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In the world of real estate investing, the ability to scale efficiently is often the difference between staying small and building long-term wealth. One of the most effective strategies to achieve this is by transitioning from single-family rentals or fix-and-flips to multifamily properties. Investors like Matt Faircloth have successfully built their portfolios by focusing on long-term residential housing and leveraging multifamily properties to generate cash flow and equity growth.
If you're looking to build a sustainable real estate business and secure motivated seller leads, shifting your focus toward multifamily investments may be the game-changer you need.
The Power of Multifamily Investing
1. Scaling Your Portfolio Faster
Owning single-family rentals is a great way to get started, but it can be slow and tedious to manage multiple properties spread across different locations. Multifamily investing, on the other hand, allows investors to purchase dozens or even hundreds of units in a single transaction. With this approach, Faircloth and his team have scaled their portfolio to nearly 2,000 units in multiple states.
2. Efficient Management & On-Site Staff
Managing single-family rentals often requires juggling multiple property managers, contractors, and maintenance teams. With multifamily properties, once you reach a certain threshold (typically around 70-80 units), you can afford on-site property managers and maintenance staff, making operations smoother and more efficient. This "business in a box" approach ensures consistent cash flow and minimizes operational headaches.
3. Stability and Long-Term Cash Flow
Unlike fix-and-flips, which depend on market timing, or wholesaling, which requires continuous deal sourcing, multifamily rentals provide consistent income. Even in economic downturns, rental properties continue to generate cash flow, making them a resilient investment strategy. Faircloth highlights how his rental portfolio helped him navigate the 2008 financial crisis when the fix-and-flip market collapsed.
Making the Transition: From Single-Family to Multifamily
Many investors wonder how to bridge the gap between flipping or renting single-family homes and acquiring multifamily properties. Here’s how you can make the transition:
1. Raising Private Capital
One of the biggest hurdles in acquiring multifamily properties is funding. Unlike single-family homes, which are often bought with personal savings or small bank loans, multifamily deals require substantial capital. This is where raising private money comes in. Faircloth, who authored Raising Private Capital, emphasizes the importance of networking with investors who are looking for passive income opportunities. Many private investors would rather place their money in a cash-flowing multifamily property than continue short-term lending for flips.
2. Finding Off-Market Multifamily Deals
While single-family investors often target distressed homeowners for direct-to-seller deals, most multifamily properties are sold through brokers. Approximately 85% of multifamily transactions are brokered, making it crucial to build relationships with commercial real estate agents. However, there are also opportunities to find motivated sellers among small mom-and-pop landlords who are looking to retire and may be open to seller financing or creative deal structures.
3. Understanding the Numbers
Unlike single-family properties that are valued based on comparable sales, multifamily buildings are valued based on their income potential. This is determined by the Net Operating Income (NOI) and capitalization rate (cap rate). Investors can force appreciation by increasing rents, reducing expenses, and improving property management. For example, if you can increase a property's income by $50,000 annually and the cap rate in that market is 6%, you’ve just added $833,000 in value to the property.
4. Implementing the BRRRR Strategy for Multifamily
The BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy isn’t just for single-family homes. Investors can apply the same principles to multifamily properties by acquiring undervalued assets, improving the units, raising rents, and then refinancing to pull out their initial capital. Faircloth shared a case study where his team bought a distressed 336-unit property for $18.5 million, repositioned it, and later refinanced it at a valuation of $35 million, returning 65% of investor capital while still retaining ownership.
Overcoming Common Multifamily Challenges
1. Managing Tenant Issues and Crime Reduction
One of the biggest concerns when acquiring distressed multifamily properties is dealing with bad tenants. Faircloth suggests implementing a strategic approach that includes adding high-lumen lighting, trimming tree canopies to improve visibility, and even hiring off-duty police officers to patrol the property. These simple actions can help eliminate undesirable tenants and create a safer environment, ultimately attracting quality renters.
2. Building Broker Relationships
Unlike single-family investing, where direct-to-seller marketing is common, multifamily investors must develop strong relationships with brokers to gain access to off-market deals. Brokers often provide early access to listings before they go public, giving investors a competitive edge.
3. Financing Large Deals
Traditional financing for large apartment complexes is different from single-family mortgages. Multifamily investors often work with commercial lenders, syndicate deals with private investors, or use creative financing options such as seller carryback loans.
