First time Multifamily / Apartment Complex

[Almuthanna Abuasi]

Hello Everybody, 

I have been snooping and studying the content on BP for a long while and have decided it's time to start. I am looking at several multi family and Apartment Complexes in my area. (Delaware) 

Mainly throughout most of the content on this site and some of the forums, I have noticed that most deals are actually flipping or rehabbing homes. Has anyone made any purchases for properties that didn't necessarily need work done?

Also, being that this will be my first property, I have my eye on an est.6 unit for around 600,000$. How can I manage funding for such a property? 

Please forgive me if these questions have been previously asked I am just looking for some insight for people that went down a similar path.

[John Warren]

Hi @Almuthanna Abuasi

The reason you see so much about properties that need work is that it is so hard to make money if you buy "turn key". I recently purchased a 9 unit apartment building in Berwyn, which is in the Chicago western suburbs. We have completely renovated 4 units, and will be doing a 5th soon. We buy this way because turn key properties are selling at 4 or 5 cap based on pro forma data (lies). 

As far as funding, I would look to see if you can use a cash out refinance or HELOC on your personal residence. That is how I personally got started, and it is a great way to get the cash. You will need to come up with 20% down for most traditional commercial apartment deals, and sometimes 25% if you aren't talking to the right banker.

What is the going cap rate in your area? Is this 6 flat a solid deal, or is it overpriced?