Multifamily Investments Don't Make Sense Right Now with Ken McElroy

Multifamily Investments Don’t Make Sense Right Now with Ken McElroy

If you’ve started to think about investing in multi-family real estate investments, it can be easy to become starry-eyed. You might imagine higher ROI, multiple incomes from one property, and more cash flow. But before you decide to bypass the single-family route all together, you’ll want to hear today’s show.

In this video, real estate legend and Rich Dad advisor Ken McElroy is back to share why he has pulled back the reigns on his multi-family investing strategy. We’ll talk about the current market, why multi-family investing isn’t working right now, and how to pivot as an investor.

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44 thoughts on “Multifamily Investments Don't Make Sense Right Now with Ken McElroy”

  1. Clayton do u have any videos on adus ? Have u done any ? I just aquired a 4/2 1500 which will make about $200 cash flow. But gonna convert a newer construction stand alone 750 sq ft garage into a 1 or 2 bedroom apartment for $1000 total cash flow. Have you any experience in this ?

  2. SFR scale is problematic. Management obviously more difficult given dispersed locations. Renovation costs suffer from scale as well.
    Acquisition of work force multi-family to preserve capital seems a bit odd for large funds. If that is the case then there is excessive capital feeding this market which cannot end well. I have seen acquisition
    side of large funds bid down to a 2 cap rate anticipating rising rents for A or better properties in primary markets.
    Interesting that Mr. McElroy mentioned a 60% occupancy rate for the underperforming property offered
    to him in Arlington, Texas. Special servicers or lending institutions seem prepared to hang on until 60% occupancy is reached then it is time to deal. Point is always look to 60% occupancy as most opportune
    for buyers leverage, which others will know as well. Probably wise to pass on the project at the numbers read between the lines 50,000 per unit plus 10,000 in renovation costs. Wasn’t there but perhaps undercutting the quoted 50,000 substantially and borrowing the acquisition and renovation
    costs elsewhere was possible. 10,000 per unit does cover a substantial renovation. I have participated
    in complete exterior renovations of roof, gutters, general carpentry, complete residing, stair and rail repairs, new windows with complete exterior paint for 3,000 to 3,500 per unit. The 7,000 or 6,500 goes to grounds, pool, clubhouse with monies left for interior updates depending on work assigned to operations. Real-Estate is a wonderful investment vehicle. Enjoy your day.

  3. Great content, loved this video, definitely gave me a different perspective and was interesting to hear someone give a different view than Uncle GC “Grant Cardone” that actually made sense

  4. I now know the importance of motivation between Wall Street $$$ and a private operator as myself. It also makes me see syndicators in a whole new light. And I learned a new word – "Workforce Housing". COOL!!!

  5. This was a very good interview.

    I wonder why so many investors go through the deal analysis process, and then not make an offer? The only thing money can't fix is location. Ken said he only made offers on 10% of the properties his team analyzed (60 out of 600). Why do you think he doesn't just adjust his offer price until the deal makes sense and then make an offer?

    Thank you again, Kevin Grail

  6. Thank you for your insights Ken and I agree that it is becoming more challenging. There are still great deals in multifamily right now but you just have to work harder with more offers. I still want my money in multifamily vs stocks or SFH right now.

  7. ###. Great. Show Clayton I definitely see you point. However I think it's worth mentioning that. There is multi family , say two, 3, and 4 units. And then there's mega multi family. Where Ken deal s. I'm currently on my second 4plex. With very strong noi s. Both. Properties are in work force areas. Finally, with. Single family or multi family. Failure is. The eniblity to do the nessinary work and planning. Before purchasing a property.

  8. It depends where Ken is talking about. AZ maybe tapped out.

    I just underwrote properties that went Loi yesterday that cash flowed 7% to 10%.

    Everyone please read David Lindahl Emerging Markets.

  9. All i got out of this, is in 10-15 years from now, there will be tons of mismanaged apartment buildings hitting the market. Let's be honest, if you are an institutional investor that knows nothing about real-estate and are making decisions based on a 25 year old analysts who also knows nothing about real estate, your investment will only sit for so long before it needs massive re-investment and by that time, these investors will want to bail and the cycle will start again. i will stock to the small deals and when that day comes, I hope I will be ready to buy these big deals.

  10. Very interesting…

    He and his guys have (had?) an acquisition team that crisscrosses(d?) the country looking for properties to buy. Must be nice to have had people (his "acquisition guy!!") like that doing all that legwork for you.

    They (not he) looked at 600 deals. 600 deals. Next question is where these deals were. But the most important question is where THAT DEAL IS out of 600 where the numbers actually worked?? What attracted their attention to the properties they looked at? What about those of us who have extremely limited resources and don't have a big, fancy "acquisition team" to go out and scour the whole of the good ol' U S of A?

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