Real Estate Rookie Podcast Summary
Episode Title: The Beginner’s Guide to Finding (and Funding) Small Multifamily Real Estate
Release Date: January 27, 2025
Hosts: Ashley Kehr and Tony J. Robinson
Guests: Amelia McGee and Grace Gudenkopf
Introduction and Guest Background
In this episode of the Real Estate Rookie podcast, hosts Ashley Kehr and Tony J. Robinson welcome back seasoned investors Amelia McGee and Grace Gudenkopf. Both Amelia and Grace bring extensive experience in small multifamily real estate investing, having built substantial portfolios in Iowa and beyond. Amelia shares her journey, stating, “I was on episode 111, but I am an investor in Des Moines, Iowa. I've been doing this for five years now and I was up to 45 units at one point” (01:09). Grace elaborates on her investments, mentioning her diversified approach with “about 26 units, a few small multifamily in there because I love them” (02:00).
Why Small Multifamily is Ideal for Rookie Investors
The discussion begins with why small multifamily properties, such as triplexes and four-plexes, are advantageous for new investors. Amelia emphasizes the reduced risk compared to single-family homes: “Small multifamily is actually much less risky than single family homes when you're starting out because you can diversify your risk in the number of tenants that you have paying rent every single month” (02:35). Grace adds, “You also have one lawn, one roof, so you get a little bit of that economic factor in there of that your money goes a lot further” (03:17). Tony acknowledges common concerns about higher purchase prices and management complexities but reinforces the benefits of multifamily investments.
Market Analysis: Niching Down and Identifying Growth Areas
Amelia and Grace discuss the importance of market analysis and niching down to specific neighborhoods or areas poised for growth. Grace highlights the strategy of leveraging city development plans to anticipate property appreciation: “I know where all the city money is going and I know where property values are going to rise” (13:05). Amelia shares a success story, noting how strategic location choices led to significant property appreciation: “I bought it for 500,000, and we just sold it for 690, which isn't quite what we wanted to sell it for. But in three years, it appreciated $190,000” (15:08).
Acquisition Strategies: Finding and Sourcing Deals
The guests delve into effective strategies for sourcing multifamily deals. Grace explains the importance of clarifying and broadcasting your "buy box" to attract serious offers: “You have to be shouting your buy box from the rooftops” (08:41). Amelia expands on proactive approaches like driving or walking for dollars and directly reaching out to property owners: “I used to walk around neighborhoods with my mom and write addresses down and then I would just directly reach out to them on Facebook or send a letter” (17:01). Grace also emphasizes the power of referrals, recommending offering substantial finder’s fees to incentivize others to bring in deals: “Probably a third of my properties I've found via referral” (17:59).
Due Diligence: Key Processes and Common Pitfalls
Before finalizing any deal, thorough due diligence is crucial. Amelia advises new investors to conduct detailed inspections and run the numbers meticulously: “You need to be good at running the numbers and understanding will this property cash flow or am I walking into a terrible deal” (19:31). Grace underscores the necessity of securing an estoppel agreement to verify lease conditions and avoid hidden obligations: “Sign an estoppel agreement to make sure you re-verify everything in the lease” (20:30). The hosts discuss common issues such as unpermitted additions and the complexities of managing multi-unit properties, highlighting real-life examples where overlooking these aspects led to significant challenges (22:59, 24:04).
Financing Strategies: Creative Approaches Beyond Traditional Loans
Amelia and Grace share their creative financing methods, particularly seller financing, which allows investors to spread out payments and minimize upfront costs. Amelia describes her approach: “I'm finding all three of them off market, asking them, hey, do you want to sell this property? … would you be willing to sell or finance so you can spread out your taxes over multiple years” (32:16). Grace echoes the benefits of flexible financing arrangements and shares a success story where leveraging their expertise and book led to a favorable deal: “He was like, I'm ready to sell or finance it to you” (35:16).
Property Management and Scaling Up
As portfolios grow, effective property management becomes essential. Grace emphasizes the importance of adopting a CEO mindset, even with a single property: “You need to act like it. You need to write things down, you need to track things and you need to be organized” (36:18). Both guests discuss the transition from DIY management to using property management platforms like Rent Ready to streamline operations and maintain organization as the number of units increases. They also highlight the necessity of establishing clear boundaries and hiring services for tasks like lawn care and snow removal to minimize tenant conflicts (25:33, 26:38).
Final Advice and Resources
Towards the end of the episode, Amelia and Grace offer final pieces of advice for rookie investors. They stress the importance of systems and processes in managing properties efficiently and avoiding burnout. Grace recommends investing in property management tools and maintaining detailed checklists for various aspects of property management: “Keep checklists of how do I rent, what are my screening requirements, how do I find and list properties” (37:49). Amelia encourages persistence and proactive communication with property owners to secure favorable deals (35:31).
The hosts conclude by directing listeners to additional resources such as the book Self Managing Landlord available at the BiggerPockets Bookstore and encouraging engagement through social media platforms, where listeners can connect with Amelia and Grace for further insights and support.
Notable Quotes:
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Amelia McGee:
- “[...] small multifamily is actually much less risky than single family homes when you're starting out...” (02:35)
- “I bought it off market through my agent that I've closed a couple deals on.” (06:01)
- “I'm finding all three of them off market, asking them, hey, do you want to sell this property?” (32:16)
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Grace Gudenkopf:
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Tony J. Robinson:
This episode serves as an invaluable guide for rookie investors aspiring to delve into small multifamily real estate. Amelia and Grace's insights on acquisition strategies, financing, due diligence, and property management provide a comprehensive roadmap for building a sustainable and profitable real estate portfolio.