I'm trying to buy an apartment complex without having millions
FL · Member since 2020 · 45 posts · 28 votes
Bigger Pockets.. Its been a long time. Since my last time on here I've successfully purchased my first investment property. A triplex, currently trending to have a full ROI in around 4.5 years. Seeing the potential and already having a goal of one day owning an apartment complex or neighborhood, I'm not wanting to see what it takes to successfully pull it off. I'm not overly liquid to be purchasing a 3M property and putting down 25% plus closing cost/etc. How do you guys do it? Is there some kind of financing specifically for large properties? To give some context, I'm a 780+ beacon with a 6 figure income and I've always tried to have immaculate credit for the goal of 1 day utilizing it to purchase commercial real estate. Any tips in the financing area would be appreciated because I know this post is somewhat vague, but I'll answer whatever to anyone wiling to share. Thanks
A credit score means nothing. Experience means everything. It's very hard to go from a tri-plex to a 10+ unit apartment complex without understanding 90% of everything in between. It's rare for investors to take that jump alone. I agree with everyone else. I'd continue buying and building your army (doors) with the plan to combine forces (investor partner) and step up to bigger deals.
Congratulations on your successful investment in a triplex! If you are interested in purchasing larger commercial properties, you may want to consider looking into financing options specifically for commercial real estate. Some options include commercial mortgages, SBA loans, and portfolio loans. It's important to have a solid financial foundation, with a good credit score and income, to increase your chances of being approved for these types of loans. Additionally, networking and building relationships with investors and lenders in the industry can also be helpful in securing financing for larger properties.
You can look at bringing in outside investors/partners to help with the initial closing amount. Remember, when apartments are underwritten, the lender wants to see experience and for the property to have a good DSCR
Bigger Pockets.. Its been a long time. Since my last time on here I've successfully purchased my first investment property. A triplex, currently trending to have a full ROI in around 4.5 years. Seeing the potential and already having a goal of one day owning an apartment complex or neighborhood, I'm not wanting to see what it takes to successfully pull it off. I'm not overly liquid to be purchasing a 3M property and putting down 25% plus closing cost/etc. How do you guys do it? Is there some kind of financing specifically for large properties? To give some context, I'm a 780+ beacon with a 6 figure income and I've always tried to have immaculate credit for the goal of 1 day utilizing it to purchase commercial real estate. Any tips in the financing area would be appreciated because I know this post is somewhat vague, but I'll answer whatever to anyone wiling to share. Thanks
Yes save for your DP or partner with someone, really not sure what else to say,
The way I started and many others have is partnering with more experienced investors who are looking for someone with your skills. They can bring capital, experience which will help get the financing you need and help guide you to manage the property (if that is what you want to do). You'll learn from them lots of the details that you can't know unless you actually participate in an acquisition or two. Get that experience, build some equity and capital yourself and then you'll be in a better position to acquire something on your own.
A credit score means nothing. Experience means everything. It's very hard to go from a tri-plex to a 10+ unit apartment complex without understanding 90% of everything in between. It's rare for investors to take that jump alone. I agree with everyone else. I'd continue buying and building your army (doors) with the plan to combine forces (investor partner) and step up to bigger deals.
You can get creative with Seller financing. For example, you have a $1M purchase price of a MF asset; 1st position lien at 65%; seller 2nd at 20%; and you bring the 15% cash down plus fees and closing costs.
If you're going to be buying a $3 million dollar apartment without a lot of cash, you'll need to raise private equity and (usually) do what's called a syndication, which you can read more about here: https://www.biggerpockets.com/...
But honestly, it's usually better to start off a bit smaller. Another property like the triplex you bought would make a lot of sense I think.
Yes save for your DP or partner with someone, really not sure what else to say,
It's not like I've got nothing, I'm talking a high 700s credit score (with decent history), great income and 150/200k down.. obviously a DP is needed, I'm just wondering if people are really coming to the table with half a million or how to get into the club so to speak with what I have.
They can bring capital, experience which will help get the financing you need and help guide you to manage the property (if that is what you want to do). You'll learn from them lots of the details that you can't know unless you actually participate in an acquisition or two. Get that experience, build some equity and capital yourself and then you'll be in a better position to acquire something on your own.
A credit score means nothing.
To an extent, but it allows leverage, which is a goal of mine. I know its a big jump, but pound for pound , it just seems to make more sense to me.
And I agree 100% ! Experience is invaluable. But I'm hoping someone whose done it or has seen it done can just drop a little knowledge on the acquisition
1st position lien at 65%; seller 2nd at 20%; and you bring the 15% cash down plus fees and closing costs.
