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Updated over 7 years ago, 05/22/2017
Best place to buy a large apartment building?
Hello all, after doing tons of research. Close to buying a 3-unit family and then backing out because I did not feel the cashflow amount was worth it. I was thinking about going bigger after watching a bunch of youtube videos. Is it crazy for a beginner like myself to want to invest in a apartment complex say with 10+ units? Also any advice where the best place to invest in something like this would be? If I sell my house I would have about $100,000 in capital to invest in RE with.
Originally posted by @Anthony Gayden:
Originally posted by @Chris Martin:
@Anthony Gayden So you bought a 10+ unit apartment as your first investment? Interesting. I don't know anyone who did that. You are the first! Congratulations!
No, I bought a 4 unit as my first deal and bought a second 4 unit 2 months later.
I wasn't a coward and I knew what I wanted.
First of all, congratulations on your remote purchase.
I never called you, or anyone else on BP, a coward. Go back and look at my posts. You are confusing me with someone else.
Regarding my post, about buying local large multifamily property. I stand by it. The reality is a quad is not a large multifamily property. From the perspective of 99% of lender's in the US, it isn't even considered multi-family. Lenders finance it with a mortgage (or deed of trust) in the same way as a single family, just with a 1-4 family rider.
So in the context of this topic, about the Best Place to buy a large apartment building, you can advocate buying remote if you like. I don't. If it is 5+ units, and as the OP said he's selling his house and has $100K... unless he's buying C class property somewhere, he will need financing. Bank financing for 5+ units will require a commercial lender. I know of no commercial lenders that would lend for a large apartment building to a newbie, out of state investor with only $100K. There are three strike (or red flags) in that one sentence!
And, yes, you can get across the country. And FNMA has a small loan program. Fannie Mae defines "Small Loans" as loans of less than $3 million nationwide or less than $5 million in high-cost markets such as New York City and Los Angeles. The good thing is the minimum is only $1M. The bad, is your net worth needs to meet or exceed the loan amount.
As I pointed out in earlier posts, I am in the small/micro MF market at 16 - 50 units. Not that I won't go larger (my partner and I are looking at one in Shelby), but in NC and SC property less than $1M and over $300K seems to be a good spot, where buyers are to big to be small and too small to be big.
@Chris Martin Your made it clear I'm a newbie and I know this already. So that being said what advice can you share if you were in my shoes.
Goodluck to your investment i wish i can do that as well in the near future.
Originally posted by @Eric DeVito:
@Chris Martin Your made it clear I'm a newbie and I know this already. So that being said what advice can you share if you were in my shoes.
When I was in your shoes, I stayed local (within about a 1 hr. drive radius) and kept within my means. While I wax maxing out on Fannie Mae loans (10 at the time), I worked on developed banking relationships with commercial lenders in my area. I learned a lot in the first 10 properties. All were SFR asset class. But what fits for me may not fit for you.
So your post: "The plan is to use the VA Loan again locally and house hack, and then use my profits from selling my original home to buy an investment property (preferably multi-unit)." sounds like a plan to me, because those are your words and your vision. You'll need to find a commercial lender if over 4 units, find a suitable property that meets your profitability, and find a trustworthy property manager. All big challenges, IMO. So talk to those folks to get an idea of how your vision fits in with those 3 key parts.
Originally posted by @Chris Martin:
Originally posted by @Anthony Gayden:
Originally posted by @Chris Martin:
@Anthony Gayden So you bought a 10+ unit apartment as your first investment? Interesting. I don't know anyone who did that. You are the first! Congratulations!
No, I bought a 4 unit as my first deal and bought a second 4 unit 2 months later.
I wasn't a coward and I knew what I wanted.
First of all, congratulations on your remote purchase.
I never called you, or anyone else on BP, a coward. Go back and look at my posts. You are confusing me with someone else.
Regarding my post, about buying local large multifamily property. I stand by it. The reality is a quad is not a large multifamily property. From the perspective of 99% of lender's in the US, it isn't even considered multi-family. Lenders finance it with a mortgage (or deed of trust) in the same way as a single family, just with a 1-4 family rider.
