Commercial Real Estate

The 6 Biggest Lessons I Learned by Acquiring My First Apartment Building

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apartment-lessons

I recently closed on my first multifamily apartment building. In case you are considering investing in one yourself, here are my biggest takeaways from the process.

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6 Lessons I Learned by Acquiring My First Apartment Building

1. Reach out.

There are people who will help you when you are in need. I gave Gino Barbaro a call, along with Matt Faircloth, as well as other local investors I know. They’ve done it before, and you can pull from their successes, along with their failures. This will help mitigate your risk. I do not recommend trying to do it all on your own.

apartment-first-deal

Related: Is it a Bad Idea to Buy an Apartment Building for My Very First Deal?

2. Consider what needs to be inspected.

During our inspection, we walked ALL the units, and had the inspector inspect them ALL as well. The building had 46 units, and the report that came back was close to 100 pages of repetitive information. I do advise walking all the units, but having the inspector inspect them is unnecessary. Our cost doubled in the compensation we had to pay the inspector by going the lengthy route.

3. Be ready for the workload.

My partner and I have been involved in over 1,000 single family home real estate transactions. Still, this deal was no easy feat. At the same time, I still believe that the time it takes to acquire one 46-unit apartment building is a lot less than acquiring 46 single family homes.

landlord-lessons

4. Underwrite conservatively and trust your numbers.

We had the property inspected thoroughly. Still, there are some things you just won’t be able to foresee. A couple of units experienced fire damage, for which we simply underwrote the rehab costs more conservatively. The building had issues with water intrusion, which the inspector pointed out. Commit first, and then figure out the rest later. As long as you underwrite conservatively, you’ll be fine. Shout out to E-money on our team who specializes in deal underwriting!

Related: 12 Surefire Ways to Increase Revenue in Your Apartment Complex

5. Be patient.

Conversations with the seller started in mid-October. We did not close on the property until February. We encountered 3-4 delays due to weather. The seller started the process of replacing the roof on one of the buildings, and the closing of the property was contingent upon that. We also had to go back and forth on price until we finally came to an agreement, and then we went under contract.

6. Let your team do its work.

Do not try and do everything yourself. Yes, I wanted to be involved in every aspect from underwriting and negotiations with the seller to bidding out the project. Though I was involved in every aspect of this first deal, as we start the renovations on the project, I am stepping back more to allow the right team members to handle the trench work.

How was your first multifamily purchase? What were your biggest lessons? What are your concerns about giving it a try?

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling w...
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    Lucas Mills Physical Therapist Assistant from Springfield, Missouri
    Replied almost 4 years ago
    What does it mean to underwrite conservatively? I’m not sure what the term underwrite refers to in this context. Does this mean your rehab costs were more conservative on the units with fire damage, etc.?
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    We add extra padding in our rehab costs to take care of any worst case scenarios. Often times that worst case scenario does come about.
    Morgan Slusar Investor from Calgary, Alberta
    Replied almost 4 years ago
    Thanks! I also didn’t know what underwriting meant. Looking to do ,y first multi family in Edmonton in th next year, and this was helpful.
    Chris Soignier Real Estate Broker from North Richland Hills, TX
    Replied almost 4 years ago
    Congrats, and best wishes, on your acquisition!
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    Thank you for the kind words. What was the biggest takeaway from the article for you, Chris?
    John Reynolds from Blacksburg, Virginia
    Replied almost 4 years ago
    Congrats keep up the good work!
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    Thank you for the kind words. What was the biggest takeaway from the article for you, John?
    Hernan
    Replied almost 4 years ago
    What was the hardest part in the process of buying the apartment complex?
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    Finding the deal. We looked at quite a bit before we found this one.
    Andrew Allen Investor from Austin, Texas
    Replied almost 4 years ago
    Hi Sterling, what is the end of this sentence? I am curious! “In his free-time he trains for a World Record….”???
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    Training for the world’s fastest fireman’s carry! Thank you for asking.
    Justin Young Investor from Honolulu, Hawaii
    Replied almost 4 years ago
    I, too, am starting with single family investing to get my feet wet but am realizing that if I just had the contacts to get started with small apartments, I may have the same amount of risk when compared to single family but much more reward. Good luck to you in acquiring more apartments. Maybe one day you’ll get a phone call from me when I decide to jump into apartments.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    I look forward to that call, Justin. Glad you enjoyed the content.
    Karl B. Rental Property Investor from Columbia, MO
    Replied almost 4 years ago
    Congratulations, Sterling! What was the largest multi-family you have prior to the 46-unit? Also, was the jump easier or tougher than you had anticipated prior to the experience?
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    Thank you for the kind words! My involvement in multi-family was mostly through managing and on the purchasing side just single-family. The jump was not tough at all. I had the experience going in from the hundreds of purchases/transactions I have been involved in-in the industry. Are you considering the jump to MF, Karl?
    Kirkland Lindsay
    Replied almost 4 years ago
    Thank you Sterling for the taking the time to chronicle the things you thought were important to share. My brother and I plan to get into multifamily soon. The prospects is a little scary and I appreciate reading your take aways. Thanks.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    Glad you enjoyed the article. If I can help you in any way as you venture into multifamily please let me know. best of wishes, Kirkland.
    Joe Moore Rental Property Investor from Los Angeles, CA
    Replied almost 4 years ago
    Congrats! Is this an Indy property?
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    yes
    Vania Castillo Investor from New York City, New York
    Replied almost 4 years ago
    Congratulations Sterling in your new endeavour and thank you for sharing this tips!!
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 3 years ago
    You’re very welcome!
    Paulette Hewitt from Los Angeles, California
    Replied almost 4 years ago
    congratulations, keep us updated as you go along I’m looking to get into apartment buildings myself.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 3 years ago
    Will do. Glad you enjoyed the content.
    Phil Morgan Investor from Amherst, Ohio
    Replied almost 4 years ago
    Great article Sterling! You referred to your team a few times, I am guess your had a team in place far before this purchase? Assuming with 1000 SFH deals you have been doing this for awhile. I have a few duplexes that I manage myself and now have an investor and want to look at a larger 24+ unit building. What kind of team members should I have in place before making this jump?
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 3 years ago
    Yes, I had a team in place prior to the acquisition. Key team members: property manager, leasing agent and a office administrator You can have your property manager wear all those above hats depending on how skilled they’re. At scale you will want to add additional team members to fill those roles. Hope that helps.
    Marcelito Salvatus from sunland, California
    Replied over 3 years ago
    How do I contact you directly ? Thank you.