I want to buy a small apartment complex, what do I need to learn?

Question

Hi,

I move around too much for my job to do the normal route of buying up SFR/MFRs and managing them before moving on to a new deal, so I would like just jump in and buy a small apartment complex and get a property manager right off the bat to manage it.  I think owning a large property that is out of state with one property manager would likely be easier than multiple smaller ones (and I can't even imagine keeping track of multiple PM's).  Since I travel anyway I'm fine expanding my search to the entire US rather than my local area (I'm near the midwest right now).

I have about 130-170k in stocks that I could pull for a deal like this.  I'd like to go it alone for my first purchase if possible (i.e. not form syndicate).

I read the beginner pockets guide and their article on finding commercial deals; I've also done a little bit of snooping online to try and understand the process (loan types, etc.). Other real estate knowledge comes from reading on reddit and some youtube videos by graham stephan, a lot of this is more geared towards residential so I don't know how much of this carries over to commercial RE.

However, I'm not sure what to look for, how to value things, what to look for in a property manager, the commercial RE loan process, etc. I could really use some advice.

Brandon Lee · Answer

Ok, seems like I'm off with my terminology (confusing building vs. complex).

Scott Mac · Answer

Hi Brandon,

20% down, and possibly lender net worth, cash set aside, and experience requirements.

Cash or tapable money for CAPEX as needed.

Cash for operating expenses.

Cash for insurance.

Cash for any lender required repairs.

Are you sure you can get into a "Complex" somewhere with 130k to 170k by yourself.

You can probably find an apartment building, but a Complex might take a bigger baseball bat.

Just my 2 cents.

Alina Trigub · Answer

@Brandon Lee

Continue educating yourself while saving more funds. You can certainly buy a property sooner if you partner up with someone else who has funds, but partnerships could be risky too. So, while you're continuing to build the knowledge, start building the relationships as well as the funds. Here's a post to guide you further on the process: https://www.biggerpockets.com/blog/7-barriers-to-entry-commercial-real-estate-investing

Brandon Lee · Answer

I think I understand.  I don't mind working with a RE agent on this, when I said go it alone I was mostly just hoping to finance the purchase myself and not have to pool money with someone else to get a loan.  Though even this is just a preference.

What should I look for in a good partner/RE agent, are you able to give tips on that?  Where's the best place to meet people in your experience?

Evan Polaski · Answer

@Brandon Lee it can be done, but will be very hard.  Unfortunately, $170k is not going to get you very far.  You are looking at about a $600k asset.  There is a lot of great info on here, just click on the Education tab at the top of your screen and start reading/listening.  You will get a crash course very quickly.

Another route, I would start narrowing down your areas of choice.  The US is huge, and being successful is knowing the market very well.  Are there areas you travel to regularly?  Once you have a couple ideas, hop on LoopNet or a local MLS.  You can filter all MLS searches to show 2-4 or 5+ (others may vary the criteria).  This will start to get you an idea of what you can get.

Best of luck.  Feel free to reach out with more questions.  I think you best bet is to start reading, reading, reading.  There are a lot of great resources out there, both on Bigger Pockets and elsewhere that can help you better understand what you are getting into.

Ryan Luby · Answer

@Brandon Lee Bare in mind I do not invest out of state so take my advice with a grain of salt.

Having said that, you have some conflicting wants here. The want to invest in a small complex for your first investment, and the want to do it alone are going to make this pursuit difficult in my opinion.

I think to tackle what you're after ultimately getting started and successfully getting your first investment should outweigh most everything else but that's up to your why in pursuing this in the first place. I recommend listening to BP Episode 211 which covers a lot of the process necessary for out of state investing of any kind, and reading David Greene's book on long-distance re investing. From there, (as these two resources will guide you towards) it will all come down to relationships. You have the challenge of moving around so unfortunately the boot's on the ground, being present, walking properties is obviously not where you have leverage but this is crucial. So you have to work constantly on network to find a great partner. This could be an investor who actually partners with you to help get you started, or an agent who knows investing and helps find a deal, or a mix of someone who invest, has a management company.. this will be up to you to determine but I strongly suggest spending serious time finding a great boots on the ground partner, and building trust and a good relationship with them.

Hope this helps

I'm sure someone with more directly relevant experience will weigh in

Best of luck,

Ryan

I want to buy a small apartment complex, what do I need to learn?

Most Popular Reply