What's Your Main Obstacle in Buying an Apartment Building?

[Michael Ealy]

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:

Part 1 - https://www.biggerpockets.com/forums/55/topics/690349-from-bankruptcy-to-1-000-units-part-1-thru-the-dark-tunnel

Part 2 - https://www.biggerpockets.com/forums/55/topics/692382-from-bankruptcy-to-1-000-units-part-2-rising-from-the-ruins

Part 3 - https://www.biggerpockets.com/forums/48/topics/695243-from-bankruptcy-to-1-000-units-part-3-how-to-build-an-empire

Who wants to go first?

[Michael Ealy]

Originally posted by @Dennis M.:

Thank you for the words of wisdom Michael . I will follow it moving forward 

 You're very welcome.

Another idea I forgot to mention is doing a 1031 exchange since you have properties already. That will lessen the capital you need significantly. Heck, you might even do it with $0 if your smaller rental properties have a lot of equity.

[Vincent Hawkes]

@Michael Ealy

Naturally I have the same dream as most, to get out from under the 9-5 job. Well I work 6am to 4pm right now and it’s hard to get out and talk to people, to learn. I do have some equity that I’d love to turn into a multi family complex that could potentially pay enough out that I can quit my regular job. Lots of sharks out there looking to take that money from you. I’d love to team up with someone experienced in this like yourself to learn how to go about being a successful multi family professional.

[Deb N.]

For me it's the fear factor that's holding me back.

I'm mid 50's and want to retire within the next 2 yrs and the company that I work for now might be closing so I am focusing on hitting my 401k aggressively and saving up emergency monies.  

My fear is, if I use the money to invest in quads now, that I'll not be able to retire and end up working well into my 60's. 

I had a goal to invest in 2-4 quadplex but now I am afraid to move forward and take a chance on losing.

[Michael Ealy]

Originally posted by @Vincent Hawkes:

@Michael Ealy

Naturally I have the same dream as most, to get out from under the 9-5 job. Well I work 6am to 4pm right now and it’s hard to get out and talk to people, to learn. I do have some equity that I’d love to turn into a multi family complex that could potentially pay enough out that I can quit my regular job. Lots of sharks out there looking to take that money from you. I’d love to team up with someone experienced in this like yourself to learn how to go about being a successful multi family professional.

Vincent,

Keep the dream alive. It's possible - even in your situation.

In fact, the way I see it, you're in a good position. Your work stops by 4 PM so that gives you some time to talk to people. The networking meetings with real estate investors are usually in the evenings. You can still make phone calls from 4 to 5 pm. You can visit properties in the weekend.

Nothing worthy in life is easy. The way to your goals is through a narrow road called HARD WORK.

Now regarding the equity - is that in your home or in a rental property? If it's in your home, my suggestion is to keep that separate from real estate investing. You don't want to lose your home if your real estate investments fail. There is always a better way. Send me a PM and I can discuss your situation further.

[Michael Ealy]

Originally posted by @Deb N.:

For me it's the fear factor that's holding me back.

I'm mid 50's and want to retire within the next 2 yrs and the company that I work for now might be closing so I am focusing on hitting my 401k aggressively and saving up emergency monies.  

My fear is, if I use the money to invest in quads now, that I'll not be able to retire and end up working well into my 60's. 

I had a goal to invest in 2-4 quadplex but now I am afraid to move forward and take a chance on losing.

Deb, I agree with you.

The investing stories we see on TV or in the movies are almost always not completely true and/or exaggerated. Successful investors that I know rarely put ALL of their money in an investment or in a venture. 

Keep your retirement account separate from investing in real estate.

Additionally, if I were you, I will figure out or learn the following:

• Learn how to acquire apartment buildings with as little cash as possible (there are many creative financing techniques)
• One of these creative financing techniques is doing owner financing
• If you have good credit, explore getting a business line of credit

Successful real estate investors or real estate investors who have survived the downturns of the real estate cycle are CONSERVATIVE investors and they are wise with their money. They prioritize safety first, and then aim for big returns. I've done that since 2006 so none of my investors have lost any money with me.

