How We Took Down Our First Multi-Family Deal (94 Units!)

Most of the time, careful planning is a good thing. It is smart to develop a strategy first, and then take action on your goals. But the one situation in which it might be better to just put the blinders on and jump in? Multi-family real estate investment.

Pili and Jason Yarusi have a background in running restaurants and bars as well as experience in the family construction business. So when they were starting a family of their own and wanted to get out of the grind, real estate investment seemed like the perfect fit. They started doing capital-intensive flips and had success with out-of-state duplexes, but soon realized that flipping was a job that would have to be repeated time and time again. If the Yarusis wanted to achieve cashflow, apartment building investing was the way to go.

After doing a lot of reading and reaching out to mentors with multi-family experience, Pili and Jason found a quality property management company in Kentucky, and made use of the firm’s expertise to find a deal that fit their criteria. The Yarusis sold investors on their background of success in other businesses, and raised the $800K necessary to close on a 94-unit property. Today they share how their willingness to jump in without a clearly defined strategy paid off in the end and how they overcame the mindset challenges around multi-family investing. Listen in for Pili and Jason’s advice about reaching out to mentors and learning as you go.

Jason Yarusi – Key Takeaways

[1:39] The circumstances that motivated Pili and Jason to invest in real estate

Ran restaurants, bars
Family construction business ‘gratifying, but grueling’
Pili pregnant with first child

[4:25] Pili and Jason’s start in-house flipping

Capital-intensive flips
No strategy going in (let idea grow)
Also purchased two out-of-state duplexes on gut feeling
Gave footprint (right questions, team members and processes)

[7:40] Why Pili and Jason shifted to multi-family

Realization that one single-family vacancy = 100% vacancy
Five vacancies in building with 100 doors = 95% occupancy
Multi-family income means you can afford team (on-site manager, maintenance, etc.)
Experience with duplexes taught them to vet property management company

[10:49] How the Yarusis moved forward once the decision to do multi-family was made

Jason educated himself, sought mentors
Utilized resources like BiggerPockets
Looked for deals in favorable out-of-state markets

[12:50] The mindset challenges around multi-family

Numbers seem scary (large = hard)
Concerns about raising capital

[14:09] How to overcome mindset challenges

Surround yourself with team, mentors
Meet people at networking events, REIA meetings
Reach out to friends of friends, other investors
The more you talk, the more it seems doable

[16:28] The hurdle of raising capital

Challenging due to lack of experience
Sold people on background of success in other businesses

[18:24] How Pili and Jason chose the Kentucky market

Looking for population growth, job growth/diversity
Familiar with Kentucky (friends, sister there)
Found property management company to offer feedback
Discovered property that fit criteria

[21:58] The Yarusi’s outlook when it was time to sign the contract

‘Game time’
Work toward closing
Remain conservative (ensure return for investors)

[23:36] How much capital Pili and Jason raised for their first multi-family deal

$800K
Verbal commitments prior to contract
Didn’t start due diligence period until written notice of records received (extra 30 days)
One investor pulled out 20 days before closing
Scrambled to fill in gap

[25:27] How the 94-unit property is performing

Very well, achieved rent increases
Modest increase for good tenants
Turnovers up to market price

[26:45] The lessons Pili and Jason learned in their first multi-family deal

Walk every unit on morning of closing
Talk to everyone (don’t leave out any high-level investors)

[28:34] What’s next for the Yarusis

47- and 57-unit in Kentucky
Bigger CapEx than first property

[29:56] Pili and Jason’s advice for aspiring apartment building investors

If multi-family is your endgame, start now
Consider the advantages of multi-family
- Easier to secure loan
- Can afford team
- Vacancies less debilitating