Hey everyone –
I'm looking for a sanity check and some guidance from the more experienced commercial investors here. I've been investing for a number of years with smaller residential multifamily properties and have built a portfolio I'm proud of, but I'm looking forward (with hope in my eyes) to the benefits of scale beyond the 2-4 unit world.
My Current Situation:
- Experience: Own and self-manage a portfolio of small residential multi-family properties.
- Portfolio Value: ~$2.5M+, all current assets are Class A/B in HCOL areas
- Capital Ready to Deploy: I have access to about ~$1M for an acquisition ($800k HELOC on my primary and another $200k+ in cash).
My goal is to transition into larger commercial multifamily properties. I'm comfortable with the fundamentals of property management and analysis on a small scale, but I'm entering a new arena when it comes to financing, sourcing deals, and the brokerage world for assets of this size.
- I have avoided working with RE agents as much as possible within residential MF, but I assume that this approach is less effective all-around in commercial?
- My primary concern is whether my ~$1M is enough to be taken seriously. If I walk into a commercial broker's office, are they going to see me as a serious buyer, or am I still considered small potatoes in this space?
- What's the best way to approach and build relationships with commercial brokers? Should I have a specific "buy box" (target location, cap rate, unit count) fully defined before my first call, or is it more of an introductory conversation?
- What are the biggest differences or "gotchas" I should anticipate when moving from residential loans to commercial/agency debt? Are local banks or credit unions the best starting point for a first-time commercial borrower at this level?
I've got the operational experience and the drive, but I want to ensure I'm starting this next chapter intelligently (or alternatively, hearing the hard truth and sticking with residential deals for some time longer).
Appreciate any and all insights from those who have made this leap before. Thanks!
Punching Above My Weight? Looking to level up to larger MF with $1M+ cash/equity available and seeking a reality check.
byu/IllustriousTip9233 inrealestateinvesting
Posted by IllustriousTip9233
4 Comments
I have very similar stats to this and just started contemplating the same question. I’ve been doing really well with small MFH properties, but conventional lending is getting much more difficult and I was starting to consider commercial.
How many doors do you have right now in your portfolio?
Start with loop net
That’s a great base from which to start. One of the best properties we’ve ever bought was a 36 unit portfolio for about 1.97M and 600k down. Brokers will certainly take you seriously if you have a clear buy box.
I’d recommend researching your market’s brokers and setting up in-person appointments. A handshake goes a long way.
Also consider building relationships with local credit unions and local banks—they’ll be the ones that will give you the best terms and rates for properties in the 1-5M range and can be great partners long term
Just me, I wouldn’t put up the house for such increase in scale. How many units do you have in control right now? A 4 unit vs a 20 unit are completely different ball games. With rates being so high right now, I can’t see any money being made, but again the right deal can always pan out. What interest rate is the HELOC at? BC even at Prime +0.5% would get you 8% and you don’t want to get stuck with your dick in your hand and not be able to refinance and get stuck with negative leverage.
IMO I would keep investing in residential and scale up during a lower interest rate environment. But again I’m just a person on Reddit and not a professional lmao.