Category: Multifamily
Air Date: 02.09.2020

How To Start Investing In Multifamily Real Estate

We speak with Arn Cedella, a real estate investor with over 40 years of experience in real estate. Learn how to start investing in multifamily real estate!

Despite what many investors say, achieving multi-family success doesn’t mean going as big as you can as fast as you can. Today we speak with Arn Cedella, an investor with over 40 years of experience in real estate. Our conversation drills down into his recent transition into multi-family and the importance of laying strong foundations that can withstand market downturns. We open by chatting about his extensive experience as a single-family broker and investor. Arn then shares the four key factors that caused him to move into multi-family investing. After touching on how multi-family benefits from economy of scale and leads to better cash flows than single-family, Arn dives into his positive experience as a new multi-family investor. He shares how he learned about this niche through podcasts, boot camps, and good old-fashioned investing. Later, we discuss why you need to develop your multi-family know-how to be able to unpick the assumptions that underpin deals. Reflecting on this, Arn highlights his process in scaling his business in step with his market understanding. Tune in to hear more about the value of creating a strong foundation for your multi-family investing. 


Key Points From This Episode:

  • Introducing today’s guest, real estate veteran Arn Cenedella.
  • Arn shares details about his extensive background in real estate.
  • Hear why Arn has recently jumped into multifamily investing, and how you can start investing in multfamily real estate. 
  • More cash flow and renters; exploring the benefits of multi-family. 
  • How multi-family investing takes advantage of economies of scale. 
  • Arn talks about his experience as a multi-family passive investor.
  • How Arn learned the ins-and-outs of multi-family.
  • The importance of unpacking the assumptions that underpin every deal. 
  • Arn talks about the value of scaling your business as you learn more.
  • Why building a strong team is a priority in multi-family. 
  • Arn opens up about what’s made him successful. 



“Housing affordability is a huge issue in most major metropolitan areas. I think everything’s pointing towards renters, and that’s right where multi-family comes in.” — @GreenvilleSCRE [0:10:12]

“Moving into multi-family as a passive investor makes sense for folks who have enough on their plate but they want to diversify their nest egg. It’s not recession-proof, but real estate is not as volatile as the stock market.” — @GreenvilleSCRE [0:13:16]

“There’s a sequence to education and investing. If you stick with the sequence, it may take a little longer, but you’re just building a more solid platform.” — @GreenvilleSCRE [0:23:41]


Links Mentioned in Today’s Episode:

Kent Ritter

Arn Cenedella on LinkedIn

Arn Cenedella on Twitter

Arn Cenedella on Facebook

Arn Cenedella Email

Arn Cenedella Phone — 650-575-6114

Spark Investment Group

MFIN Summit

Dan Hanford

Best Ever Conference

Joe Fairless

The Best Ever Apartment Syndication on Amazon

The Power of Now on Amazon

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Interested in Investing Alongside me in our next multifamily deal?

Contact me at

My operating partner, Birge and Held Asset Management have a twelve-year track record creating sustainable wealth for over 2000 investors through high-quality multifamily investments.

Thanks for listening!

—Full Transcript Below—

AC: I think it makes a lot of sense for folks, who have enough on their plate now, but they want to diversify their nest egg. They maybe have concerns about the stock market. They realize real estate is fairly stable. It’s not recession-proof, but it sure is not as volatile as the stock market and it is also better set up, simply to provide cash flow than stock investments are.” 


[00:00:31] KR: Welcome to Ritter on Real Estate, the show about how to passively invest like a pro. On each episode, I interview real estate experts, who give their top investing advice, strategies, and tools that break down the insights and the practical steps to avoid the pitfalls and make better investments. I want to help you passively invest like a pro. This is Ritter on Real Estate, and I’m your host, Kent Ritter. 


[00:00:54] KR: Hello, fellow investors. Welcome to Ritter on Real Estate, where we teach you how to invest like a pro. Got a special guest today. His name is Arn Cenedella. Arn has been in the real estate business for over 40 years. He’s learned a lot. He’s here to share that with us today. He’s had an interesting journey, where he was a longtime single-family renter, or rental owner, and has now moved on to multi-family and is now focusing on multi-family investments. He recently founded Spark Investments. He’s helping single-family landlords and busy professionals invest in multi-family apartments. Really interested, Arn, to dig into your story and all the value you can share from your 40 years of experience. Thanks for being with us today.

