All Forum Posts by: Matt H

Running an apartment building is "exactly" the same thing as running a duplex. What's the difference? There's only 1, which is more tenants. However, let me give you a real world example. I have a 15 suiter. And my work load on that consists of calling the resident manager about once a month. We have a 5 to 10 minute conversation about everything. He tells me what's going on. Usually it's nothing other than the odd move in and move out that's happening. He collects the rent, does the deposits into my account, moves people in and out, cleans the halls, collects the laundry funds, deals with complaints, problems, or whatever arises. For that I give him a discount on his rent. The going rate for experienced resident mangers is $25 per unit. So if it's 10 units it's $250.

Listen, there's this seemingly big misconception that if you own an apartment that you'll be running ragged trying to keep up the place. That is completely bogus. There nothing further from the truth. The truth is that whatever building you buy most likely "comes with" a resident manager that runs the thing. Just build a good relationship with them and let them run it for you. It's not worth your time to run it. Even if you have to give the person free rent, it's okay. Because the amount of things that they do easily justifies that expense. That means your job consists of making one 15 minute telephone call to them each month to see how things are going. That's the truth about how much work is involved in managing a building as an owner.

If you have 65k to invest, my question is...why on earth are you shopping for a duplex???

That 65k is a 10% downpayment on a small apartment building worth $650,000. Maybe a 12 or even 15 unit if you're lucky.

A small apartment will actually cash flow for you. You'll make a few thousand per month in liquid spendable cash after all debt service and expenses. Compare that to a duplex. A duplex will not do anything for you. All your buying is one thing "a headache"!!! You get perhaps $200 buck cash flow if you're lucky and little to no appreciation. And if a renter does a midnight move, then guess who's funding the mortgage out of their own pocket for that month? Good guess.

With even a small apartment building of this size here's what you'd be getting:

Approximately: $2000 liquid spendable cash
Mortgage paydown of about: $400 to start
@ 5% appreciation per year on a $650k apartment building you'd make: $2700 per month

Add all of that up and you're making: $5100 net per month. That's almost 100% ROI your very first year. You will not make that on a duplex, not even close. On a duplex you'll make $200 bucks a month if you're lucky. But factor in people doing midnight moves and you might end up with a negative cash flow. With even a 10 unit apartment if you get 1 midnight move, it's no big deal because that's only a 10% vacancy. You're cash flow at the end of the month would be slightly less, but you'd still have "positive cash flow". And apartments are super easy to re-rent. If you put an ad in the paper you're phone ends up ringing off the hook.

Anyway, if it were me I'd leverage that $65k.

It appears to me that so many people who are just starting out are a little confused about what exactly their buying. You're goal is to use your small deposit to be able to go to a bank and get the biggest loan you possibly can. You're using it as leverage. In some situations who's to say that $65k can't act as a 5% downpayment on a building. It's totally possible if you make enough offers.

This is how it would look on the offer with 10% down:
1st mortgage: $487,500
Seller Second mortgage (VTB): $97,500
Your balance: $65,000

You can offer that all day long as a solid offer, and you'd get lots of apartment owners willing to sell out on those terms. It happens all day long.

You might be even able to find a situation where you're downpayment acts as just 5% of the deal. That's what you want to find.

Good luck.

My situation is that I'm trying to come up with some short term financing either in the form of a second mortgage, or else a line of credit.

My situation is that I'm buying an apartment building, and at the same time I'm selling one. However, my sale isn't going to close until the end of May. But I have to remove conditions on this building I'm buying as of May 12th.

As you can see my dilemma is that I don't want to remove conditions until I know that my building is sold. Apparently the seller won't grant any extensions either.

So I'm trying to find a lender who will loan me either $100k could be secured by an apartment I own or my house. Or find a lender that will do a second mortgage on the apartment building I'm buying.

I have good credit, high net worth, and very low risk. Just one of those situations where my funds are mostly tied up and I need a short term loan. If you can help, please PM me. Thank you.

How about you let him keep the deed, that way he can put a huge mortgage on it behind your back and then skip town on you?

You make your money when you buy, not when you sell. That's one of the most important points in REI. That means if a house is worth $100k and you're able to buy it for $80k then you've made $20k once you take possession. You made that money up front. And the reason is because when you go to sell, that house is only worth $100k, and you're competing against other properties for sale. So if you try to jack the price, it won't easily work. It generally will only sell between a small range for a particular neighborhood and type of home. Or in otherwords you'll only get what the market will bare for it. So make lots of lowball offers. If you make 100 low ball offers there's someone who's bound to want to negotiate with you and give you a deal. So make lots of offers. And you're definitely not helping yourself by giving them list price unless, it's an apartment building that you plan to hold onto for many years.

You know I've had kinda an interesting week....

I've seen like two of those rare deals of the decade this week. One anyone could have stood to make about $300k net. The other was rather unique in that there was potentially as much as $1m on the table.

However, without all cash you'd pretty much be left out of the running because you'd have to come in with an unconditional cash offer to even have a chance. But it got me thinking that if you had a lot of cash available for those kinds of unique opportunities you could stand to make a fortune, as you'd be able to always beat out these smaller players who have to make their offers "conditional".

Anyway food for thought, keep it on the down low.

that sounds crazy? Remove a pool? Won't the cost like at least $10k? Offer them $35k for the house.

Actually I think I have some of that black stuff growing in my ears.

esnuts....well, then you should sell off all her panties

Ya I couldn't agree more....

Here's my list of reason for doing REI:

1) You can never get fired so you have permanent job security
2) You can work from home which has it's own huge set of advantages
3) You can set your own schedule, wake up when you want and work as many or few hours as you want.
4) You set your own pay
5) You're often earning as much or more than high power doctors and lawyers.
6) Once you have as little as 1 apartment building you likely have enough income to never have to work again if you don't want to.
7) As you continue to acquire rental properties your month cash flow rapidly goes up into the five figure range and eventually even six figures.
8) You can do a deal from almost anywhere in the world. Because you could be on vacation and still be researching properties on the mls and sending and receiving contracts via fax.
9) The job is easy to do. Far easier than most professions which require you to both retain tons of knowledge to do the job and then constant upgrading to keep your skills up to date. REI doesn't change much and there's not much you need to know to do it.
10) It puts you in the "I quadrant" which is the most lucrative quadrant you can be in.
11) You're odds of becoming a millionaire in less than 10 years of doing REI, if done consistently are virtually guaranteed. And if you're smart it could be done in as little as a couple years.
12) You're not making someone else rich. You're making yourself and your own family wealthy.