You can do the same.

[Dennis M.]

Michael who is the author of ask and you shall receive ? There’s many by this title

[Michael Ealy]

Originally posted by @Dennis M.:

Michael who is the author of ask and you shall receive ? There’s many by this title

Dennis, 

LOL. I was talking about the book - the Bible when I mentioned the phrase, "Ask and you shall receive" :)

[Dennis M.]

Originally posted by @Michael Ealy:

Originally posted by @Dennis M.:

Michael who is the author of ask and you shall receive ? There’s many by this title

Dennis, 

LOL. I was talking about the book - the Bible when I mentioned the phrase, "Ask and you shall receive" :)

You are correct - it is “ THE “book . Thanks again for the insight  

[Effram Barrett]

Originally posted by @Alana Donson:

I am a realtor and my soul purpose of acquiring a real estate license was to become an investor in multifamily/apartment buildings. However life happened and my credit burned up and now I have a five month old. In life you either need the credit or the money. Of course I know about creative financing but that means you have to know people in high places and since I'm new to real estate I don't. So yes, I'm stuck.

 Has the bold/underlined worked in your favor so far? I ask because I am in the process of getting my license to leverage my investment business

[Effram Barrett]

@Michael Ealy what are the key measurements you use to figure out if a complex is worth pursuing?

[Michael Ealy]

Originally posted by @Effram Barrett:

Originally posted by @Alana Donson:

I am a realtor and my soul purpose of acquiring a real estate license was to become an investor in multifamily/apartment buildings. However life happened and my credit burned up and now I have a five month old. In life you either need the credit or the money. Of course I know about creative financing but that means you have to know people in high places and since I'm new to real estate I don't. So yes, I'm stuck.

 Has the bold/underlined worked in your favor so far? I ask because I am in the process of getting my license to leverage my investment business

Effram,

Being licensed helped me specially in the beginning. But is it absolutely necessary - no. You can start an apartment investing business even without it.

And with regard to what Alana posted - I disagree that you need to know people in high places to do creative financing. There are many forms of creative financing - one of which is structuring a deal with the seller so he/she allows you to buy the property with as little cash as possible. Anyone - even a newbie investor can do that. How do I know? I was a newbie once before too and if you read my story - that's how I actually purchased my VERY FIRST DEAL.

[Michael Ealy]

Originally posted by @Effram Barrett:

@Michael Ealy what are the key measurements you use to figure out if a complex is worth pursuing?

The ROI has to be 30%

So I not only look at the current NOI, I also look into the Pro-forma (but not the seller's pro-forma: I make my own based on my understanding of the deal, the building and the market).

I am sharing too many secrets...I should start charging people money for advice (hahaha)

[Vedran Sehovic]

Issues (in order): 
1. Capital
2. Market (NYC)

[Michael Ealy]

Originally posted by @Vedran Sehovic:

Issues (in order): 
1. Capital
2. Market (NYC)

 Vedran,

I hear you - and I understand why capital will be a problem specially in your market.

Your options are:

1. Be in a position so that you can raise massive amounts of capital. How do you do that? The one thing going for you is that in NYC, there are a lot of hedge fund managers and private equity firms looking for the right investments. You have to figure out how to break in the right circle of individuals with access to a lot of money. Once you get IN, it's a matter of finding the right deals. 

I am closing (in about 44 days) on a 200-room hotel in Wisconsin and just a few years ago, I never imagined I could do it but I did. The key to raising the big capital is the few who control massive amount of cash. And you're living in the few cities on earth who have those few people!

2. If you're not willing to do #1, then learn how to do smaller deals and investing out of state.

[Hal Fitzgerald]

@Michael Ealy I think I am the one who combines several if the factors you mentioned. I'm not the rich person who can face failure peacefully. It is vital for me to investigate and finally make a decision. I try hard to avoid risk although I know it is possible. For me, I hope I can get professional advice from others before paying the bill. 