Seller financing is one of the best methods I've read about with $ down.
15% down is simple enough, but a 1st pos lien at 65% and seller 2nd. Can you elaborate? The seller should be financing 85% , so what the difference in the 65/20 in how the lien is held?
I need to do more research on syndication, I'm somewhat familiar with what they are from a few RE books but I'm a little lost when it comes to meeting people to make them a reality.
The reason I'm trying to skip so many steps and go large, is just my logic.. if I were to put 6 figures into a smaller MF - tri,quad, 5,6- it wouldn't provide me enough cash flow to accomplish my goals. A 3/4 could potentially CF 2500/3500 monthly, I'm looking for more around 5000.
Bigger Pockets.. Its been a long time. Since my last time on here I've successfully purchased my first investment property. A triplex, currently trending to have a full ROI in around 4.5 years. Seeing the potential and already having a goal of one day owning an apartment complex or neighborhood, I'm not wanting to see what it takes to successfully pull it off. I'm not overly liquid to be purchasing a 3M property and putting down 25% plus closing cost/etc. How do you guys do it? Is there some kind of financing specifically for large properties? To give some context, I'm a 780+ beacon with a 6 figure income and I've always tried to have immaculate credit for the goal of 1 day utilizing it to purchase commercial real estate. Any tips in the financing area would be appreciated because I know this post is somewhat vague, but I'll answer whatever to anyone wiling to share. Thanks
For a larger deal ($5m+), this can be accomplished through syndication. Basically, you are bringing in other people to help cover all aspects of the deal that you can't or don't want to do yourself.
This includes bringing money for the down payment, capital expenses, and other costs associated with acquiring the property. It may also include bringing in somebody who has the ability to sign on/guarantee the commercial loan.
These people come in in exchange for part of the equity in the deal. At the end of the day, you might give away 20%, 30% or even 60% or more of the deal to other people to bring the things that you don't have yourself, but you will ultimately get the deal done and retain some percentage of the ownership yourself.
When done correctly, you don't need to put in a penny of your own money, assuming you Can find investors who are willing to cover the cost in exchange for part ownership in the deal.
Yes save for your DP or partner with someone, really not sure what else to say,
It's not like I've got nothing, I'm talking a high 700s credit score (with decent history), great income and 150/200k down.. obviously a DP is needed, I'm just wondering if people are really coming to the table with half a million or how to get into the club so to speak with what I have.
Yes they are coming to the table with 20% or more, which is what is required Find deals for those doing them You will earn ad fee. Learn save then go on your own,
All the best
Yes save for your DP or partner with someone, really not sure what else to say,
It's not like I've got nothing, I'm talking a high 700s credit score (with decent history), great income and 150/200k down.. obviously a DP is needed, I'm just wondering if people are really coming to the table with half a million or how to get into the club so to speak with what I have.
Yes they are coming to the table with 20% or more, which is what is required Find deals for those doing them You will earn ad fee. Learn save then go on your own,
All the best
Bob, what is the "average" down payment for an apartment complex? Several factors to consider, I know, but just curious what should be expected.
3.5 years is a great turnaround time - good work Zach!
Hi @Zach Jones. Great question. Coming from a Commercial Mortgage Broker perspective, I often see investors in similar positions bring in sponsors to help solidify the deal. The sponsor would bring credibility and experience to the project, based on the specific apartment complex acquisition. They might also provide additional capital as needed to cover DP, closing costs, and CAPEX if it's a value add. As for credit score requirements, your score is taken into consideration. The focus is often however on the subject property and how it's currently performing (debt service coverage ratio and cashflow wise) or has the potential to perform in the future.
Darnell Lockett
I need to do more research on syndication, I'm somewhat familiar with what they are from a few RE books but I'm a little lost when it comes to meeting people to make them a reality.
The reason I'm trying to skip so many steps and go large, is just my logic.. if I were to put 6 figures into a smaller MF - tri,quad, 5,6- it wouldn't provide me enough cash flow to accomplish my goals. A 3/4 could potentially CF 2500/3500 monthly, I'm looking for more around 5000.
Zach,
I shot you a dm. I hope it helps.
@jaron I could probably come up with $150k, a far cry from 750k(3M) or even $375k(1.5M). Everyone is very pro partner but I fear the getting screwed royally by some guy that knew enough about Commercial RE to con me into losing everything. I know that my be illogical , but the trust factor dealing in these sums of money is a real thing dealing with strangers.
