BiggerPockets

1. Forget cap rates - they provide almost no useable information because they are based on operating expense data that doesn't exist. Even if they did serve their intended pupose (they don't), all they would tell you is what the losers paid for their buildings (on all but very large commercial projects). Look up the previous discussions on this topic using the search function.

2. I get almost all my buildings through personal contacts. In real estate, it's WHO YOU KNOW. That doesn't happen by accident.

3. Yes, auctions do happen for multi-family.

4. I've purchased most of mine with no money down.

5. I don't use software to analyze properties and don't know what software would do to help.

Good Luck,

Mike

Most of us here can not emphasize enought to Do Your Own Research. The more properties you buy the more you will realize the numbers you were given are bogus. Plus the more you will both have a feel for the real numbers and have a track record of your own bills to which you can refer.

William, I think Christian is referring to doing your own research on the property. Listings often quote cap rates and NOI. But, they're rarely accurate. Sellers and seller's agents may tend to fudge the numbers to make the property look better. Or, they may just not have accurate records. A 300 unit complex ran by a REIT will likely have very accurate numbers. A 8 unit building ran by a person who only owns that one will probably not. Further, many significant expenses, like roof and boilers, are very intermittent. So, numbers for the last 5 years may not reflect such expenses. And, having a very low maintenance number may indicate just the opposite. There may be a lot of deferred maintenance.

The other point is that real estate is a local activity. Read and learn here and other places. Do your research on some listings and the economic situation. But there's a lot to be said for actually getting out and talking to people face to face.

Well, I've yet to buy an apartment building. But if I understand the process, its somewhat different than buying houses. You don't always get to have much of a look until you have a contract. Seems like for apartments, you get a contract very early, then have a fairly lengthy due diligence period where you carefully investigate the property and get the seller to prove their numbers.

William - Jon explained what I meant by research very well - to use your words it is all about the DD. I find most listings and seller provided info to be incorrect. Much of the info can be figured or looked up.

Taxes for example - millage rate times assessed value. Sometimes the millage is different for land and improvements (buildings) so the formula is a little more involved but still simple.

Trash - is it city or can a service be purchased? Do they have a dumpseter now? If so - what size? How often is it dumped? What is the cost?

You get the point. As for REI intelligence - you hit the nail on the head - it is here. There are a lot of great resources on the web - but the folks here are willing to go out of their way to explain - or debate - with you.

There's a lot of great ideas here. I would suggest using some model (Mortgage/Equity, Discounted Cash Flow etc.) to analyze the total return, the timing of your expected returns, and risk. You can partition the return into its various components (tax shelter, rental income, capital growth). Sensitivity analysis can be used to analyze the property under different economic scenarios as well. There are some great programs out there, though I would suggest creating your own model as a great learning tool.