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