@jscott I can't tag you for some reason. Realistically, how do you meet these people? ex: A bigger pockets post? Hi, I'm a late 20s RE minded investor. I make X at my dayjob and I'd like to retire. I've got X saved. Would you and your friends like to fund my ventures for 45%?
lol. I guess its the networking aspect of RE that I've come to read is very important..
@Jared Bandel Appreciate that!
@Darnell Lockett I'm Finance at a car dealershop so I'd love to get insight into the banks POV. So a deal could be judged based on its potential to make money and not its current reality with a negative CF, for instance? The sponsor comment goes back to my original issue of where the hell are ya'al finding these people??
@Andrew Syrios You're absolutely right. The problem is, another tri cost me 120+. Liquid, gone. I don't have the financial ability to keep repeating this process without this taking years and years.
@jaron I could probably come up with $150k, a far cry from 750k(3M) or even $375k(1.5M). Everyone is very pro partner but I fear the getting screwed royally by some guy that knew enough about Commercial RE to con me into losing everything. I know that my be illogical , but the trust factor dealing in these sums of money is a real thing dealing with strangers.
@jscott I can't tag you for some reason. Realistically, how do you meet these people? ex: A bigger pockets post? Hi, I'm a late 20s RE minded investor. I make X at my dayjob and I'd like to retire. I've got X saved. Would you and your friends like to fund my ventures for 45%?
lol. I guess its the networking aspect of RE that I've come to read is very important..
@Jared Bandel Appreciate that!
@Darnell Lockett I'm Finance at a car dealershop so I'd love to get insight into the banks POV. So a deal could be judged based on its potential to make money and not its current reality with a negative CF, for instance? The sponsor comment goes back to my original issue of where the hell are ya'al finding these people??
@Andrew Syrios You're absolutely right. The problem is, another tri cost me 120+. Liquid, gone. I don't have the financial ability to keep repeating this process without this taking years and years.
@jaron I could probably come up with $150k, a far cry from 750k(3M) or even $375k(1.5M). Everyone is very pro partner but I fear the getting screwed royally by some guy that knew enough about Commercial RE to con me into losing everything. I know that my be illogical , but the trust factor dealing in these sums of money is a real thing dealing with strangers.
@jscott I can't tag you for some reason. Realistically, how do you meet these people? ex: A bigger pockets post? Hi, I'm a late 20s RE minded investor. I make X at my dayjob and I'd like to retire. I've got X saved. Would you and your friends like to fund my ventures for 45%?
lol. I guess its the networking aspect of RE that I've come to read is very important..
@Jared Bandel Appreciate that!
@Darnell Lockett I'm Finance at a car dealershop so I'd love to get insight into the banks POV. So a deal could be judged based on its potential to make money and not its current reality with a negative CF, for instance? The sponsor comment goes back to my original issue of where the hell are ya'al finding these people??
@Andrew Syrios You're absolutely right. The problem is, another tri cost me 120+. Liquid, gone. I don't have the financial ability to keep repeating this process without this taking years and years.
Great point about private loans!
@Neil Cronkrite @Andrew Syrios Oh ya, partnerships/syndication would only make sense with a much larger project. I do need to look into private lending and even SBA loans. I've not taken any time to talk to any lenders yet to determine what I could realistically get accomplished through regular financing. Thanks for the suggestion!
Hi @Zach Jones. Great question. Coming from a Commercial Mortgage Broker perspective, I often see investors in similar positions bring in sponsors to help solidify the deal. The sponsor would bring credibility and experience to the project, based on the specific apartment complex acquisition. They might also provide additional capital as needed to cover DP, closing costs, and CAPEX if it's a value add. As for credit score requirements, your score is taken into consideration. The focus is often however on the subject property and how it's currently performing (debt service coverage ratio and cashflow wise) or has the potential to perform in the future.
Darnell Lockett
@Darnell Lockett, I am curious what is considered enough investing experience to move up to multifamily? My husband and I have 9 single family properties with a 10th under contract. We are looking to move into multifamily somewhere in the range of 12-20 units. Do we have to partner with someone? Also, what type of documentation are investors required to provide to the lender regarding the actual property, to help "sell" the deal to the lender? I figure if we know how to sell the deal to the lender, we will know how to underwrite it for ourselves. Thanks!
@Neil Cronkrite @Andrew Syrios Oh ya, partnerships/syndication would only make sense with a much larger project. I do need to look into private lending and even SBA loans. I've not taken any time to talk to any lenders yet to determine what I could realistically get accomplished through regular financing. Thanks for the suggestion!
Absolutely, any time! Happy to have a direct phone call to discuss further.