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Updated over 5 years ago, 07/11/2019
What's Your Main Obstacle in Buying an Apartment Building?
My question is: what stops YOU from acquiring an apartment building?
Is it...
- lack of capital?
- lack of know how?
- mindset?
- fear of doing a big deal and then failing?
- can't find good deals?
- bad credit?
- something else?
Whatever stops you from thinking BIG and acquiring apartment buildings, share it here. I will give you ideas on how you can overcome the number 1 obstacle preventing you from acquiring apartment buildings.
I have acquired over 1,000 apartment units (and I did it with no money and bad credit) and I shared how I did it, here on BP:
Who wants to go first?
Originally posted by @Ryan D.:
@Michael Ealy
Michael, thanks for sharing your experiences here, it is very much appreciated!
I’m at a point where I own several 4unit buildings that cash flow well, but my market has taken a major jump in the last 1-2 years, & buildings I bought for $200k last year are now selling for $300k, though the rents have only moved up 3-4% over that time, and to me the buildings just aren’t worth what people are paying now (given where the rents are).
We’ve been looking for smaller commercial multi family, but haven’t had success finding ones that are priced anywhere near what I think they are worth (at least a 7 cap based on the existing rents).
I expect we might be able to find better opportunities off-market, & there is where our experience falls flat. What are some suggestions for finding off-market opportunities?
Good for you Ryan!
I have the same experience but just add one more zero on the end :)
So I am selling.
But I am still buying with the intent to add value and then sell.
Sometimes, I will refi instead of selling.
How do you find OFF market deals? Here are some ideas: (and you probably know some or all of them)
- Direct mail to owners of buildings with code violations and owners who have owned their buildings more than 10 years: they are probably retiring
- Wholesalers
- I ask commercial real estate agents to look for deals for me and they get both sides of the commission
I recently found some Interesting opportunities in West Virginia. I purchased a Single family home, renovated, and currently positive cash flow $700 a month. Post renovation appraisal will net approximately 65K. I found a multifamily 4 plex that I’m interested in acquiring. My question is, what is the best approach to acquire this opportunity? Should I refi and cash out? Or seek other means such as partnering with another investor or utilizing my own cash to obtain to this property. I would rather not use my own cash.
Originally posted by @Jared Brown:
I recently found some Interesting opportunities in West Virginia. I purchased a Single family home, renovated, and currently positive cash flow $700 a month. Post renovation appraisal will net approximately 65K. I found a multifamily 4 plex that I’m interested in acquiring. My question is, what is the best approach to acquire this opportunity? Should I refi and cash out? Or seek other means such as partnering with another investor or utilizing my own cash to obtain to this property. I would rather not use my own cash.
Jared,
When you say post renovation appraisal will net $65K - do you mean that the property will appraise $65K more than your purchase and renovation costs? If so, that's pretty good.
Now to answer your question: should you refi the SFH to buy the 4-plex, or should you seek other sources of cashflow (like another investor)? You kind of answered your question already by saying you'd rather not use your own cash.
It becomes a question of risk vs. returns and the availability of deals in your market. If the 4-plex is low risk/high returns and you need to move quickly, then by all means use your own cash to quickly secure the property.
If the deal is high risk/high returns - then use your money not someone else's. You would rather lose your money not an investor's because if you do, you won't have access to private capital and that will seriously affect your ability to scale.
If the deal is low risk/high returns and you can wait to close on it, sure, use private capital.
Makes sense?
@Michael Ealy
Money... Money... Money.
I eventually caved in and bought another SF. I would love to start with a 8 unit. There s one on sale about 2 miles from my current rental.
It's a little over priced and I don't have money for the down payment and I just bought my rental.
I LL keep reading and learning hopefully make it happen in the next couple of days.
Could use someone to help me brainstorm my situation and create a game plan... If possible.
@Michael Ealy hey I think it’s more along the line of just asking for help. Iam super analytical, so much so that it turns into ready aim aim aim.... I find it difficult to break that cycle.
Lack of know how. Retiring investor wants to sell his 15 unit complex. 2 buildings. 800K, NOI 116K , 93% occupied. In the city downtown location. Not sure on how to make this deal work.
Education, I am still in the learning stage. I just bought my first SF a couple months back. I really want to get all the terms, math, and analysis principals down before I jump in. My plan is to begin by finding deals for others for free or almost free and then scaling up from there.
