1st time apartment owner

[Steve Rugg]

Hello, I live in California and my partner and I currently own and manage 20 doors in Missouri (a mixture of fourplexes, triplexes, duplexes, and SFRs). We recently took the plunge into larger multifamily. Our offer was accepted on a 40 unit apartment complex and we are currently in our diligence period. He is local in Missouri, so that helps tremendously, but I just wanted to reach out to the community here and see if anyone out there was willing to share some experiences with apartment investing. The numbers look good. We have financing lined up with 25% down. It is a value-add deal. It currently has 4 vacant units that need to be rehabbed immediately. Our plan is to renovate all of the units over the next 2 years, take better control of the management, and increase the rents by at least 15% (they are currently under-market). We have some inspections set up next week as well as a meeting with the current owner and property management company. I'd love to hear anything anyone has to share or recommends... THANKS!

[Jonathan Greene]

If you are buying in on a 40-unit you want exactly what you state you have. A value-add property at a good price with a few vacant units so you can start the transformation right away. As you renovate the first batch of units you are upselling the complex to a new renter and hoping that your upgraded management will encourage the current tenants to take more care as well. Once you get those 4 done then you keep assessing on a tenant-by-tenant basis, based on their payments, who needs to go and who would be good to keep. Your best tenants you could offer to move to nicer units so then you can renovate theirs and the bad ones, just serve notice, and do the turnover. Without seeing the numbers, it sounds like the scale up, especially with your partner there in MO, is solid here.