[00:01:40] AC: Hey, again, thanks for having me. I’m looking forward to chatting to you with you about real estate investment, and hope to provide some useful information to your listeners as they go on their investing journey. Looking forward to helping them as much as I can.

[00:01:57] KR: Awesome. Let’s dig into it. Let’s start off with a little bit about you, how did you get into real estate? Give us a brief synopsis of that 40-year span and the different things that you’ve done. How about that?

[00:02:11] AC: Yes, there’s a lot to cover. Time is valuable, so that I understand. I was a pretty typical kid, growing up in the San Francisco Bay Area, on the San Francisco Peninsula and what is now more commonly known as Silicon Valley. Went to school, college, grad school, got a master’s degree in physical chemistry.

Then it occurred to me that probably wasn’t my life’s passion. I returned to the San Francisco Bay area, where my father had a residential real estate company in Menlo Park, California. That was way back 1978. I think March 1978, I got my California real estate salesperson license, and went to work selling single-family homes and condominiums in one of the best real estate markets in the world. I was blessed to be able to live and work there.

My dad was an old school guy, born in 1919, went through The Depression. He was pretty much fundamental investor. He understood that investing, brokerage was really the key to long-term success. He started investing in single-family homes, and he accumulated a fairly sizable portfolio. Being the good son that I am, I followed in his footsteps. As my real estate brokerage career grew, I started to acquire single-family rental homes, both in the San Francisco Bay Area and elsewhere in the country, most notably Austin, Texas.

I manage most of the local properties myself. Over the years, I’ve had probably 25, 30 rental properties, maybe at one time up to 30-35 doors. In 2020, I made the decision to transition into multi-family investing.

[00:04:17] KR: Got you. A long history in single-family. Clearly had success there, doing it for over 30 years. What was the trigger in 2020 that made you decide to switch into multi-family investing?

[00:04:31] AC: Great question. I always marvel at how someone’s life direction can just switch on a phone call, or a movie, or a book. Certainly, I was aware of multi-family, but I was happy doing the single-family investing. It did well. Bay Area’s mainly a capital growth appreciation market, not so much a capital cash flow market.

In the middle of March, a young investor buddy of mine, I’m now living in Greenville, South Carolina, called me up in the middle of March 2020 and said, “Hey, Arn. What do you think’s going to happen with rent collection due to COVID?” We had a long conversation. Basically, I told him, “Hey, Mario. I don’t know. Ask me on April 5th. If my April rents come in, I’ll let you know what happened.”

Anyway, at the end of the phone call, he sent me a podcast on multi-family and the impacts of COVID. I listened to that. Honestly, a light bulb went off in my head. This was right when COVID had hit the United States. We were starting to shut things down. I probably listen to podcasts, three, four hours a day, a variety of podcasts, including yours during that time period, as well as several others. I became fascinated by it and the whole thesis behind multi-family made sense to me. I can go more into the specific details of that if you’d like.

[00:06:13] KR: Yeah. No, I think it’s a great story. I think it obviously resonates with me as I spend most of my time in multi-family. What are some of the moves, or folks that are less familiar with some of the reasons to invest in multi-family? What were the specific things that attracted you to multi-family and to walk away from the long career with the single-family rentals?

[00:06:34] AC: Sure, great question. I would say, there were primarily are two or three factors. One thing I’ve always done with my investments is I keep a spreadsheet of fair market value, loan balance, equity, gross income, expenses, net income. At the start of every year, I review my portfolio. When I did it at the start of 2020, and I actually looked at my cash flow based on the equity in the single-family homes, I was probably only getting about 3% to 4%, if that makes sense.

The net dollars I put in my pocket was about 3% to 4% of the total equity in my portfolio. I’m not complaining. They’re great properties. They were going up in value. I think as I got older, I’m now 66, I started to focus more on cash flow, rather than capital growth. I’m in a secure financial position, but cash flow becomes more important, I think, to folks as they get older, as compared to when they’re in their peak earning years.

