Buying an apartment complex tips

[Jonathan M.]

Hello BP!

Hello everyone, in the coming months I want to be prepared to bounce on apartment complex deals due to covid-19. I am looking for a lot of advice for after I purchase the asset and how to effectively run the property. Id like to know how experienced apartment owners run there property from start to finish.

-Best way to finance a property over 6 units?

-How should I handle security deposits and rents? Should I open an account for each unit?

-Should set-up an additional LLC for managing the cash-flow and the property?

-How should I structure taxes in getting the biggest deductions? if I am considered a full time real-estate professional?

-Is there a software that investors recommend to track everything?

I am a relatively new investor to the apartment complex world, I have not done a larger scale project more than 4 units.

So far I am pre-approved with a commercial lender, I have set-up an LLC to purchase a complex. I have a real-estate attorney to handle title/closing and CPA for taxes.

Please if anyone has anymore advice other than the questions asked above pls elaborate. Thank you everyone!

[Evan Polaski]

@Jonathan M., you are on the right track already it sounds.

Financing depends on your business plan - buy and hold long term? Value add with a refi or sale in a few years?  For a 6 unit range in FL, you are probably not into agency financing.  But there should be some good commercial loan brokers that can give you some insight.

Security Deposits and rents: I would talk with a local RE attorney.  I am guessing different jurisdictions have different rules one how these are handled.  Can you earn interest on your security deposits?  Can you commingle operating cash with security deposits? Do you owe interest on Sec Deposits in certain scenarios?

Starting out, I would keep things as simple as reasonable on the legal side.  You can always create various holding companies, acquisition entities, etc as you grow.  Again, a business formation/real estate attorney can help with your goals.

Taxes: full-time real estate professionals get the most use out of your depreciation expense.  I have found that you typically need to perform cost seg and accelerate depreciation to fully wipe out income, but that might be my assets.  This would be a question your CPA.

Software: I use Cozy and Quick Books.  Other people may have a lot more suggestions, but I have never had more than 10 units at once, and this was pretty easy.