Getting Started with Multifamily Investing
If you're ready to expand your real estate investing strategy and build a portfolio that generates long-term wealth, here are some actionable steps:
- Educate Yourself – Read books like Raising Private Capital by Matt Faircloth to learn how to fund deals without relying on your own capital.
- Network with Investors and Brokers – Attend real estate conferences, join investment groups, and build relationships with brokers who specialize in multifamily properties.
- Analyze Deals Regularly – Get familiar with underwriting multifamily deals by looking at real-world examples and practicing deal analysis.
- Start Small, Then Scale – Consider starting with a small 10-20 unit building before transitioning to larger apartment complexes.
Additional Insights from Matt Faircloth
1. Learning from the Cash Flow Game
Faircloth credits the Cash Flow Game by Robert Kiyosaki as one of the key tools that helped him understand financial freedom and real estate investing. He even used the game to practice raising private capital by structuring deals with other players. For those looking to introduce their children to financial literacy early, there is even a kids’ version of the game, which Faircloth has played with his own children.
2. Tax Benefits of Multifamily Investing
One of the most significant advantages of multifamily investing is its ability to provide major tax benefits. Depreciation, cost segregation studies, and bonus depreciation can create substantial paper losses that offset taxable income. Many active investors use these tax strategies to reduce their overall tax burden, making multifamily real estate an attractive option for high-income earners looking to shelter their earnings.
3. Raising Private Capital Book & Where to Buy It
Faircloth’s book, Raising Private Capital, is a top-selling guide on how to secure funding for real estate deals using money from private investors. The book is available on Amazon and BiggerPockets. While Amazon offers a standard purchase, BiggerPockets provides exclusive bonus materials valued at over $50, making it a great option for those who want extra resources.
Getting Started with Multifamily Investing
If you're ready to expand your real estate investing strategy and build a portfolio that generates long-term wealth, here are some actionable steps:
- Educate Yourself – Read books like Raising Private Capital by Matt Faircloth to learn how to fund deals without relying on your own capital.
- Network with Investors and Brokers – Attend real estate conferences, join investment groups, and build relationships with brokers who specialize in multifamily properties.
- Analyze Deals Regularly – Get familiar with underwriting multifamily deals by looking at real-world examples and practicing deal analysis.
- Start Small, Then Scale – Consider starting with a small 10-20 unit building before transitioning to larger apartment complexes.
Key Takeaways
Scaling Faster: Multifamily properties allow rapid portfolio growth by acquiring many units in one deal.
Operational Efficiency: On-site staff makes managing 70+ unit properties more streamlined than scattered single-family homes.
Stable Cash Flow: Multifamily investments provide consistent income, even during market downturns.
Private Capital: Raising money from passive investors is key to funding large multifamily deals.
Off-Market Deals: Building relationships with brokers and mom-and-pop owners helps uncover hidden opportunities.
Valuation Based on Income: Multifamily properties are valued by Net Operating Income and cap rate, not comparables.
BRRRR for Multifamily: The Buy, Rehab, Rent, Refinance, Repeat strategy works at scale and increases property value.
Tenant & Crime Solutions: Lighting, visibility, and off-duty police can improve safety and attract better tenants.
Broker Relationships: Strong broker connections are essential for accessing deals before they hit the market.
Creative Financing: Large deals often require syndication, commercial loans, or seller financing options.
Action Steps: Start with education, network with brokers, practice underwriting, and begin with smaller properties.
Financial Literacy Tools: Games like Robert Kiyosaki’s Cash Flow can teach capital raising and deal structuring.
Tax Advantages: Multifamily investing offers depreciation and bonus depreciation to reduce taxable income.
Recommended Resource: Raising Private Capital by Matt Faircloth teaches how to fund deals with investor money.
Build a Scalable and Sustainable Real Estate Business
The transition from single-family to multifamily investing is a strategic move that allows investors to scale their business, generate consistent cash flow, and build long-term wealth. By focusing on raising private capital, forming strong broker relationships, and leveraging value-add strategies, you can position yourself for success in the multifamily space.
If you're ready to take your real estate investing to the next level and capture motivated seller leads, now is the time to start exploring multifamily investments. Whether you’re a seasoned investor or looking to transition from single-family rentals, implementing these strategies can help you scale efficiently and build lasting wealth.