Number one reason to switch to multi-family was increase cash flow based on my equity. The second one was as much as I enjoyed managing my single-family rentals, in 40 years, if I have even one horror story of being a landlord, it would be hard for me to remember. I had a happy landlording career. I was good at picking good tenants. I was blessed fortunate, however you want to say. I don’t really have any nightmare stories about it.

It is time consuming; dealing with repairs, keeping track of 15 different mortgages, 15 different property tax bills, collecting 20 or 30 rents. I just wanted to free up some of my time for that. With multi-family and the economies of scale, you can more easily afford professional property management on a 100, 200-unit building. Property management might be 2%, 3%, 4% of the gross rent.

Single-family, you’re probably paying 8% to 10%. There’s some economies of scale with the property management that makes sense. Plus, just taking the day-to-day responsibilities off me and putting it on a professional who’s doing it full-time. I’d say, that’s number two. Then number three, I think the demographics in society is different than say, 30 years ago. I think we’re moving more towards a renter nation, where if maybe that’s not the right word, I would say a more mobile society.

I’d say, somebody my age, the dream back when I was 30 was to afford the nice house at the end of the cul-de-sac in suburbia and that’s where I’d raise my kids. Where I think today’s 30 something, they want to live in London. They want to spend six months in Bali, whatever it happens to be, we’re a much more global, more mobile society. I think that just therefore, renting makes sense in a more mobile society than a stationary one.

Then I think the fourth factor is in most major metropolitan areas, housing affordability is a huge issue. There’s so many people who can’t afford to buy. I think everything’s pointing towards renters, and that’s right where multi-family comes in.

[00:10:27] KR: Got you. Okay. What I heard you say was there’s definitely some — just from a time and work-life balance aspect, there’s benefits that you saw. Also, you’re looking at the demographic and economic indicators too and saying, you’re just reading the tea leaves and seeing the trends and seeing that multi-family is where you want to be. I mean, it makes a ton of sense to me, obviously. I think, hopefully that really resonates with folks. I think one thing that — because I have a lot of conversations with folks that are single-family landlords, maybe they have a couple of properties and they’re thinking about investing in multi-family. And then they want to understand more about it.

I think, the thing that I often — that you touched on that resonated with me from a lot of those conversations is people often undervalue, or underestimate the time commitment of having 10, 20, 40 separate properties and having to manage the different mortgages. And the different tax bills and different contracts, and all those things. Whereas in multi-family, when you’re bringing that together and have it all under one roof, you have the same scale, and it’s just much more efficient. It’s just a lot less time from a time management perspective.

[00:11:41] AC: Precisely. For me, my entire career has been spent in real estate. I haven’t had, say, the typical 9 to 5 job, where I got to be at the office and I’ve got three meetings every day. For me to manage my properties, that was just my day-to day-activity. I was out showing property to buyers or tenants. I was meeting with contractors, staging houses, fixing houses up. Probably a little easier for me being a real estate professional to manage my portfolio, where if somebody has a high-demand corporate job, they just don’t have time to run around town and keep track of these things.

Yes, I think the time is a big part of it. I also believe there is a reason for specialization of labor. If you’re a great software engineer, spend your time doing that, right? Let somebody else manage the property. Of course, then the economies of scale come back into it, because the property managers have systems and operations and things. I think it just makes a lot of sense. To me, people are so pressed for time in our current society. I mean, the average corporate person, it’s probably not a 9 to 5 job. It’s probably more a 7 to 6 job, right? Then you have family, and how do you fit it all in?

I think the idea of moving into multi-family, as a passive investor, letting professionals run the operation, I think it makes a lot of sense for folks who have enough on their plate now, but they want to diversify their nest egg. They maybe have concerns about the stock market. They realize real estate is fairly stable. It’s not recession-proof, but it sure is not as volatile as the stock market. It is also a better setup, simply to provide cash flow than stock investments are.

I think there’s a lot of rationale behind looking at that. I’m not asking folks to move all of their nest egg into real estate. I would just ask them to consider moving a part of it into real estate as a diversification strategy.

[00:14:19] KR: Yeah, there’s a lot of wisdom there, Arn. I think you’re exactly right. From a risk adjusted return standpoint, there’s really nothing else that will beat it. That’s why we do what we do. It’s why we’re here doing what we do.

