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Updated about 12 years ago,
Is now the time for a 2nd property?
Hi Everyone,
I'm new here, and was looking for some advice. My father and I are partners in a real estate holding company, and bought our first property together this time last year. The old adage that you don't make money in real estate when you sell, you make it when you buy is correct. This office building is in the heart of our little town (statesville), in great shape, and was purchased well below tax value. It's a 4k sq ft office complex that was a former bank building.
It currently houses our call center business (no, not telemarketing). Unfortunately, our other tenant is leaving us. There goes a cool $2k/month ($1500 rent/$500 utilities). Our payment on the building is only $1400/month, so we aren't really hurting, even if we can't find another tenant right away.
For the past few weeks, I've been scouring information on purchasing our first apartment complex. I've set some guidelines for the property we're looking for. Tell me what you guys think, and feel free to add to the list:
*Established Tenants
*Vacancy of less than 10% annually
*Local vacancy of the area the apartments are in <15%
*Located within 2 hours of charlotte (where I live)
*Minimum 6 units, preferably 10 or more.
*Minimum 12% cap rate
*Good location w/ good schools
*No Section 8 or gov't subsidized tenants
*No Rent Controls
*No Bad Neighborhoods...if I wouldn't live there...we won't buy it
*<$600k in price (renovations included)
I have a few questions:
A) Where is the best places to find apt. complexes for sale? I've used loopnet, and am not impressed.
B) Should we budget for a property manager or no? I guess a big part of that depends on the size of the property. 6 tenants are easier to manage than 20.
C) What type of apartments should we target? Which type of property is better and why - a complex that has 8 units that rent for $800/mo or a property that has 16 units that rent for $400 (assuming the cost of the buildings are the same)?
D) We presently own about 1/3 of the equity from our first property which roughly equates to about $100k. Are there ways to leverage this to help us purchase a larger/better complex?
E) Is now even the time to buy? From what I'm seeing there's some decent deals out there, but with us already having the obligations from our 1st office building, should we stick our neck out even more to help balance the risk? We're by no means over exerting ourselves as our call center is the equivalent of a cash cow. One would think that by owning multiple properties that you can more evenly spread the risk. What are your opinions? Wait and make sure the office building pans out, start small with a 6-12 unit building that doesn't break the bank, or should we shoot for the stars and go for a 18+ unit building?
Thanks!
Jeff