Large Apartment Building Turnkey Experience

[Marco Campos]

I currently own residential multifamily properties that are near passive income investments. My property manager handles minor events and I respond with decisions for major events such as a repair that exceeds $1K. I am looking into purchasing a 20 unit apartment building in Cleveland that has been completely renovated. I would like to get insights on how active are out of state investors involved in managing large apartment buildings to give me an idea if I should get involved with this larger asset. 

In my assumption, I believe it would be just like owning residential multi family properties except that I would have a higher volume of interaction with the property manager. Yet, I would like to get insights from experienced investors.

Questions for the discussion:

How frequent do you interact with PM for your apartment building?

What are typical fees for managing your larger property?

Do you have someone living on site because its required? 

What else must  I consider/plan for managing this larger asset from out of state?

Thank you all for your time in advance

[Joel Owens]

20 unit is small. To get scale and passive you likely need 80 to 100 unit building. You say property in Cleveland completely renovated but what does that mean?

Usually for these sellers it means nothing and that they did the cheapest crap possible with some carpet replacement, paint, and new knobs and maybe some fixtures if your lucky.

I could care less about such items. What I equate completely renovated to is they replaced all plumbing, electrical, heating and air, water heater, new roof, new siding,etc.,etc.

I would want to see pictures they took of the renovation and replacing everything. They could say electric replaced but splice it into old in the walls. All of these things and many more can take away cash flow for years with unexpected repairs and replacements. That property you thought was a higher cap rate in another market not local to you is now a dog sucking the cash flow dry and you might even have to add money to it just to keep it afloat.

These sellers tend to slam tenants in and there is no long term history of occupancy at the building and payments on time by the tenants. Depending on the tenant base you could pay 10 to 12% management fee if area is rougher and tenants take more work to manage. It's really not that much money for a manager. It depends on the rents per door.

If you have 20 doors at 400 a month then 8,000 a month and 96,000 a year. If they received 10% or 9,600 off of the gross and it will be less from non-payables etc. then not much money. Make sure you go check out the market and the area.

If you want to be really passive and have scale you might could invest with a syndicate on a much larger property that is better quality and has good scale.