My other biggest obstacle is lack of energy. I drive ~3-4 hrs 18 days out of the month to get to my fulltime job where I work 9 hour days. By the time I get home I am usually pretty tired. I listen to audiobooks/podcasts to leverage my commute for more learning time and spend about an hour a day on top of that researching business/stocks/RE/finances. I am getting there just taking small steps for now.
A lack of direction. That’s clearing up a bit. I started listening to Grant Cardones “real estate investing made simple” podcast and reading his book about it.
Money is. I need to find more people to go in with me tens of thousands of dollars at a time. I know a few but I need more.
Originally posted by @Nandy B.:
@Michael Ealy
Money... Money... Money.
I eventually caved in and bought another SF. I would love to start with a 8 unit. There s one on sale about 2 miles from my current rental.
It's a little over priced and I don't have money for the down payment and I just bought my rental.
I LL keep reading and learning hopefully make it happen in the next couple of days.
Could use someone to help me brainstorm my situation and create a game plan... If possible.
Nandy,
At least you bought a rental. Start where you can. But maybe buy at least a duplex next time ;)
Read through what I suggested to others here on how to find people with money. They want to invest money with people who are movers and shakers...people who take action...like you.
Originally posted by @Cody Abrahamson:
@Michael Ealy hey I think it’s more along the line of just asking for help. Iam super analytical, so much so that it turns into ready aim aim aim.... I find it difficult to break that cycle.
Announce to the world what you're going to do and by when. Forcing yourself by giving yourself a deadline and letting others know your goals forces you to take action instead of being paralyzed by the never ending analysis that you do.
Thanks for your response Michael. Yes, my SFH was a foreclosure that had good margins.
When I stated "Use my own money" I was questioning if I should cash out refi my SFH. Or use out of pocket funds. Thoughts?
Can you also elaborate on the use of private capital? How would you suggest one go about securing this level of support. It’s my belief that the 4-Plex that’s on my radar is low risk high return. The four Plex is located Near a college that has maintained a 90% occupancy rate over the last several years. This would be a buy-and-hold strategy in my opinion.
My goal is to build my LLC so that it is profitable and self-sustaining, something that will allow me to grow my portfolio.
Originally posted by @Maureen Dawson:
Lack of know how. Retiring investor wants to sell his 15 unit complex. 2 buildings. 800K, NOI 116K , 93% occupied. In the city downtown location. Not sure on how to make this deal work.
Maureen,
If the numbers are real, sounds like a good deal.
Get the T12 and rent roll to look into the numbers deeper.
Then send me a PM.
Originally posted by @Michael Sjodin:
Education, I am still in the learning stage. I just bought my first SF a couple months back. I really want to get all the terms, math, and analysis principals down before I jump in. My plan is to begin by finding deals for others for free or almost free and then scaling up from there.
My other biggest obstacle is lack of energy. I drive ~3-4 hrs 18 days out of the month to get to my fulltime job where I work 9 hour days. By the time I get home I am usually pretty tired. I listen to audiobooks/podcasts to leverage my commute for more learning time and spend about an hour a day on top of that researching business/stocks/RE/finances. I am getting there just taking small steps for now.
Michael,
I feel you. That's a terrible schedule. Maybe the first step is find a different job closer to home or relocate. To succeed with active real estate investing, you need at least 10-15 hours a week and that's on top of getting yourself educated.
Originally posted by @Joshua Howaniec:
A lack of direction. That’s clearing up a bit. I started listening to Grant Cardones “real estate investing made simple” podcast and reading his book about it.
Money is. I need to find more people to go in with me tens of thousands of dollars at a time. I know a few but I need more.
A lot of books out there are not very detailed. I am not sure about Cardone's books. I will do better by writing in a book what the gurus only reveal in their overpriced seminars :)
For now, network like crazy to find the people with money. They are out there.
@Michael Ealy
Thank you. My next plan is to refinance my current home which I upgraded from a 3 to a 4 bedroom and fully remodeled. I hope it appraises well.
I m Airbnbing my rental to help pay down as much of my debt as possible.
I hope that will allow me to house hack a duplex or a fourplex next year.
I m actively pursuing owner financing opportunities for short term rentals as well.
I m enjoying reading all your comments.
Thank you for your time.
@Michael Ealy that is probably something I look into in the future, but for right now it is hard to find. I work in IT where it is hard to find a job that is high paying, respects your time, sharpens your skillset, and is close by or remote-work. I currently deal with the trade off of having a company that pays well, has 0 hours of work or time outside of the standard 40hrs and I get paid to learn valuable skillsets. The only thing I don't like about it is the commute and to some degree the schedule.
