When investing in multifamily properties, or any investments, we need to take emotions out of the equation and really look at the data and numbers to make sound and smart investments. I talked with Chris Larsen who does just that. He has a background as an engineer, which is very helpful when he analyzes new markets and decides which markets will be profitable now and in the long term. Chris is all about the data behind a potential deal. For years, he’s worked hard to rely on metric points to analyze a market and remove his emotions from his decisions. Today, he has a $225 million-dollar real estate portfolio and an investor membership club called Next-Level Income as well as a book by the same name.
Chris started out in engineering and was also a professional racer, but these didn’t resonate with him. At age twenty-one he was day-trading stocks, but that proved to be far too volatile and stressful, when he was looking for something more stable and steady. He decided to look into real estate investing. Initially he wanted to own enough properties to have at least ten thousand dollars a month coming in. He felt this would give him the flexibility and freedom he desired. He started out investing in single family rentals, but felt the returns were too low and it took too long to see those returns. He then became a passive investor, moving into multifamily units.
Chris likes multifamily units for the demographics as well as the efficiencies he can achieve on them. When looking at different multifamily investments, because Chris is an engineer, he has over two dozen data points that he looks at.
Some of his favorite data points include:
- Net population: You want to invest where the people are moving to, not where they are moving away from. One quick tip he uses to find this out is to go to the United Van Lines website and look at the trends. Is there a large percentage of people moving to a certain part of the country or a certain city? You want to invest there. This data point is not perfect, in fact it’s pretty topical. BUT it’s a great starting place.
- Diversity of employment: You want to invest in areas that have many successful employers. Take a look at the top ten employers in the area. Are they stable? Do they have good leadership? Are they in a growth trend? If you only have one or two employers in that particular market, and those employers tank, you could lose a lot of renters, and your multifamily investments are not going to be stable.
- Tenant employers: Who do your renters work for? Are they in the service industry? Are they white collar workers? This is important so you can gauge the risk when investing. If your renters can’t pay on time, or at all, it will be hard for your multifamily investment to be profitable.
TIPS FOR SUCCESS
Chris has always trusted the numbers, and at this point, he feels he can trust his intuition as well. Intuition when investing is something we should all be paying attention to, especially if you’ve been in the business a while, as well as the numbers.
When it comes to raising money for your investment, always over-raise. Inevitably, an investor is going to back out or something will come up within their personal lives that stops them from investing the money they said they would. We’ve had all kinds of things happen to our investors, including family emergencies, illness, and even crime that stopped them from investing with us. The bottom line: always over-raise so you don’t end up short when it’s time to close on your property.
When it comes to working with people, you want them to know, like, and trust you. Really build that network and community. As always, the relationships you build are key to being successful in the real estate investing world. You need great communication, honesty, and always put investors first. Always be thinking about your investors first. ask yourself if this is better for investors versus asking if it’s better for you. Investors first, yourself second and everything else will fall into place.
The last tip is that you should have some kind of membership platform to work from. Somewhere people can learn, read articles, see updates on their deals, and communicate. Rather than have every investor or buyer calling you multiple times to check on their deal, they can look at the platform to see where it’s at. It’s nice to have one place that everyone can check for education and mentoring. You post the info one time, and everybody that is a member can access it. This is exactly what Chris’ Next-Level Income is. He is able to educate, mentor, and inform his investors all in one spot.
When big investments and lots of money are involved, it can be hard to take our emotions out of the equation. I recommend you take your emotions out of the equation and really just look at the analytical side of things. Study the metrics, study the numbers. Really use your data points and get an excellent feel for your potential market investments. Look at the potential demographic. Check out where the moving vans are heading. You want to protect your portfolio and really help it grow and sustain that growth. Use the metrics, and a healthy dose of intuition, and you’ll be well on your way to successful and profitable real estate investments.
Don’t know where to start? We can help you. Sign up for coaching at JoshCantwellCoaching.com.
Listen to the full episode here.
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