Categories
Real Estate

6 Challenges Multifamily Property Investors Face

A multifamily property is any residential property with more than one housing unit. Duplexes, townhouses, condominiums, and apartment complexes are all multifamily properties.

Investing in a multifamily property is one of the best ways to dip your toes in real estate and property management. That’s because multifamily properties offer many benefits, such as steady cash flow, lowered risk, passive income, tax benefits, and valuation potential.

Multifamily-Apartment

 

That said, like any other investment channel, it has its pitfalls. These are some of the challenges facing the real estate industry in 2021:

1. Management intensity

You do have the option of outsourcing management for a multifamily property. However, looking after such property is so intensive that it occasionally requires your personal intervention.

For instance, you will deal with multiple tenants, leases, maintenance jobs, tax issues, and even different payment options. Each tenant has a unique way of handling their lease and communicates differently.

Some tenants will treat the property with respect, while others will tear up the place, leaving you with hefty repair bills. You can avoid this by screening potential clients to ensure you lease the property to a responsible tenant.

Also, if one thing goes wrong in one unit, it will likely go wrong for other units as well. Such a situation translates to higher maintenance and repair bills.

Compare this to if you were dealing with a single-tenant leasing a 15,000 sq. ft. office space. Despite the size, it’s still just one tenant. Unlike residential properties, maintenance costs and obligations fall to the tenant and not the owner, making management less intensive.

On the flip side, dealing with a multifamily unit has its perks compared to managing separate single-family units. It is easy to hire one on- or off-site manager to oversee the complex with a multifamily property. Whereas with multiple rentals, you’d need several managers to do the same job.

2. Cost

It is an understatement to say the price for a multifamily property is hefty. In fact, this is one of the main challenges of property development. This causes many real estate investors to shy away from investing in this property type.

Investing in a multifamily property is also challenging for first-time investors who may not have the required amounts to make the down payment.

For example, a two-unit apartment in New York or San Francisco costs more than one million dollars. As an investor, banks will require you to raise at least 20% for a down payment. This amount translates to $200,000, which is an amount a new investor may not have.

The scenario is more challenging in a bull market because new investors compete against seasoned investors for the same property.

An advantage to this is that you are more likely to get approval for a multifamily unit loan rather than a single-family home. That’s because banks view multifamily properties as low risk.

If you are a first-time investor, you can qualify for an FHA loan if you opt to live in one unit within the multifamily property, as you rent out the rest. FHA loans require a small down payment compared to other loans.

If the rental income from the multifamily loan is enough to pay for the mortgage that means you will live rent-free. However, you might need to live at the property for at least one year for this to apply.

3. Competition

As mentioned, multifamily properties attract seasoned investors. The result is serious market competition, which shuts out budding investors.

Experienced investors have an advantage over the others as they can pay for these properties in cash. Moreover, they have the industry connections to effortlessly secure funding.

These investors are also more than willing to waive purchase contingencies like financing contingencies or paying for inspections. Combined, these factors make seasoned investors more appealing to sellers than new and inexperienced ones.

New investors should partner with experienced investors when they start investing in multifamily homes to stand a greater chance. The partnership offers an opportunity for a new investor to learn the ropes.

4. Regulations

Landlords for single-family units already deal with strict regulations, but they are worse for multifamily properties. Breaking any codes results in hefty fines and penalties.

Because of real estate issues during COVID, the federal government made some rules and regulations you must enforce, including social distancing rules to stop the pandemic.

Further, there are mandatory design standards, utility cost computation rules, and the federal government has regulations governing multifamily communities.

To avoid falling foul of these rules and regulations, ensure you research the federal and state laws and abide by them religiously.

5. Vacancies

It is not uncommon for multifamily properties to have vacancies for weeks or months at a time. If you are still paying a mortgage on the property, you will have to cover that cost on your own.

Renting out both sides of the complex ensures that you still have a rent collection of about 90%. With a single-family unit, months-long vacancies are costly and offer a collection rate of about 80%. If this continues for a couple of months, it will affect your overall profits.

6. Frequent Turnover

Generally, tenants in such properties are more temporary than other real estate types. Multifamily property tenants are typically first-time renters, and with time, they’ll want to move onto more family-friendly properties.

With an enlarged family, they’ll need a bigger space, a yard for their kids and dogs to play in, and a garage for their multiple cars.

