Management options for 32 unit apartment

[Tom Lafferty]

I've been looking for a 60+ unit apartment complex that would afford 3rd party management in the DFW area for several months without much luck. I've recently had a 32 unit deal basically fall in my lap and I've decided to move on it. It is a solid deal if self-managed, but the returns just aren't where I (and my investors) would like them to be with a PM company involved. I also like the idea of truly learning the business from the bottom up before moving onto bigger properties where I'd be using a PM co. The Ken McElroy podcast reinforced my thinking when Ken said he puts his new people at a property to learn the basics.
I'm looking for input from those of you who have owned/operated similar properties, and how you did it. I know many other owners of these smaller properties and have discussed resident managers, part-time professional staff, partnering with owners of nearby properties and sharing staff, etc. Our budget includes payroll for a PT maintenance person and PT mngr.
All of these have pros and cons, but this is a huge step for me, and I guess I'm just looking for reassurance that others out there are successfully doing this. I've got a great deal of support locally from experienced people, but BP was much to valuable a resource to ignore...

[Tom Lafferty]

I ran across this post while searching for something else and cannot believe its been almost two years since purchasing the 32 unit property.  Given all the advice that came in from my original question, I figured I should add some information in case others read this.

I've been self-managing since Feb 2014, and while there were times in the beginning that were a little crazy, it has been great.  When I say self-manage, I don't mean I'm sitting there every day writing leases or fixing toilets.  We have a manager and a maintenance guy, but there is no property management co to pay the bills, hire staff, direct contractors for rehabs, etc.

We have rehabbed about 20 of the 32 units, increased rents dramatically, and the property is still 100% full with a waiting list, so they need to go up some more. 

I mainly wanted to say that I am extremely glad that I made the leap on this one.  I was scared to death to do it with no real estate experience whatsoever, but it has been an incredible learning experience.  I had an amazing group of investors who trusted me, so that was obviously key in this.  I would NOT invest in something like this myself if I weren't very very comfortable that the person running the deal was either very experienced, or working with someone who was.  In my case I have a great mentor who helped me buy the deal, which could have been a disaster had I tried it on my own. 

Learning the business from the ground up has given me a great insight into the business, and I've even invested in several other deals where people were doing the same thing I did, but now I get to be the totally passive investor!  I am invested in over 500 units now, which I think would have been much harder to do without my hands on experience. 

The property is now under contract to sell.  We bought it for $1,137,500 and our sale price is $1,475,000.  Our initial equity was about $325k, so with the cash flow during our ownership as well as the capital gain on sale, our investors will get approx. a 100% return on their investment, or a 50% annualized return.  Our goal was to double everyones money in 5 years, but we can hit that now, so they voted to sell. 

I will also add that having a great staff (even if its only 1 part-time person) on site is absolutely critical.  I know some other first-time apt owners who are doing the same thing I am, and are doing extremely well.  They did have challenges getting the right person on site, which took a ton of their time, and was very stressful.  I simply got lucky that the woman who we had from day one is an absolutely AMAZING person.  Without her this may not have been as successful.  Just wanted to say you CAN self manage successfully if you learn all you can before jumping in, and have good people around to help you.

Just wanted to post the end of the story....