New to the game. Buying 300+ unit apartment complex. Any wisdom?

Question

Good day! I studied RE investment from 2008, or 2009, to 2011, but I'd always hesitated from buying. Looking back, I should have then, but at the time the big numbers were intimidating to me. Now, I shall soon be the proud owner of a 300+ unit apartment complex. Does anyone have any words of wisdom for me on busting out of the gate with a horse this big?

Brandon Wells · Answer

@Alan Lambert That is a great first deal!  Where are you at in the process?  Here are a few items that I can notate from an operational point of view:

• - Make sure you partner up with a reputable full service Management Company. This would be a company who can handle your leasing and rents, lease expiration matrixes, all your facilities needs, accounting and even your construction and project management needs.
• - It is also advisable that you have your preferred Management Company perform some form of due diligence for you.  For example, they would compare every lease to the rent roll and notate discrepancies, walk every unit and notate age of appliances, carpet condition, any evidence of water intrusions etc.
• - As @Charles Carillo mentioned, you want to partner with someone who is going to keep you informed.  Do they send you weekly updates on the performance of the week before (that update should include leasing velocity, renewal updates for all leases expiring out 60 days, current reputation data (likes, reviews star rating etc..), updates on maintenance requests and construction projects.  What does their financial reporting look like?  Do they send detailed budget variances?  
•

I can keep going on what it takes to ensure your property is in great hands, but the above should give you something to think about.  Wish you the best of luck on your journey in the multifamily investing.

•

Brian Adams · Answer

@Alan Lambert congrats!!

I can give you a laundry list, but here are my top 3:

1. Be prepared when the deal doesn't perform the way you have outlined in your PPM and executive summary. Don't just hand off the keys to the property management company and be an absentee owner. Ask for updates and it will be your job to verify.

2. Assuming you are syndicating the asset - communicate regularly with your team and investors. Share the good, bad and more importantly the ugly. If you can't pay returns to the investors because of XYZ issue, get ahead of the issue but sharing what happened and your plan to resolve.

3. If this is your first deal, raise more money than you think you need. Projects and costs can add up quickly so make sure you have adequate reserves for Capex and working capital.

Good luck!!

Alina Trigub · Answer

@Alan Lambert

Congrats on your first deal! Are you buying as an active investor or as a passive one?

Tj Hines · Answer

@Alan Lambert Congrats! That's awesome! Your support system/team will be the most critical component here. Your property manager is the horse you will have to rely on. Make sure they are fully equipped to take on a beast of 300+ units and already have experience in doing so. Accounting and reporting is vital as well. Make sure the management team has all the proper systems and procedures in place to run operations efficiently. To sum it up your management team is everything Hope this helps.

Charles Carillo · Answer

@Alan Lambert

Congrats, that is a large deal, especially for your first deal. Tell us about the deal? Did you syndicate it? Is it value-add?

Alan Lambert · Answer

@Brian Adams Thank you Bryan! I've found your advice most helpful. I'll be on site as often as possible. I agree, clear and thorough communication with all parties involved. I do plan to syndicate the deal. I'm very grateful for the tidbit on organizing a plan to resolve before talking to the investors, and especially for #3! Thank you! I shall indeed get more together than I'll need. Your advice is precious, and shall not fall on deaf eyeballs.

Alan Lambert · Answer

@Roni Elias

Thank you, Roni! I'll be on site as much as possible. I plan on getting to know the management team, and the tenants, and using my profits to boost the living quality there more yet and reinvest in more commercial RE.

Alan Lambert · Answer

@Alina Trigub

Hey, Alina. I'm still searching, but I'm confident I'll find my precious soon. It's a bit of a challenge to find something with that many units.

Alan Lambert · Answer

@Tj Hines

Thanks for your advice, Tj! I appreciate all I can get.

Roni E. · Answer

Great job. Make sure you have reserves, review the monthly numbers, speak with the PM on a continuous basis. I would visit the property quarterly for walkthroughs and speaking to the local team and tenants how is the tenant experience.