[Randall Weatherall]

@Michael Ealy

Thanks for sharing the info! As a commercial agent in a pretty popular investment market, I find myself helping people figure out deals all the time and trying to find what works best for them only to find them something and them stall out on financing or other issues that can be handled up-front. They need info like yours before jumping in to go into the ring with both gloves on!

Thanks for sharitypir experience for us all to benefit from, Michael!

[Michael Ealy]

Originally posted by @Hal Fitzgerald:

@Michael Ealy I think I am the one who combines several if the factors you mentioned. I'm not the rich person who can face failure peacefully. It is vital for me to investigate and finally make a decision. I try hard to avoid risk although I know it is possible. For me, I hope I can get professional advice from others before paying the bill. 

 Hal, I avoid risks as much as possible too. After learning from losing everything back in the day (and fortunately, I didn't have any investors at that time), I never lost any of my investors' money in any deal. Why? Because I assess all the risks, and if I can't develop a mitigation and contingency plan to handle the risk, then I don't do the deal. It's all a matter of knowing how to reduce the risk's chance of happening and having a plan of action if the risk happens anyway.

And as far as getting professional advice from others before paying the bill - what do you mean by that?

[Michael Ealy]

Originally posted by @Randall Weatherall:

@Michael Ealy

Thanks for sharing the info! As a commercial agent in a pretty popular investment market, I find myself helping people figure out deals all the time and trying to find what works best for them only to find them something and them stall out on financing or other issues that can be handled up-front. They need info like yours before jumping in to go into the ring with both gloves on!

Thanks for sharitypir experience for us all to benefit from, Michael!

You're very welcome Randall.

I work with a lot of commercial real estate agents so I know what you mean. We have beaten out other investors on several deals because we have the reputation of being to close on the deals we make offers on. In fact, I am closing on a 42 unit apartment and on a 200-room hotel in the next several weeks. All the capital have been lined up way ahead of the closing date!

[Alana Donson]

Originally posted by @Michael Ealy:

Originally posted by @Effram Barrett:

Originally posted by @Alana Donson:

I am a realtor and my soul purpose of acquiring a real estate license was to become an investor in multifamily/apartment buildings. However life happened and my credit burned up and now I have a five month old. In life you either need the credit or the money. Of course I know about creative financing but that means you have to know people in high places and since I'm new to real estate I don't. So yes, I'm stuck.

 Has the bold/underlined worked in your favor so far? I ask because I am in the process of getting my license to leverage my investment business

Effram,

Being licensed helped me specially in the beginning. But is it absolutely necessary - no. You can start an apartment investing business even without it.

And with regard to what Alana posted - I disagree that you need to know people in high places to do creative financing. There are many forms of creative financing - one of which is structuring a deal with the seller so he/she allows you to buy the property with as little cash as possible. Anyone - even a newbie investor can do that. How do I know? I was a newbie once before too and if you read my story - that's how I actually purchased my VERY FIRST DEAL.

I read your story after the fact...my apologies. However, you did have something to offer. A trade...a skill that was very beneficial in your journey which was the construction factor. If I went looking for inexpensive deals that could be flipped like yourself I'd have to find a contractor to do the work. A dependable one at that. Your story was very inspiring and definitely a pick me up. With that being said I guess I need to get out here and meet some people and network. You said you have to be uncomfortable and I'm an introvert so there you have it lol wish me luck!

[Alana Donson]

Originally posted by @Effram Barrett:

Originally posted by @Alana Donson:

I am a realtor and my soul purpose of acquiring a real estate license was to become an investor in multifamily/apartment buildings. However life happened and my credit burned up and now I have a five month old. In life you either need the credit or the money. Of course I know about creative financing but that means you have to know people in high places and since I'm new to real estate I don't. So yes, I'm stuck.