You made an interesting point in that around investing passively in multi-family, because I believe that’s how you started your — as you got interested in multi-family, that was the next step for you. Can talk a little bit about that and what your thought process was of going into those passive investments and how that’s helped you get to a point where you are now?

[00:14:51] AC: Yes, great question. I made my first passive investment, May of 2020, right in the height of COVID. What I did over 2020 is I’ve sold three or four of my rental properties, taken the proceeds, and I’ve now made six LP investments, passive investments in syndications. You look at the sponsor, so I would evaluate the track record of the sponsor, also look at the market and invest in markets that I felt were growth markets. Most of my investments have been either in the Southeast or the Mountain West, two areas I particularly like.

By doing this, I increase my cash flow. I get regular ACH deposits into my checking account. It’s fabulous. It’s like my Social Security check, which is also good, and which I started taking maybe three months ago. It’s nice having those monthly distributions, or quarterly distributions show up in your checking account, and I don’t have to worry about repairs or management. It’s a good way to put my capital to work for me and give me a decent return.

[00:16:14] KR: That’s great. What have you learned from being a part of those passive investments?

[00:16:19] AC: Well, I’ve learned quite a bit from podcasts. I’ve done a few boot camps. I would say, by investing in six or seven different passive investments, they all have a slightly different structure. They all have slightly different flavor. As I think, as you get more familiar with the offerings, you start to get a better idea of what as an investor you should be looking at, and you just get a feel for how the deal is set up and what are the critical factors.

I think it’s just experience in evaluating these deals, attending the webinars, listening to the sponsors present the investment. And while you’re listening, you can say, “Does that ring true to me? Is what this person is saying, does it make sense, or does it not make sense? Do I get a sense that this is an individual I can trust with my hard-earned cash?” I think you can develop a gut sense.

Then, also, they should be willing to have one-on-one conversations with you. If you have questions and that you need to drill down and you need a little hand holding, they should be able to do that to earn your business. I’ve learned a lot with my own — one of the great things I love about passive investing is the ability to diversify. Of my six passive investments, two would be considered Class A, newer, fancier, more expensive properties, high-income tenant demographic. I’ve got two Class B properties, and I’ve got two Class C, and I’m spread out in six different locations.

Again, I come back to the notion of diversification. As a passive investor, it’s almost like a smorgasbord, right? You can take a little here, a little here, and spread the risk a little bit. You don’t need to go all your chips in on one investment. I want to recommend that — spread it around a little bit, get your feet wet, see how these operators work. As you go on, you can build relationships with them.

[00:18:42] KR: Yeah. A couple of things that you said that really resonated with me that we talked about a lot on this show is — sounds like you started by vetting the sponsor out, and getting to know the sponsors and really understanding their personalities, and trying to judge if those people have integrity. You really started there. Then you went into the market and said, “Okay, are they operating in markets that I want to be in?” Make a decision based on the market. I think those two things are so important, before you start looking at individual deals.

[00:19:09] AC: Yes, 100%. Because as a limited — like most things in life, what is a benefit can also be a con. The benefit of passive investing is you don’t have to worry about it. The con is you have no control. You know what I mean? You don’t have to worry about it, because you don’t have any control, and so it’s really important to do that investigation before you invest your money. I think the other thing I would say is, all of these investment offerings, they’re going to talk about cash-on-cash and internal rate of return and equity multiplier, and all the numbers are important, but I wouldn’t necessarily think that the ones with the highest numbers are definitely the best investment, right?

You got to use your judgment as to what is practical and reasonable. If you have somebody saying, “I’m going to raise rent 5% a year for five years, and I’m going to give you a 19% IRR.” It sounds good, but you got to back up from that and say, “Is that really feasible?” I would encourage passive investors to look beyond the numbers and make some assessment, is the business plan and the projected returns achievable?

[00:20:38] KR: Yeah. I mean, I think that’s a fantastic point. I don’t think you hit home on that enough that — I think you have a unique perspective, in that you owned rentals for years, right? You understand your rent growth and how things like that work. You’re in real estate selling real estate, you understand markets and demographic trends. I think, challenging the assumptions is what you’re talking about, is understanding what assumptions are they making in their model. Because at the end of the day, every pro forma is wrong. Every pro forma is wrong, because you’re never going to 100% hit everything.

