Advice on purchasing mid-size apartment complexes

[Jeremy Hunsberger]

Hello all, so my goal is to buy apartment complexes. I would love to hear any stories, advice on purchasing properties 20+ units. Advice on best place to find financing would be appreciated too. Thanks!

[Darryl Dahlen]

In short, the path to success when buying multifamily properties is build in having a strong infrastructure. You will need a GOOD property management firm to manage the property so find one that is reputable before you start looking for a property. Find one that preferably has an established network of contractors, plumbers, electricians, etc. in place that are used on other properties they manage so you don't need to find those people yourself.
Secondly, you'll need a good layer and accountant. The larger the property you get into the more important these two people are, but for a 20-unit you'll certainly benefit from having a good lawyer and accountant on your side.

Get your finances/money in order BEFORE you look for a property. You won't have time to deal with this once you start looking for properties so make sure your PFS, tax returns, and funds needed to pull the trigger on the deposit and closing are in place.

I don't concur with Kim Younkin on getting pre-approved for commercial financing as there really is no such thing. Commercial loans are based on the income of a property, not yours, so a lender has no way to pre-approve you for a loan if there are no financials to analyze. 

You can, however, talk to local banks to get an idea of what kind of terms they'd offer on a 20-unit. They'll tell you what their likes and dislikes are for things such as the market, needed occupancy level, tolerance for deferred maintenance, etc.  

The more you know about what a lender(s) will or will not allow will give you a rough idea when looking at a property if it is bankable or not. In order to get a term sheet from a lender you will need to put a property under contract and obtain rent rolls and historical financials though.

In my experience, where people fail the most is trying to bite off more than they can handle either from lack of money, lack of experience, or both. Everyone wants to hit a home run when it comes to multifamily, but it's easy to fail as a property can easily go "off the tracks" when you lack experience or the funds to keep deferred maintenance issues from building up.

Find a property that works for you both in terms of financially and physically and remember that this is your first big multifamily purchase, not your last.