Thanks for replying and for your original posts. SF is a really easy subject to find info on, but MF isn't always easy to find info on. Help or advice from an expert is always a huge catalyst to growth!
@Michael Ealy I’ll type you a summary of his method later. He’s pretty candid about what he does and how he does it. Yes, he has a 10k program that goes more in depth but having not used it I can’t bash it. I use Cardone University and I love the training on that platform. Very helpful.
But yes I am networking. I target investors and realtors in my day job specifically so that I am always meeting people in this world. Flippers, buy and hold, people, and so on. It is all part
of the long term goal. I am going to find enough people and or money to buy properties based off of GC’s model because I can copycat him to make up for my lack of creativity, being new to multifmaily investing myself.
But I’ll do it.
@Michael Ealy
We are struggling to pick a healthy market that will not suffer come the next economic downturn. We have to invest long distance since price to rent ratios are untenable in New England (and 1800’s structures for buy and hold are not ideal). We are looking in the Southeast and Midwest but lack experience in identifying what areas are not saturated with investors, making it harder for newbies to gain a foothold.
We have great credit, strong incomes, hustle, and high capital family members - but it’s overwhelming to find a safe and smart place for that money. It won’t stop us, but it is slowing us down. How would you pick your market? Or what city might you pick? We are seeking a 6-40 unit structure in a B/C neighborhood.
@Michael Ealy
I own 11 units and am in the middle of a BRRR 7 unit in a B area that will appraise for 25% higher once I am down with the renovations to only a few of the units. I have huge goals for myself and my team. I know in the next year or 2 I will be purchasing 20-50 unit complex's at a time. Right now I am more so in the renovate, then refinance and wait phase on my 7 unit. I have a few smaller investors but am looking for larger 6 figure investors that love an amazing return from a very well known trusted person that would bend over backwards for his family friends and investors. I think I'm just trying to speed up the process because I know I can BRRR a 100 unit complex and have the team and mentality to take it down. Very similar to what you are doing but just in a different market, south of Boston for me. I appreciate you commenting back to everyone and giving tips and hints. You will be repaid 10 fold for your generosity.
@Michael Ealy
I'm new to BP maybe 2 weeks. I've been listening to the podcasts I literally started on the first podcast I'm on #19 I haven't done my introduction yet. I've been wanting to get into REI wasn't sure how and I wanted to learn more to reduce the chance of major loss or disappointment or going in totally blind. I know it can't be eliminated. My manager I'm kind of trying you use him as a mentor trying to figure out what I can offer in exchange he is really into real estate I think he's mainly large multi 115 doors and up. I have run somethings I've been learning by him he's impressed with how much I have learned in that time frame. He also doesn't think it's a good time to jump in due to High DOM in the area and unrealistic inflated pricing so I'm still learning. I did start the process with Nick Vertucci and formed a C Corp which I now see may be over doing it but I can't see doing 40k when that could go to Reno. I also just became licensed for life insurance and learned I can borrow against my life insurance policy I'm still working on that it might get me enough capital to get a full buy and hold but I appreciate feedback thoughts or suggestions
Great story! Thanks for sharing!
Originally posted by @Michael Ealy:
Originally posted by @Sherwin Gonzales:
@Michael Ealy great post!
I literally just answered a similar question on another thread and my answer is Capital. There is no such thing as a No Money Down deal. You need capital to close deals regardless of what anyone says. It's how you get that capital for deals is where strategy comes to play whether you use leverage from banks, raise from friends and family, acquire seller's financing, etc. You need capital to scale bigger and grow your portfolio.
Sherwin,
Thanks. I disagree on the statement that there's no such thing as a "no money down" deal. There is. I've been given buildings in the past and even now.
Here's an example that happened 8 months ago. Owner is tired and he asked me to take over ownership of a 40+ unit apartment building for $1.5M. My downpayment on the deal = $0.
My team took over. We thought we needed to put in capital to renovate the units to increase the rents. Good thing we didn't.
Instead we used the income from the building to turnover the units one at a time but we improved the units significantly. As a result, section 8 increased the rents significantly and we got an offer from a buyer willing to buy the building for $2.2M.
Maybe we'll net $2.0M by the time we close (in 2 months) and pay everyone.
$500,000 profit in 10 months on a $0 down deal.
And I can give you more examples (maybe I will do that on a separate post).