Because of that, the average length for tenancy in a multifamily home is one-third of what you’d expect at a single-family property. So, if you’re looking for tenants to stay a little longer, a multifamily property is not the right fit for you.

You can also avoid having too many vacancies by offering a generally pleasant living experience.

Final word

You may be wondering if multifamily properties are the right real estate investment to try out. Like any other real estate investment, this type of property investment is lucrative. That said, it comes with its own set of cons, like any other type of real estate.

The most prevalent real estate challenges of 2021 you will face include hefty initial investment, high maintenance requirements, and frequent tenant turnover, forcing you to search for new tenants frequently.

That said, it’s up to you to decide whether to invest in them. When you address most of the challenges listed above, the multifamily property is one of the best investments.

Categories
Podcast

How Time Is More Valuable Than Money And How To Use It To Negotiate With Dr. Gurpreet Padda

So the big tax question is this: how do wealthy people keep their money working for them when selling their business, real estate, or other highly-appreciated assets, without paying hundreds of thousands to millions of dollars in tax? What if we, as business and real estate owners who have poured blood, sweat, and tears to growing our wealth, and who didn’t hire expensive tax attorneys and CPAs to map out an exit strategy, knew their secrets? Instead of recreating the wheel, why can’t we just model the way they deferred 30 to 50% in tax, paid off debt, funded their next business stream, and most importantly, leave a financial legacy to give to the causes we believe in most? What if their secrets weren’t complicated at all, and you just need a guide who is a few steps ahead of you? That is the question, and this podcast will give you the answers. My name is Brett Swarts, and welcome to “Capital Gains Tax Solutions.” Welcome to the “Capital Gains Tax Solutions Podcast,” where we believe most high net worth individuals and those who help them, they struggle with capital gains tax deferral options, not having a clear plan is the enemy and using a proven tax deferral strategy, such as the deferred sales trust, or cost segregation, or 1031 exchange when it makes sense is the best way for you to grow your wealth. Hey, I’m your host Brett Swarts. In each episode, I am joined by some of the best real estate minds, financial minds and wealth minds in the world where they share their ideas, deal stories and inspiration. So together we can make complex tax deferral strategies simple and passive income plans achievable. I’m excited about our next guest, he’s a physician by trade, but he’s had real estate in his bones, in his blood since a young age of 14, he’s gonna share that part of his story, and he wants to… He’s on a mission to help create and preserve wealth for himself and his family and his partners, and also help people to understand real estate as a whole.

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Categories
Podcast

Discovering Multifamily- Passive Investing As A Full-Time MD With Gurpreet Padda

On this episode of Discovering Multifamily, Gupreet Padda joins us as the Founder of Red Pill Kapital and also a full-time physician. We discuss his experience all aspects of real estate investing, starting his remodeling company when he was just 14 years old and now how he helps his fellow doctors attain financial independence and practice medicine on their own terms.

Podcast Links:

ITunes: https://podcasts.apple.com/us/podcast/discovering-multifamily/id1506820688

Website: www.redknightproperties.com/media

YouTube: https://youtu.be/_eUjDlRNC68

Spotify: https://lnkd.in/gfcVc3p

Links/Shout-Outs Mentioned:

www.redknightproperties.com – Red Knight Properties Website

https://www.linkedin.com/in/gurpreet-padda – Gurpreet Padda LinkedIn

https://redpillkapital.com – Red Pill Kapital

Categories
Real Estate

CallumConnects Podcast – Gurpreet Padda

Gurpreet Padda – My biggest hurdle as an entrepreneur.

Welcome to “CallumConnects.” Five-minute entrepreneurial inspiration for your day. Joining us today on “CallumConnects” micro-podcast is Gurpreet Padda. Dr. Padda is a serial entrepreneur who started rehabbing houses and repairing diesel engines while in high school, before entering medical school at the age of 17. His secret power is his ADD and curiosity about how things work.

