BiggerPockets

What are the things to look for in an apartment building for sale for the new investor.

My meaning is conidition of the building, location, rents vs expenses, how many rentors they have and turnover. What are key things that should stand out to me looking at purchase of this nature.

apartment building for sale for the new investor

I would offer that an apartment building may not be a wise initial investment for a "new" investor.

Almost all apartments can look good on paper, all you have to do is minimize expenses and exaggerate income. This stuff is very hard to discern when you are new.

Does it stack up financially

Ease of acquiring new tenants

Type of tenants the asset attracts

For the financials take either current or maximum effective rent total, then deduct expenses such as 10% for vacancies, 10% for repairs, property taxes, insurance, lawncare, loan payment - commerical note with a 20-year amortization schedule at 6.75%

you should then get an idea of what the NOI/cap rate/cash on cash return fgures are

I would not go into apartment buildings as a first project - they are more complex than people anticipate. start with duplexes or quads.

I think the sweet spot for the first level of multi-family commerical is 70-80 units.

At this level you can hire a full time maintenance guy but still run the management yourself without it becoming too much of a burden.

I'm currently at 50 units and am looking to get to the 75-100 unit level in the next year

Are you saying start with 2-4 units then jump to 70-80?

Is this 50 unit your first property or just your first investment in apartments?

What are the things to look for in an apartment building for sale for the new investor.

If you have to ask, you're not ready to buy an apartment building! As Dixie said, I would start much smaller. In my opinion, single family houses make the best first rentals. They are more forgiving with generally better tenants; better appreciation; and fewer management challenges.

However, to answer your question directly, I look for apartment buildings that have a positive cash flow of $100 per unit per month with REAL WORLD operating expenses. If you don't understand this issue, do a search of the 50% rule.

Good Luck,

Mike

"I think the sweet spot for the first level of multi-family commerical is 70-80 units."
I would have to say that this statement is way off the charts. EVERY full-time professional apartment investor I know has said time and again that an investor new to commercial multifamily should start off with no more than 12 units.
As others have mentioned, it is a more complex vehicle than your average SFR and ONE mistake could put you into foreclosure or bankruptcy.