Economies of scale are VERY important in this business.

It's hard to create economies of scale when you have a small number of units in a market that is away from your other assets.

You can run into different operational issues from construction to your property manager and on to the regional manager..

It increases your risk level and makes it a lot harder to run the assets, especially from a distance.

When you have multiple assets you can attract the right person and share property and leasing managers across properties.

Now, this doesn't mean you should laser focus on one small sub-market.

When you're that specific it may take you years to do a deal.

Be a little opportunistic – trigger that law of the first deal. 

Then, after a few deals, if you can break into a major market where there is enough inventory, people, and tailwind behind the market you can build out from there.

An example of that is one of Nighthawk's recent deals. We wanted to break into the Atlanta market and found a really good deal but it was only 130 units and the manager just wasn't working out.

We found another deal nearby with a very good manager that could oversee them both. Had we not been in the same market with those two assets, we would not have been able to accomplish that.

So if you're investing out of area, try to get scale as quickly as possible.

Find a market where you can establish a scale.

There are some markets that are really great emerging tertiary markets, which are fantastic.

If you're wanting to analyze two deals a week to get your deal flow going, you need to be looking at a market that sustains that kind of deal flow.

For anyone just getting started with multifamily investing…

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