Looking to invest in an apartment building

[Carl Sandquist]

Hello, i live in Viila Park Illinois and looking to invest in an apartment building. I've done some research regarding this and notice a lot of "new" terms associated with apartments - rent roll, cap rate, net operating income, etc. Seems theres more involved in apartments then single family properties. I realize there are many books, videos and seminars but would like to hear from someone who is currently invested in an apartment building and share their experiences. Thank you, Carl S.

[Veni F.]

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[Greg Barbre]

Welcome Carl!

[David Thompson]

Carl,

You are essentially entering commercial property arena instead of residential. Valuation models, scale, and shear financial challenges in buying and managing a larger asset comes into play.  It's way more of a team game.  If you are going to be active, then just get your education ramped up.  Good RE books (Complete Guide to Buying and Selling Apts - Steve Berges: MF Millions - Dave Lindahl) as examples.  Find a local MF meetup group.  Listen to BP podcasts focusing on apts.  Download deals from crowdfunding sites and see how syndicates structure deals.  Consider a coach depending on your time, resources and passion for it.  The latter is a must IMO for serious folks.

Alternatively, do all above to learn but if you don't have the heart, time, skill or whatever and think you'd rather be a passive investor (especially if you are accredited) then look into being a limited partner in apartment syndicate deals. I encourage my investors to still be educated and I spend a lot of time doing that because I want them informed. That said, my investors are very good at what they do to earn the income they generate, nothing wrong w/some education and interest in REI, but that does not mean you have to do what I do which is buy large apartments w/other experienced partners for a living. We don't say it enough here but you are competing w/the professional in the commercial space. BP is a DIY area and we encourage and share ideas to make you more informed. It does not mean you have to become a syndicate or buy an apartment. It may mean, I'm a more informed investor and can make prudent decisions w/what I have learned to improve my wealth, income and ultimately the quality and choices for my family to have a better life.

[Paul Timmins]

@Carl Sandquist

I work for Dave Lindahl send me an EMAIL I can send you the Blue Sky case study to help you evaluate deals.

Paul

[Bill Manassero]

Hi @Carl Sandquist!

Welcome to BP!  You've had some good suggestions here to help you move in the right direction toward apartment investment.  I personally went from SFRs to duplexes and last year bought a 22-unit in Indianapolis.  I was able to do all of those without outside investors.  But now I am pursuing 100 plus units and see how what @David Thompson says is true.  It becomes a team sport as you get into the larger apartment communities.  I am currently seeking a sponsor (someone with net worth and liquidity surpassing the value of the apartment) and private investors as part of my syndication.  In addition, I need a good syndication attorney, strong "boots on the ground" and an excellent property management firm.  David is right that another entry into multifamily is as a passive investor in a syndicate.  This is a great way to get your feet wet and learn what goes on "behind the scenes" in multifamily investing and management.  It also counts as experience when you are being evaluated by potential multifamily lenders.  Another excellent resource for you is Samuel K. Freshman's Principles of Real Estate Syndication.  It explains in layman's terms what syndication is and how it works for you as an investor.

I am not the most experienced but would be happy to answer any questions you have.

Best of luck.

bill

[Adam Bontrager]

@Carl Sandquist

First of all, welcome to BiggerPockets. You've come to the right place if you're looking to learn more about real estate investing.

Are you looking to purchase an entire apartment complex or are you simply looking to invest in a syndicated deal? I'm not able to tell for sure from your initial post.

Regardless, as @David Thompson pointed out, you're entering a different market when you start dealing with apartment buildings with 5+ units.  The valuation is different than with residential property so the performance metrics become even more important than with residential property.

If you have specific questions, I'd be happy to answer them. Otherwise, I would recommend you spend some time browsing the multifamily forums here on BiggerPockets. There is a wealth of information here that will help you make an informed investment decision.

[Carl Dean]

@Carl Sandquist, 

If you do not already, I would check out the Old Capital Podcast hosted by Paul Peebles and Michael Becker. I have been in the the investing space my entire adult life and these guys are not about the flash and pat on the back. They are really humble guys that do real deals and share their experience to teach others. It's a good place to start and they are always doing deals and offering syndication opportunities. 

[Leslie Pappas]

Hi @Carl Sandquist if you’re interested in a “hands-off” experience it might be beneficial to learn about DSTs (Delaware Statutory Trusts). They have minimum investments as low as $25,000 for straight cash into funds, which are small portfolios of properties. Investors may develop their own personal portfolio of institutional properties using DSTs as cash investments. 

[Baseemi Iqbal]

Hi Carl,

Apartment building is a lot of work especially in a low income area. I would suggest starting small maybe a 4 to 6 flat before getting into something big.

Baseem

[Rashad Nelson]

Hey Carl, 

To get started in commercial (apartment buildings / complexes), here's two great resources:

Commercial Property Advisors - google Peter Harris, you'll find tons of his free video content on YouTube.  His stuff is gold.

JakeandGino.com - these two investors out of NY decided to invest in the Knoxville, TN market. They started with nothing down there, little to no money and no credibility with local brokers and lenders, but now they have multiple and sizable apartment complex holdings in that market and growing.  They have tons of blogs and videos on their website. Great stuff.

I hope this helps.  Happy investing, ;-).

[Becky Y.]

@Rashad Nelson wow this is great, thank you for sharing!

[Rashad Nelson]

@Becky Y.  - you're welcome Becky.