$0 down deal exists but 99% of investors don't realize that you can use things other than cash as "downpayment". You just have to be a little bit creative and use a lot of HUSTLE.
Originally posted by @Frances Buerkens:
@Michael Ealy
We are struggling to pick a healthy market that will not suffer come the next economic downturn. We have to invest long distance since price to rent ratios are untenable in New England (and 1800’s structures for buy and hold are not ideal). We are looking in the Southeast and Midwest but lack experience in identifying what areas are not saturated with investors, making it harder for newbies to gain a foothold.
We have great credit, strong incomes, hustle, and high capital family members - but it’s overwhelming to find a safe and smart place for that money. It won’t stop us, but it is slowing us down. How would you pick your market? Or what city might you pick? We are seeking a 6-40 unit structure in a B/C neighborhood.
Frances,
B's and C's are where capital is flowing to right now. The way I made my money though is you pick up properties in C-, even D's (but not war zones) with the provision that those areas would become B's.
That is not an easy market analysis to do but one of the signs is when there are multi million dollar development happening, or a big employer is coming to an area, or there is a change in a city government and it is now friendlier to investors, etc.
This know-how comes with being aware on what's going on in the community...actually talking to city councilors, developers, etc - and of course, I won't divulge all of my secrets here on how I pick my markets (LOL)
Originally posted by @Ryan Short:
@Michael Ealy
I own 11 units and am in the middle of a BRRR 7 unit in a B area that will appraise for 25% higher once I am down with the renovations to only a few of the units. I have huge goals for myself and my team. I know in the next year or 2 I will be purchasing 20-50 unit complex's at a time. Right now I am more so in the renovate, then refinance and wait phase on my 7 unit. I have a few smaller investors but am looking for larger 6 figure investors that love an amazing return from a very well known trusted person that would bend over backwards for his family friends and investors. I think I'm just trying to speed up the process because I know I can BRRR a 100 unit complex and have the team and mentality to take it down. Very similar to what you are doing but just in a different market, south of Boston for me. I appreciate you commenting back to everyone and giving tips and hints. You will be repaid 10 fold for your generosity.
Sounds like you got it figured out and good for you!
In this market, I actually do BRRSR (Buy-Rehab-Rent-Sell-Repeat). It took me 6 years to make my first $1 MILLION profit on one building but in this market, every 2-3 years I can buy-rehab-rent then sell and make a million dollars and more. Of course depending on the numbers, I still do BRRRR (hope that gives you a "hint" on how to accelerate and jump to 100 units or more)
:)
Originally posted by @Angelica Holden:
@Michael Ealy
I'm new to BP maybe 2 weeks. I've been listening to the podcasts I literally started on the first podcast I'm on #19 I haven't done my introduction yet. I've been wanting to get into REI wasn't sure how and I wanted to learn more to reduce the chance of major loss or disappointment or going in totally blind. I know it can't be eliminated. My manager I'm kind of trying you use him as a mentor trying to figure out what I can offer in exchange he is really into real estate I think he's mainly large multi 115 doors and up. I have run somethings I've been learning by him he's impressed with how much I have learned in that time frame. He also doesn't think it's a good time to jump in due to High DOM in the area and unrealistic inflated pricing so I'm still learning. I did start the process with Nick Vertucci and formed a C Corp which I now see may be over doing it but I can't see doing 40k when that could go to Reno. I also just became licensed for life insurance and learned I can borrow against my life insurance policy I'm still working on that it might get me enough capital to get a full buy and hold but I appreciate feedback thoughts or suggestions
Angelica,
You need to FOCUS. It sounds like you're trying to do/ learn too many things all at once.
Pick one - houses or apartment buildings
Pick one - wholesaling, fix n flip, BRRRR
Then develop an action plan on ONE property type and ONE strategy.
Then implement the plan DAILY.
Hi Michael,
I'll definitely be reading your whole story today. I'm in my late 40s, with a wife battling cancer, and I am looking at the fastest way to be able to quit my regular job to be with her and celebrate every day we have together.
I originally thought about single and/or multi family, but scaling to replace my salary would be fairly slow, in terms relative to my situation. I am certainly interested in going bigger with apartment complexes, but have a few barriers listed below.
1. Lack of knowledge even though I've been consuming as much content as possible lately.
2. Lack of funds. I have great credit and some funds put away, but not as much as I would need for even a triplex down payment in my local area.
3. The cost of entry in New England is quite high. There are triplexes in the area that cost as much as small complexes (25 units) in other areas.