Saving to buy a big apartment complex

General Real Estate Investing
10yFollow

Saving to buy a big apartment complex

Eric Bilderback
Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes

I am curious if any of you have thought of how to save money/capital and move into a giant (for me) 50 unit or so apartment complex.  I hear investors compare it to the game of Monopoly 4 houses for one hotel.  Tactically, however selling 10 homes to trade into a giant apartment complex would be difficult.  My specific situation is I did a 1031 exchange into a 15 unit apartment, which I am hoping in 5-10 years will allow me to trade up into the big time (for me) 50 or so units.  I want to invest my current profits and any other money I can scrape together into more real estate.  Probably a house or two per year until I have enough capital to invest in a large multifamily.  That cashflows good enough to quit working.  I have begun to wonder as I am looking at all of these little houses what the exit would look like.  I am thinking maybe I should hold off and buy fewer more expensive properties to ensure I don't have ten or so on the market all at the same time, when I will hopefully be trying to execute the final part of my plan and consolidating all of my capital for one property.  The down side of buying bigger properties is it will take longer to save up for them.  Idol money is not good and could cost me valuable time.  You guys love this stuff as much as me.  Do you have a similar plan and if so how do you plan on cashing in all of your houses for a hotel?  

Happy Mothers Day to all you badass investor moms and soon to be investor moms out there,

1Reply
11 views

Most Popular Reply

Oren K.
Rental Property Investor · Toronto, Ontario · Member since 2012 · 538 posts · 298 votes
10y

Eric,

Remember that as you build your SFR portfolio one or two units at a time, you have the option of selling them as a package. The downside, is that you will be selling the package to other investors who will look at them as you do vs. to people who will live in them and likely pay more for each unit.

In terms of bigger and 'higher' quality; that is usually the path that most investors take. We start out chasing cash flow regardless of quality, build a base then buy higher quality at lower cash flow. Or to phrase it another way, start with high risk high reward and move when you can to lower risk lower reward.

A lot of hard work and a bit of luck will get you where you want to go.

Good luck,

Oren

1Reply
See this reply in the discussion

4 Replies

Jump to latestLatest
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y

    I just sold one of my multifamilies that had a lot of equity in it. Im hoping to trade up to an apartment building as well. However I am not doing a 1031 exchange.  I figure I would rather pay my taxes now, and not have a super low basis in the next property.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    0Reply
  • Eric Bilderback
    OP
    Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    Russell, 

    That is one way of doing it for sure.  But I would rather pay as few tax as possible for as long as possible.  I am trying to roll this snow ball as fast as I can down the hill.  Hoping it gets big enough to support me and the family.  If I broke some of that snow ball off before I was able to cashflow our family that would be more time doing what I am trying to get out of.  Work!  Good Luck!

    0Reply
  • Oren K.
    Rental Property Investor · Toronto, Ontario · Member since 2012 · 538 posts · 298 votes
    10y

    Eric,

    Remember that as you build your SFR portfolio one or two units at a time, you have the option of selling them as a package. The downside, is that you will be selling the package to other investors who will look at them as you do vs. to people who will live in them and likely pay more for each unit.

    In terms of bigger and 'higher' quality; that is usually the path that most investors take. We start out chasing cash flow regardless of quality, build a base then buy higher quality at lower cash flow. Or to phrase it another way, start with high risk high reward and move when you can to lower risk lower reward.

    A lot of hard work and a bit of luck will get you where you want to go.

    Good luck,

    Oren

    1Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    10y

    Good question and an important and complicated one.  It would be ideal to create equity in one or more of your existing or future properties that would create the capital for the 50 units.  For example, does the 15 unit complex (or other properties) have the capacity for higher rents if rehabbed?  If so, you could spend your money there with the intent of selling (or refi) that property(s) to create capital for the 50 units.  Another option would be to do that with you next properties...purchase fix and flip (or fix, rent and refi) rather than something that just cash flows well without any rehab.  This plan will be more work and maybe more reward.

    If you are able to spend say $5k per unit on the 15 units and raise the rent by $100/mth, that would increase the property value by $15k (using an 8% cap for illustration purposes).  $15k increased value - $5k rehab = $10k instant equity.  Do that on 15 units and you have $150k in incremental equity.  Feel free to substitute properties or modeling assumptions into this logic.

    The investors on BP that keep the snowball rolling create equity via adding value rather than just purchasing cash flow.  Congratulations on your progression to that level and good luck.

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free