And it may be better-wrong. It may be worse-wrong. It’s always just your best guess. It’s all about the assumptions that are being made, and are the assumptions reasonable? As an investor, you have to be educating yourself to know what’s reasonable and what’s not. You got to be educating yourself to know that 5% rent growth over five years in most markets is unachievable. It should be more like a 2% or 3%.

I think, doing the education, like you said, you said that you started with podcasts and books and webinars and everything else. That was your first level of your education. Then you started investing passively, once you had a base of education. That investing passively lets you get to the next level of education, where you’re actually in the deals, you’re asking questions directly to sponsors, you’re seeing it from the inside and the numbers and what’s going on. You’re building your base and doing that.

The reason I can say all that is too, because — I mean, it’s really the same thing that I did when I started investing, was started with educational webinars and mentors and things and moved onto passive investing. Then eventually moved on active once I felt that I — for me, it was like, when I was going to those conferences and I started really knowing everything that they were talking about, I was like — the first conference I went to, I had no idea. Then three years down the road after going to eight, 10 conferences every year, it started to get to a point where, “I know what he’s talking about and I don’t need to be in there,” yeah, type things. Started to build confidence.

Anyway, I think your path there is just such a good path, a path that I would recommend for really anybody that wants to go from really whatever you’re doing, into multi-family investing. Especially if you want to get to the point where you’re actively doing your own deals, where you’re sponsoring your own deal. Is, you got to build that base of knowledge up, so that you avoid those pitfalls before you’re trying to take on other people’s money. Because that’s a big commitment. You need to take that seriously.

[00:23:13] AC: Yes. I’m an old school guy. There’s a lot of people in the multi-family community, and I’m not arguing with them. That kind of say, “Go big. My problem was I didn’t go big soon enough.” And that’s okay. I think I’d come back to your point more about building a proper foundation. Don’t get ahead of your skis. I think there’s a sequence to education and investing. If you stick with the sequence, it may take a little longer, but you’re just building a more solid platform. So. when the bad times come, and I’ve been in business since 1978. I paid 11 and three quarters for my first mortgage. 11 and three quarters percent, okay. Reality check, when now it’s two and a half, okay.

What I would say is on my own journey, I’m now starting to move into the active side of the multi-family syndication business. I just completed a small 12-unit acquisition here in the upstate of South Carolina with a couple local buddies of mine. We’re excited after this call. We have to go there and we’re remodeling three of the units, putting in granite, so it’s exciting. I mean, that’s the other great thing about being a multi-family. You get to take these properties, and you get to fix them up and you make — you upgrade the HPAC and the plumbing, and you make them nice places to live and you charge people reasonable rent, and you get great tenants.

I like to improve properties. It’s something I enjoy. I’ve also been code GP on two transactions now, 167 units, and it goes to Georgia and 93 units in Easley, South Carolina, which is a Greenville suburb. Again, that’s one more step on my education. I’m talking to investors and I’m investing alongside investors, because I won’t ask anybody to invest in a project, unless I was also willing to invest my money. I got to put my money where my mouth is. If I believe in it, I can communicate that to other investors.

Again, my knowledge has taken up to another week. I continue to try to learn every day. I just finished the MFIN Summit that Dan Hanford does. I’ll be at the Best Ever Conference that Joe Fairless runs again on virtual. What I would say is, even with 40 years’ experience, I don’t think I’m ready to tackle a 200-unit multi-family deal being the lead operator. I still need to learn the specifics of this business more before I feel comfortable assuming that role.

At this point, I want to play a more supporting role. I give the operators my input based on 40 years of experience. The physical construction of the properties are not much different. Two or three storey garden apartments are really the same construction as single-family houses. It’s the same materials. It’s the same systems. Renting to tenants is very similar. I’ll continue my process.

I think the goal would be eventually, to maybe move into a more lead role. Even with that, I would only do it if I had the proper team and support that I teamed up with three or four people, who had the skills that I lacked, who were strong in the areas that I am weak on. And you get this synergy where the sum is greater than the — how do you say it? The whole is greater than the sum of the parts. I need to partner with the right people to make it a successful transaction, both for me and my investors.

[00:27:39] KR: Yeah. I mean, I think that’s exactly right. I think the way, the reverence that you take in thinking about doing that, I think is refreshing. It’s a great point of view. I think you’re exactly right. People say all the time, multi-family is a team sport and it totally is. You find folks that complement yourself and your business really starts to take off.

