new to apartment complex investing

[Brent Rogers]

I am a new investor and I have flipped one home and bought one rental in the past 9 months.  Both were very good deals for me.  My "insider" who brought me the leads on these two has brought a couple of apartment complex deals in front of me.  They are out of state about 4 hours away.  I feel comfortable analyzing any single or multifamily residence but apartment complexes are another world to me.  I'm educationg myself quickly to the numbers (like assume 35-40% total expenses) but can someone tell me if this sounds like a deal worth pursuing?

Very close to major university in urban town so mostly student rentals

Currently 100% rented

13 units , 23 beds

$7,175 month in rents (86.1k/year)

I think I can get the property for around $625k.

Should I stick to what I have been doing (houses) or consider this deal?  The place appears to be well maintained and very close to campus.  My modeling shows positive cash flow of around $7,600/month.  However I get more than that with my rental house although it is on a 30 year personal mortgage and this obviously would be commercial.

Any wisdom appreciated.

[Wade Sikkink]

@Brent Rogers  We bought a 14 unit complex about 15 months ago.  Here's what we've learned since buying it.

Expenses last year ran right at 45%, which surprised me.  It felt like we were putting a ton of money into the place, but 45% is just about text book.

The previous owner had the place for 19 years and was worn out on managing it.  He had not done anything with rents for quite a while so we successfully raised rents 20% 6 months after buying the place.  We didn't lose a single tenant because we were still one of the cheapest places in town.

Inherited tenants are a pain.  We have been gradually getting rid of them, starting with the worst ones first and working our way up.  We just got rid of the last one that was a problem (late rent, dogs, etc.)  The lesson here is we didn't have a clue on the previous owners screening criteria.  Turns out there was none.  He handed keys to anyone that handed him $400.  If I did it again I would make all inherited tenants reapply.

Understand the deferred maintenance situation.  Older buildings require work, especially if the previous owner neglected them.  When we bought the building the seller kept referring to it as a cash cow.  Well, that's because he never put a dime into it.  For us it's been a money pit, but we knew that was going to be the case for the first 2-3 years.  Once we're done stabilizing the building it will be a nice cash cow for us, we just need to clean up his mess first.  The good news is the building is self funding the renovations.  We bought the building with zero out of pocket and haven't put any of our own money into the repairs.  Make sure you buy it right.

Good luck.