doors were cited at roughly $150,000 to $300,000 or even $400,000 each, so 100 to 150 doors could require $15 to $30 million or more.
- At the start of each year, audit liquidity (saved reinvestment, projected fee income with 10 percent set aside for purchases, and investor capital) and audit the portfolio for high-equity, fully depreciated, or underperforming properties that could be traded for more doors.
- Contact every broker and wholesaler in your market with your buy box, and state clearly that you are a buyer, not seeking their commission.
- Close deals smoothly to build bonds with deal finders, since this brings repeat deal flow.
- Meet local banks and lenders, learn their current lending appetite for multifamily, and offer them deposits or other value.
- Revisit goals when market conditions change, for example if borrowing costs spike, and scale targets up or down accordingly.
- The speaker's 2022 results included lending growth above 15 percent with over $100 million funded, and brokerage sales above $150 million against a $125 million goal.
- The speaker stated the company runs its own staff and does not hire out property management, and that more doors reduce per-unit costs across its roughly 1,000 existing doors.
- The speaker set a goal of 300 doors in 2023, forecasting acquiring more rental properties in that year than in the prior three years combined, but noted this goal was tied to current market conditions and could be scaled back, e.g. to 150, if conditions like rising borrowing costs changed.
Bottom Line
Acquiring a large number of rental doors depends less on any single purchase and more on pre-committed capital, a clearly defined buy box, and relationships that keep deals flowing. Treat these as the constraints to plan around, and adjust the target whenever financing or market conditions shift.