– A hurdle I’ve faced as an entrepreneur is also my greatest strength. I have horrendous ADD and I have shiny object syndrome, and I’ve had that ever since I can remember. I started a company when I was probably 14 years old while I was in high school. And I loved science but I loved taking things apart and I loved construction as well. So I ended up doing a construction company and then starting a company that fixed diesel engines, and I did this all while I was in high school. But I was so curious about anatomy and physiology that I went to medical school. I got into medical school when I was 17 and then I ended up graduating when I was, it was a six-year program, so I graduated when I was 22 or 23 years old. I’ve got an incredible curiosity about how things work and that often leads to a lot of nonsensical learning or appearingly nonsensical learning. So I end up getting curious about something and doing a deep dive and learning everything that there is to know about it and then I get distracted by my ADD, which says, hey, this is something interesting over here. And what that does is it allows me to learn and deep dive on things that appear non-related and then my ADD interrupts me and I end up jumping to another topic eventually. And often I’m able to reconnect a variety of different topics. So what I ended up learning from this is essentially use that superhero strength of ADD to learn and to move from topic to topic, but then use the overarching entrepreneurial mindset to give it application, to come up with a cohesive theory and a business model of how to get things done. One of the coolest books that I’ve ever read is “Who Not How.” And so I’ve been able to use some of those concepts more and more, which is not necessarily doing a deep dive into every single aspect of every single thing, but finding experts that already know that and engaging them, learning from them. And that way I’m not spending forever learning about a topic that I had no interest in. I ended up starting an entire restaurant company because I was curious about the food production system. I ended up with five restaurants before I knew it. And I was interested in fermentation and ended up starting a brewery. So this can really get out of control. And I’ve found that in order to channel that correctly and do it the right way, I have to be able to bring other people on board who will keep me in check. I have an amazing business partner that helps keep me in check. And I think that the ability to rely on others to kind of self-monitor our own behavior, that you trust these others, is really valuable. The ADD permits rapid reiteration of concepts. And it also allows you to abandon concepts that are less than ideal, but only within the context of getting assistance from other people. I don’t think that if I had other great people around me, I would be as successful.

– If you have enjoyed today’s show or got any value from today or previous episodes of “CallumConnects,” do please subscribe and leave a review. It means the world to our guests to be able to see what they’re sharing has led to your learning.

Categories
Real Estate

The Journey of a Physician and Real Estate Investor with Gurpreet Padda, MD

This week’s episode is the first in a two-part series that features Gurpreet Padda, MD. He is a private practice physician out of St. Louis, Missouri, who runs Reversing Diabetes MD and Padda Institute Center for Interventional Pain Management. Dr. Padda also runs Red Pill Kapital, which is a real estate investment development and management company. He is an advocate for educating private practice physicians on passive wealth strategies through owning real estate.

In this episode, we talk about…

[5:05] Getting into real estate as a teenager

[6:08] The desire to have a life outside of the hospital

[9:05] Characteristics that are more relevant than your education when it comes to owning a business

[10:30] The applicability of medical training to real estate

[11:09] How Dr. Padda decided on his medical specialty

[12:39] How capital flow impacts our health as well as the real estate market

[15:17] The importance of investing in real estate for your practice(s)

[16:31] How to decide where to purchase real estate for practice locations based on patient perspectives

[17:33] The effect of the pandemic on retail real estate

[21:28] Selling restaurants before the pandemic began

[24:14] Educating clinicians on creative passive cash flow and equity growth

[25:22] Why physicians tend to make financial decisions based on narcissism

Links to resources:

Reversing Diabetes MD: https://reversingdiabetes.com

Padda Institute Center for Interventional Pain Management: https://painmd.tv

Red Pill Kapital: https://redpillkapital.com

Categories
Real Estate

Dr. Gurpreet Padda: Creating Wealth with Real Estate for Healthcare Professionals

OVERVIEW:

Jason A. Duprat, Entrepreneur, Healthcare Practitioner and Host of the Healthcare Entrepreneur Academy podcast speaks with Dr. Gurpreet Padda, MD, MBA and entrepreneur. Dr. Padda is an avid real estate investor. He shares the lessons he has learned as an early entrepreneur and also provides tips for healthcare professionals interested in creating wealth through real estate investment.

