Making Multifamily Money - Jan 17th 2024

Real Estate Updates

I own 51 stabilized units. 49 out of 51 units are rented out and the majority of the units are renovated.

Now the question is, what is my weekly time commitment managing these 51 units?  Since my portfolio is stabilized, I average 1-2 hours per week to be honest.  Most of the units are rented out.  I only have to do normal maintenance since I own C-class apartments built in the 1970s.  If 1 tenant moves out and that unit was never renovated before then I renovate it exactly the same as my other units.  All I need is a total price and a breakdown of what needs to be done then I will approve it.

Let me breakdown my weekly time commitment during different phases of owning real estate

Direct mail marketing phase averages 10-15 hours per week from sending 300 letters per month.  This includes preparing leads and coordinating letters to be sent.  You have to talk to owners to get financial information about the property (T-12 and rent roll).  Afterwards, you need to underwrite these deals yourself and with lenders to see what offer price makes sense. Once you have an offer price (usually present 2 offers - 1 conventional financing and 1 for creative financing) then you submit letters of intent.  Back and forth negotiations and so on. 

Acquisition phase (financing, due diligence, value add strategy, closing, etc) averages 25-30 hours per week.  The acquisition phase is the busiest phase.  You need to give the lender all financial and legal documents.  Coordinate physical due diligence and plan to be on-site for the full apartment inspections.  You need to figure out the value add strategy and prepare your money.  If you are raising money, it will take 40 hours per week at least.  I didn’t raise money so my time commitment was less.  Acquisition phase lasts about 60-90 days depending on how fast you are able to close.

Stabilization phase averages 10-20 hours per week.  This is when you need to work with your new property manager to onboard the new apartment complex.  Change utilities (gas, water, electricity, etc) to your LLC name.  Give your property manager a rent roll and help them set up their management software (i.e - rent manager or buildium).  At this point you need to coordinate your general contractor to start renovations.  Renovate 1 “test” unit and if you like it then copy and paste to all other units for economies of scale.  Tenants will churn.  Tenants will move out from renovations and tenants will move in until all desired units are rented out.  Stabilization phase took me 1.5-2 years.

Cash flow phase averages 1-2 hours per week.  This is when all the units have been renovated.  All tenants have been churned and upgraded.  Not much repairs and maintenance going on since most units were renovated.  This is when you cash flow extremely well and can sit back and relax.  You still have to keep on top of your property managers and be responsive to their needs.  It’s good to check in periodically with a brief phone call or quick text message to keep them on their toes.

What I Learned

To optimize sleep, you need to optimize sunlight exposure.  To set your sleep cycle, get as much sunlight as possible before 9 am and limit any light exposure after 8 pm.  I leave at 6:30 am to commute.  I turn on as many lights as possible first thing in the morning and open my blinds.  As I charge my Tesla, I stand outside to get some light exposure.  After 8 pm, I turn off most of my overhead lights to limit light exposure.  Dim down the laptop and tv and only have a small desk lamp on.  Your home environment should simulate the outside environment.  Any light exposure after 10 pm reduces your melatonin (sleepiness molecule) significantly.

Weekly Self-Reflections

I am about 3 years away from FAT FIRE at 36 years old.  This is what I need to take care of before considering leaving my W-2.

• Build up emergency reserve fund of at least $150,000 in cash sitting in the bank

• Finish max funding my indexed universal and variable universal life policies (~$250,000)

• Pay off my Tesla car loan of $47,000

• Pay off $90,000 line of credit at 2.5% interest (not as urgent since such a low interest rate)

• Buy another primary residence or move into one of my existing single family homes

Once this is all done, I can consider transitioning into part time work then eventually full FAT FIRE.

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