9 ways investing in multifamily real estate is like having a huge family
There are striking similarities between investing in multifamily real estate and having a huge family, which can be both challenging and rewarding.
I remember vividly the feelings of an absolute joy and fear when my first child was born. I was ecstatic to usher our first baby into the world (actually, my wife did the ushering, I just cowered in the corner), and yet, a feeling of uncertainty and panic set in immediately. I wondered: Is this how all parents feel? Will this feeling be perpetual?
These feelings of fear began to dissipate as our family grew, but we never got used to the process. Every single pregnancy and birth was unique! Amazingly, these feelings were rekindled when Jake and I were pursuing our first multifamily deal together. Excitement and wanting to puke rushed back to the forefront!
I would like to share with you the similarities that I have witnessed between having a family (especially a large one) and investing in a multifamily real estate.
Here are my nine similarities:
1. Each child and investment is unique
All of my children have their own unique personality, as with all of our deals. Every single deal has had its own host of problems, solutions and rewards (or failures).
Here are just a few of the problems:
– Non-paying tenants
– Tons of deferred maintenance
– Higher physical occupancy than economic occupancy
– Lower cash flow realized
– No systems in place when take over occurs
– Partner in fighting
– Overpriced deal
Here are a few of the solutions:
– Implemented our management systems once we learned them
– Owner financing to increase returns
– Evicted non-paying tenants
– Cleaned up the property and handled all deferred maintenance
The amazing thing about having children and real estate is that each child and deal brings new opportunities, is unique, and allows you to grow as a person. Bottom line: No two deals are the same, each has its own inherent challenges and rewards.
2. The majority of people will think you’re crazy
Try telling a total stranger that you have six kids, and I bet you will hear some wide-ranging responses. Unfortunately, most people think you are a bit crazy. I fell in that camp of sentiment before I started to grow my family, and I can guarantee you that most people with whom you share your real estate aspirations will think you are a bit different as well.
Once you start acquiring assets (or kids), you realize that it can be done, and it is rewarding and satisfying, albeit challenging. Name one thing in life that is worth doing that is not extremely difficult. Kids and multifamily fall into that category for me.
3. You will become a better parent and investor with each child and deal
I remember when my first child was born and the fear I felt when I thought of driving home with this new little person in the car. Weren’t they supposed to give me a manual on how to raise a child? The only way to become a good parent is to enroll in the school of hard knocks and learn from doing.
When you buy your first deal, you will NEVER be prepared for every situation (bed bugs, dead tenant, failed septic systems). Every problem appears to be monumental until you figure out how to solve it, and then it falls off your radar.
As your experience in investing and parenting grow, you will be able to handle more and notice that patterns emerge. Jake and I witnessed our pattern of attracting “Mom & Pop” sellers, and our knowledge, experience and success grew with each acquisition.
4. You will never be ready, the time is never right
The person who tries to time the market or time the birth of a child is usually the one who ends up childless or deal-less (is that a word?). Seriously, the time will never be perfect for each action you take. I often tell the story of Jake buying a home during our search for our first deal, putting off the partnership for over a year. We started back years ago when it was easier to find a deal, but it was harder to secure capital for the deal. Now, the opposite is true.
This is also true in my personal situation with my family. When I found out that we were pregnant with our sixth child, these feelings of “not the right time” came flooding back. They quickly subsided once the baby was born and became part of the Barbaro household.
5. Parenting and investing are team sports
Jake and I are constantly hammering the benefits and necessity of building and nurturing a team for your real estate business. Real estate is a team sport, and the stronger your team is, the better you will perform.
I have the same feelings when it comes to parenting. It is always nice to lean on family members to lend a helping hand at times and belong to groups and communities, such as our church and homeschool group.
6. Incredible investment in time and capital
This is an obvious example for any parents. My monthly food bill is starting to eclipse my monthly mortgage payments, and 20 percent down on a $5 million deal is no small feat. Do you want your family and investments to flourish? There is nothing passive when it comes to raising a family and growing your cash flow.
7. You need to continue to invest in both endeavors
In real estate, we reinvest back into the asset by creating a capital expenditure account and contributing capital to it. If you do not allocate for capital expenditures and perform routine maintenance, then your asset will decay, and you will become the next Mom & Pop, and Jake & Gino will be there ready to buy at a discount. If you decide to neglect your family, much worse things will begin to manifest. Please spend time with your kids, be present at every opportunity and always offer encouragement and love. (And oh, that’s a tough one. You can always love a child, but not love their actions. Differentiate between the two).
8. Constant learning to become better
The one characteristic that differentiates success from failure is that successful people are constantly learning and growing from their experiences. I have been blessed to have created Jake & Gino, and I have learned more from our students than they have learned from us. They have brought a different perspective and have pushed me to research and learn the business even more. As parents, it is our duty to learn more about parenting, nutrition, health and what is best for our family.
9. Amazing return on enjoyment (ROE)
Although at times, it appears that the enjoyment in real estate is little and far between, there are so many moments that bring joy and happiness. Kids are exactly the same. At the moment, you want to kill them. Five minutes later, they are the cutest things on the planet and you quickly forget that they scratched your car with their bike! Please savor the moments of enjoyment and focus on the good times. It is amazing when you put your focus in the correct area, that area will grow, and you will lead a much happier life.
There is one huge difference
Real estate is designed to put money in your pocket while children have been designed to take money out of your pocket. I am now reaching the inflection point in which my children are approaching the age where they can start working for me and contributing to the monthly burn rate. Either way, I would NEVER change my decision to have a large family, and I hope to inspire you to add to yours!
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
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