So in the context of this topic, about the Best Place to buy a large apartment building, you can advocate buying remote if you like. I don't. If it is 5+ units, and as the OP said he's selling his house and has $100K... unless he's buying C class property somewhere, he will need financing. Bank financing for 5+ units will require a commercial lender. I know of no commercial lenders that would lend for a large apartment building to a newbie, out of state investor with only $100K. There are three strike (or red flags) in that one sentence!
And, yes, you can get across the country. And FNMA has a small loan program. Fannie Mae defines "Small Loans" as loans of less than $3 million nationwide or less than $5 million in high-cost markets such as New York City and Los Angeles. The good thing is the minimum is only $1M. The bad, is your net worth needs to meet or exceed the loan amount.
As I pointed out in earlier posts, I am in the small/micro MF market at 16 - 50 units. Not that I won't go larger (my partner and I are looking at one in Shelby), but in NC and SC property less than $1M and over $300K seems to be a good spot, where buyers are to big to be small and too small to be big.
When it comes down to it, I don't think it is out of the scope of reality to want to invest in multi family as a beginner. I will not change my opinion so I will have to respectfully disagree.
Eric DeVito have you given up on NYC? Sounds like it's been good to you so far!
If going big MF is your goal go after it. But keep in mind more units doesn't always equal greater ROI. There is a reason the cap rate in NYC and the surrounding areas is so low.
I talk to guys doing MF down south up here. I know a few investors who own hundreds and one that owns thousands of units down south. That's good for them.
Plenty of success stories closer to home tho. I know a guy here in NYC that bought a building in NYC that made 350x his money in 30 years. Right here in good old NYC. Big multi family guys can force all the appreciation they want. 350x just isn't going to happen for them.
I was talking to my neighbor the other day. Retired cop. Has a 14 unit in the Bronx he juts sold. He bought for 300k sold after 20 years for 2m. He put down 50k. He took out a fortune in rents while he waited.
If your in your market you have knowledge people in far away places don't have. The same works for people in far away places you want to buy. You'll have to work harder to get and close deals. Harder to force appreciation, manage your manager. All that stuff is easier when you stay close to home.
Im guessing from your post your ruling out OO FHA I'm sure you must have your reasons(wife/kids?)
If you can take another look at that. you have a huge advantage if you can owner occupy and use an FHA loan.
@John Hickey I will be using the VA loan again to buy a multi family after I sell the home I'm in now. If I want to stay close to home in terms of investment properties perhaps I can look in Newark and PA. Hard to break into NYC market
Eric DeVito Your in Staten Island, that's NYC.
I know guys buying there and making big bucks. It's tougher now than it was a few years ago sure, did you think it would be easy to get rich? Certainly no easier driving a hundred miles or two and then trying to learn that on the fly.
You have to dive into whatever market you want to do business in. You'll
Need to spend a lot of time to familiarize yourself with geography and in some cases learn block by block pricing. Or you could just ask someone you've never met in person till you told them you had 100k to invest if it's a good deal.
When I find my deals I'm fighting tooth and nail to get, and close them. That's why they are good deals. If there easy to find there is a reason for that. I would be wary of towns (and people)with plentiful deals.
That beat up area on the north shore they are fixing up right now is where I would be investing if I was closer to SI. You buy one now while it's still cheap and in 20 years you'll be farther along than guys that bought a 100 unit at a 7 cap that will barely appreciate faster than inflation.
@John Hickey Way easier said that done my friend.
Eric DeVito easy? Who ever sold you on this being easy owes you a refund.
What I was trying to along to you above is that you can make big bucks close to home without taking huge risks of losing your investment. What it sounds like to me that your considering doing is jumping into MF business from a distance. If that's your goal then go after it. You didn't mention any numbers except 100k down.
I turned 30k into a 1.4m profit with an FHA OO on one transaction 1 building. I lived in it for a year and self managed for the other 9. It's about the easiest way I can imagine a guy like making close to 50x my investment in ten years.