 Has the bold/underlined worked in your favor so far? I ask because I am in the process of getting my license to leverage my investment business

 Like ME said its not the end all be all but definitely a bonus in my opinion. I personally haven't had any deals yet and am still getting out there and building my network. Go ahead and invest in yourself and get your license. You wont regret it!

[Michael Ealy]

Originally posted by @Alana Donson:

Originally posted by @Michael Ealy:

Originally posted by @Effram Barrett:

Originally posted by @Alana Donson:

I am a realtor and my soul purpose of acquiring a real estate license was to become an investor in multifamily/apartment buildings. However life happened and my credit burned up and now I have a five month old. In life you either need the credit or the money. Of course I know about creative financing but that means you have to know people in high places and since I'm new to real estate I don't. So yes, I'm stuck.

 Has the bold/underlined worked in your favor so far? I ask because I am in the process of getting my license to leverage my investment business

Effram,

Being licensed helped me specially in the beginning. But is it absolutely necessary - no. You can start an apartment investing business even without it.

And with regard to what Alana posted - I disagree that you need to know people in high places to do creative financing. There are many forms of creative financing - one of which is structuring a deal with the seller so he/she allows you to buy the property with as little cash as possible. Anyone - even a newbie investor can do that. How do I know? I was a newbie once before too and if you read my story - that's how I actually purchased my VERY FIRST DEAL.

I read your story after the fact...my apologies. However, you did have something to offer. A trade...a skill that was very beneficial in your journey which was the construction factor. If I went looking for inexpensive deals that could be flipped like yourself I'd have to find a contractor to do the work. A dependable one at that. Your story was very inspiring and definitely a pick me up. With that being said I guess I need to get out here and meet some people and network. You said you have to be uncomfortable and I'm an introvert so there you have it lol wish me luck!

Alana,

I did the work myself when I started. No contractors. And then eventually, I got subcontractors and GC my own projects. Only after I met my business partner - Nate - who is a master at construction and renovation management, that's when we were able to do BIG projects.

So, don't go too big too fast. Start with a 2-family that needs a little bit of work that you can buy at some discount. Then scale from there. 

And yes - you got to network. Even if you're an introvert. In fact, introverts are actually better than extroverts when networking. Introverts are better listeners in general. Just be genuinely interested in people, start a conversation and then listen more than you speak. You will be amazed when you do that. 

[Kevin Clayton]

@Michael Ealy

I’m my own obstacle. Making sure I set aside time too....Create clear goals. Talking with other people who are doing what I want to do. Analyzing the data and being real with the numbers. I own a quadra plex and I’m preparing to leverage it to get another single family residence or multi unit. Step by Step

I’m going to listen to the podcast to find out how you made deals happen with with no money and bad credit. I’m curious about how you found the money, opportunity, analyzed them, got the right team, worked with budget and turned it into profit that moved you into your next deal.....all the while taking advantage of tax benefits and minimizing taxes.

[Anthony Petrarca]

I'm currently shopping as we speak. I will be doing a 1031 on a commercial property that is very close to contract now. I  also currently own a 2 family. 

I have the capital and I have the reserves I will need to make it happen, just not easy finding something I like. This will be my first "big property", so I would like it in my tri state area, RI, MA,CT. Would love to venture further out, but I'm a little timid at this point. Would prefer 1 large bldg, but I'm open. 

So, I have some experience, but not on a large scale. Looking to put $800 - 900K down

Debt wise I would like to be no more than 70 LTV or even 50 LTV. Thoughts?

[Chris Gray]

Government

[Ivan Lopez]

@Michael Ealy for me is financing or mortgage lenders. For example I'm in the process of acquiring a property that requires over $700,K in lending and needles to say it's been very hard to find bankers willing to work with me. Right now the best offer I've received is for a 60 months ARM with 25 years amortization at 5.05% w/15% down payment (+100,K) and I've an excellent credit! So my question is, should I continue to shop around for loans? A good friend of mine recently got a fixed rate (4.50%) $240,K for 30 years and he believes I can find a better deal. Your thoughts BP folks...