Find It, Fund It, Fix It, and Flip It. This is the Myers Method for investing in multifamily housing. First, you find a lead and turn it into a deal with a purchase sale contract. Then, you develop a business plan and team to secure the necessary funding. With those steps completed, it’s time to begin executing the business plan!
Fix It:
The most significant relationship that you will have during this phase is with your property manager. And by the time you have begun the Fix It phase, you need to have secured an excellent property manager. Not only should you have a good relationship with the property manager, but you need to ensure that your interests, both in terms of contract and intention, match up. As you execute your business plan, you must establish open and frequent communication about the performance of the property and tenants.
Regarding maintenance and renovations, make sure that there are effective modes of communication between residents and the property manager. There should be protocols and procedures in place for both residents and property managers, so that all parties feel like the property is operating like it is supposed to.
Since renovations can be extremely expensive, you want to make sure that you fully understand the issues at hand so that you can make a good decision about spending. Replacing that expense or replenishing it dollar for dollar may take months, so you’ll want to be involved in the process. Spend money where you can increase the rent and preserve the property.
While some fixes may not increase the rent, they will go a long way towards preserving the property. The trick is figuring out where best to spend money on the fixes and preservation. For instance, for basic cosmetic updates such as making a door look better, you can go with a fresh paint job instead of replacing the door entirely. Update your lighting fixtures, upgrade countertops, and refinish your floors. These cosmetic changes can increase rent by making the property look much nicer and can be a more frugal option for you.
Most importantly, stick to the business plan that you created before you invested in the property. You made it in detail and put a lot of thought into it, so just because you see potential renovation opportunities here and there does not mean that you should abandon your business plan. If the conditions are mostly the same and your assumptions were mostly correct, then stay true to your plan. It can be helpful to make sure that your property manager sees your business plan before closing so that you can work together to make sure that it gets implemented and you share the same vision. If you need to tweak some details, you can also work together to do that and move the plan forward.
To make sure that your business plan is being implemented appropriately, have weekly performance reviews. Consistently look at invested distributions and be sure that you are communicating with investors and partners to let them know what’s going on, and that they are getting paid. Carefully manage the renovations to make sure spending doesn’t get out of hand. Keep occupancy rates as high as you can, and if you do have any vacant units, you can start by renovating those so that you can eventually get the highest occupancy possible. But don’t renovate at a pace that might adversely affect your occupancy rates, which means always having a unit ready to show.
Lastly, plan consistent trips to the property at different times of day to make sure that everything matches up with the reports you are receiving from the property manager. Be sure you consistently touch base with the property manager. This allows you to receive updates and shows that you care about what is happening with your investment property.
Flip It:
So, you’ve done it! You have followed the Myers Method—you FOUND it, you FUNDED it, and you FIXED it—and now it is time to FLIP it.
Here are some reasons you might want to flip:
- Cash-Out: This one is my favorite and one of the reasons I think multifamily investing is the best real estate method. If you have a good deal and have dealt with it correctly, then you get to keep the property, continue to have cash flow, and can put money back into your pocket to take that dream vacation you’ve always wanted or to do another deal. It’s up to you to decide what you want to do with the money that comes back from the asset.
- Non-performing assets: There may be situations where you aren’t hitting the goals in your business plan. If so, it may be time to sell, recoup your investment, and put your energy towards another deal.
- Partnership issues: Some partners may have entered the partnership with different expectations, and this can be a great opportunity to dissolve the business and hopefully still earn a return.
- Somebody wants it more than you: You might meet an investor who loves your property more than you and is willing to pay for it!
- Strategy change: Some investors may decide this business is no longer for them.
- Cash-out refinancing: If the property has performed at or above the goals of your business plan, then you can reward yourself and your partners with the proceeds from a cash-out refinance. This is an opportunity to recover the initial cash investment of all partners on top of the rental income dividends they have received over time. This is also a good opportunity to buy out partners who want to relinquish their part in the deal.
The Myers Method multifamily investing course is ideal for finding deals and making the best business plan. This plan should help you maximize the potential of a “broken” asset by adding as much value as is advantageous at the point of purchase, during the fix, and during the flip. Through the method of Find It, Fund It, Fix It, Flip It, you can successfully invest in multifamily property.
With broad expertise in multifamily investing, our Jerome Myers team acts as a reliable apartment investing mentor and advocate. We dispel the myths surrounding the real estate industry and help investors find their way to passive income through successful multifamily home investing.