Well Arn, it’s been great having you on. I really appreciate talking.

[00:28:02] AC: Thank you.

[00:28:03] KR: Yeah, as we wrap things up, I like to do a segment called the Keys to Success. I know you’ve got a lot of them, I’m sure, over your career. The first question I want to ask is, what is the one thing, if you only got one question, that people should be asking their sponsor to understand if it’s a deal they should be investing in?

[00:28:24] AC: I would ask them, how many prior deals have you done, or are currently operating in that particular market?

[00:28:39] KR: Track record. But not just track record. Track record in a particular market, because it does change as you go from city to city.

[00:28:47] AC: Yes. I think, if you have an operator in one area, they build up a team of property managers and contractors, and they know the laws and it’s rinse and repeat. Yes, they have to be in that market. They have to have other projects in that market before I’ll invest with them.

[00:29:07] KR: Got you. What are you most proud of in your career?

[00:29:11] AC: I would say, I’m most proud of trying to conduct my business in an ethical manner. I was never concerned with being number one in my office. What was more important to me was taking care of my clients and friends and doing the very best that I could for them. As I often tell people, I may not always be right. Okay. My opinion may not prove to be right. My thinking about it is not always correct, but whatever I tell you is what I honestly believe. That’s the best I can do.

You’re going to get straight on assessment from me. I’m proud of that. I built a great network of friends, past clients and by taking care of them. They’ve in turn, have provided me with a wonderful career in real estate through referrals and repeat business. Like most things that work well, it’s a win-win. Yeah.

[00:30:17] KR: That’s great. What books should everyone be reading?

[00:30:21] AC: Well, can I give you two?

[00:30:23] KR: Sure.

[00:30:24] AC: Yeah. I would say, in terms of multi-family syndication, you can start with The Best Ever Apartment Syndication book. That’s a go to thing. Not the be all and end all. If you want to learn the background and a lot of the basics and give you a foundation to go, I think that would be great. Then another book that’s had a big impact on my life, which I probably read 20 or 30 years ago is The Power of Now by Eckhart Tolle. It talks about just trying to focus on the present.

Drop the regret about the past. Forget about the fear, anticipation of the future and just be in the present. If you can stay in the present, generally things are okay. It’s when you start thinking backwards or forwards that problems can arise. I think that’s a great book in terms of personal growth.

[00:31:23] KR: Yeah, awesome. Then, what is your number one key to success?

[00:31:23] AC: For me, I would say it is networking. Through networking, you can help people. The more people you know in a related industry, whether they’re lenders, or closing attorneys, or title people, or contractors, whatever it happens to be, your network, people you can count on/ People you can rely on and being able to call on them to help people you care about, I think is really critical. I’m sure you have your go-to people that you know they can handle their end of the business perfectly and it makes your job easier and you know your folks are in good hands. I’d say, that’s absolutely critical.

[00:32:16] KR: Awesome. Those are great tips. Arn, how can folks get a hold of you if they want to learn more, if they want to connect with you?

[00:32:24] AC: Sure, that would be great. The name of my company is Spark Investment Group. The website is S-P-A-R-K. Email would be Then my cellphone is 650-575-6114. Reach out, I’m on Facebook and LinkedIn. As you can tell, Kent and I always love talking real estate investing. Both of us are happy to talk to anyone at any time about it. It’s something we enjoy and feel passionate about.

[00:33:02] KR: Most definitely. Most definitely. We’ll make sure all that gets in the show notes, so people can —

[00:33:07] AC: Thank you.

[00:33:08] KR: — Check that out. Arn, it’s always a pleasure. Thanks for coming on today and sharing your journey and your insights. I think a lot of value to folks today and some unique perspectives. Thank you again.

[00:33:20] AC: Thank you. I enjoyed it and I hope your listeners do too. Thanks so much, buddy.


[00:33:25] KR: Thanks for listening to another great episode of Ritter on Real Estate. Hit the subscribe button and make sure you don’t miss out on the content that will make you a better investor. Also, visit for articles, videos, and tools curated just for passive investors. Until next time, this is Kent Ritter with Ritter on Real Estate. Now, go out and invest like a pro.