EPISODE HIGHLIGHTS:

Dr. Padda grew up in India during war and uncertainty. He moved to the US when he was 8 and started his first business at the age of 10 selling cards door-to-door. At 16, he had a team of 30-year-old men working for him. He states – I was an entrepreneur before I went into medicine. Dr. Padda made it through medical school by hustling, which he did through real estate auctions. During his first year of residency, Dr. Padda rehabbed an eight-unit building in Chicago. After his residency, he went into pediatric anesthesiology for heart, liver and lung transplants. His medical path also included addiction and interventional pain management. Dr. Padda’s practice has 7 locations and he provides $1.5 million in free care. “Option” is when you purchase a sale contract with an option to buy. You have three months to decide if you want to buy and the price is held at the same level. If you decide not to buy, you’re usually only out $100. Dr. Padda uses option contracts, where he’s looking at zoning and municipal plans. He researches what’s being planned for development in the area. Option contracts are low risk and offer a high reward. There are two types of wholesaling. “Ugly” includes houses below $80k requiring a lot of work. “Pretty” is when someone wants to sell and is having a hard time finding a buyer. This option provides great margins and it’s the one Dr. Padda recommends physicians to use. Dr. Padda also recommends going big with real estate vs buying single units. Cap rate is the net operating income divided by the price. Become a passive investor with somebody first, watch and learn from their mistakes, and then become an active investor. To get started in real estate investing, talk with people you know. Work referrals through friends and contacts. Don’t blindly trust people on the internet.

3 KEY POINTS:

The most valuable resource on earth is not money but time. You have to look at both active and passive methods of gaining wealth. Passive income is what people pay you while you’re sleeping. The biggest impediments to becoming wealthy are ourselves and our taxes. The number one impediment is our personal wealth operating system and how we think about money.

TWEETABLE QUOTES:

“Time is like a water hose and you’re watering a particular concept or project. The more water and fertilizer you apply to it, the better it grows.” – Dr. Gurpreet Padda

“I think entrepreneurship is the ability to ask questions of yourself, realizing you don’t know, and then trying to figure out the answer.” – Dr. Gurpreet Padda

“Leverage what you know.” – Dr. Gurpreet Padda

RESOURCES:

Red Pill Kapital: https://redpillkapital.com/

Dr. Gurpreet Padda’s LinkedIn: https://www.linkedin.com/in/gurpreet-padda

Michael Blank podcast: https://themichaelblank.com/podcasts/

Adam Adams podcast: https://podcasts.apple.com/us/podcast/creative-real-estate-podcast/id1285094279

Categories
Pain Doctor Podcast

The AviationZorro Podcast – Financial Well-being and Awareness with Dr. Gurpreet Padda

Aviation United by AviationZorro chatted with Doctor and Red PIll Kapital (Commerical Real Estate Investment, development, and management company, with a focus on creating asymmetric returns for its investors) Founder Dr. Gurpreet Padda. The podcast explains Dr. Gurpreet’s background, What is Financial Well-being/Awareness, Financial difficulty and the impact on Mental-Health and Well-being, Why we love to spend money, the cost of training to become an Aviation Professional compared to the return in that investment, is it advisable to have a financial advisor, how to manage money, An overview of Red Pill Kapital.com. Dr. Gurpreet has offered a Complimentary course worth $975 Dollars to listeners of this podcast. All you have to do is, listen to the podcast, reach out to Dr. Padda and let his team know you listened to the AviationZorro Podcast with Dr. Gurpreet Padda. https://redpillkapital.com/ info@redpillk.comDisclaimer: This podcast and website represent the opinions of AviationZorro and our guests to the show and website.

The content here should not be taken as medical advice and is for informational purposes only, and because each person is so unique, please consult your healthcare professional for any medical questions or Aviation/Aerospace Employer, Regulator, an organization for questions related to you. Views and opinions expressed in the podcast and website are our own and do not represent that of our places of work. While we make every effort to ensure that the information we are sharing is accurate, we welcome any comments, suggestions, or corrections of errors. Privacy is of the utmost importance to us. This website or podcast should not be used in any legal capacity. No guarantee is given regarding the accuracy of any statements or opinions made on the podcast or website. In no way does listening, reading, emailing, or interacting on social media with our content establish a coaching session, employment interview, wellbeing advice, employment advice, the doctor-patient relationship. AviationZorro is an Ltd company based in Dublin, Ireland. If you find any errors in any of the content of his podcasts or blogs, please send a message to contactus@aviationzorro.com. This podcast is owned by “AviationZorro LTD” If at any time you want to play or stop the podcast, it is at your own discretion. The podcast may contain conversation or opinions you may find unsuitable or against your opinions or beliefs, if you feel you may be uncomfortable, stressed, anxious, worried, concerned, upset, insulted by any of the podcasts, we recommend you do not listen to the podcast.