I quit my CPA Job to buy Large Apartment Buildings

370 Replies

@Brian Adams thanks for your inspiring story.  My dream is to do exactly what you're doing.  Buying, fixing and selling for short term capital and invest those capital gains into multifamily units for cash flow. How many marketing funnels do you have to find leads for your flips, multifamily properties and investors?

@Nancy Brook , lenders generally for large apartment deals look at the NOI (net operating income) of the property.

But they don't just give everyone who has a great cash flowing property a loan. Lenders will want the operator to have experience owning/managing properties, financial strength and liquidity. 

If you are just starting, you might not have any of the requirements. 

Don't despair as each component can be solved. 

For the management, possibly partner with a reputable management company in the area and add them to your team. For the net worth and liquidity, you can locate a loan sponsor by partnering with someone who has the financial capacity to help you out. Know though you need this person more than they need you so be prepared for your first deal to give a chunk of the deal away. The "chunk" is negotiable so whatever works for both parties.

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@Walter Davis , marketing has been such an integral part of my business success. I am not sure how many funnels off the top of my head I have working right now. 

I subscribe to this great marketing platform that has helped me understand the core principles of marketing. It has over 120 hours of step-by-step "How to trainings", has sample copy, ads, postcards, scripts, case study's. The platform isn't just for real estate as marketing applies to all businesses.

@Robert Blanchard

Development is another animal. Zoning, land acquisition, construction loans, impact on utilities, architects and engineering, etc... Plan on a couple of years just to break ground. I built a couple of 240 unit complexes. Construction time another 12 to 18 months, then another 6 to 12 months to lease up. So this is a 3 to 4 year project. In that time the market could change.

@Brian Adams this is definitely a popular thread with great an inspiring information. Being a part of an apartment management company, and working with owners and asset managers, i thought I may add a little insight. 

Benefits of having a good management company and what we do.

1. We are setup and have systems in place to effectively manage a property.

2. We provide a buffer, that shield you from day to day tenant issues, and are versed in how to handle those situations. Tenants can get pretty irate when a roof leaks, or a water line burst.

3. Buffer applies to vendors. Cash flow doesn't always cover the expenses, and when collection efforts start, you avoid the brunt. Just a dose of reality.

4. We provide the site staff that handle day to day operations, maintenance, leasing, marketing, scheduling make ready activities, entering purchase orders, bills, etc.

5. We have regional managers in place to help govern the sites, and keep watch of the financials, assure things run smoothly, tweak as needed, and keep you informed.

6. Department heads also watch over operations, marketing, maintenance and accounting.

7. We use our leverage of buying power to save owners money on products and services.

8. We also use leverage to renegotiate contracts and increase your ancillary income.

9. We assure staff are getting necessary training on fair housing, sexual harassment, and so much more.

10. We do the leg work on your capital improvements, and assist with insurance claims

11. We offer due diligence services to help you expand your holdings, and inform you about deals that may come our way.

12. We have a blanket insurance policy you can piggy-back on.

These are just some of the major things. You get a relationship with a group of people to answer questions, and offer advice from our combined years of experience.

The biggest thing you get. The freedom of your time to look for new acquisitions, time with your family or doing the things you love. 

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@Brian Adams

I read your "Quit My Job" post. Question...with long term, fixed rate, commercial financing that's available this days. When do you consider short term financing? What is your response to investor when he asks,"what happens if we can't sell when the short term financing is due?" In your syndication deals, what is your compesation structure....(equity share, acquisition fee, ongoing management fee)? Do you always invest some of your own cash in the deals?

Great post!  This is very motivating for investors who are thinking about graduating to apartment buildings.  It's great to see other taming the cobra of fear and taking action in spite of it.

@Xavier Randall , I am currently using short term financing on my 200+ unit deal since the deal had "some hair on it" and I am doing rehab. The strategy is to refi into perm debt before August 2016. 

When an investor asks the what if's...be prepared to share multiple exit strategies. In my deals and what I teach my students is to have Plan A, Plan B, Plan C.  

Compensation structures will vary depending on the deal, my minimum is to take 25% up to 50% of a deal, the structure between myself and the investors has to be a win-win as I am creating long-term relationships with the investors. And if the investor wants me to keep my own cash in the deal I am happy to do so.

@Cecil Jones, thanks for your message. That F word - FEAR can paralyze you and keep you from hitting your life's potential or it can drive you to say "you know what, I have had enough" and make you take that leap of faith.

@Akachi Azubuike , as you probably would agree, it is very important to select the right management company for your property. 

How I have found my management companies in the past is to tap into my network and relationships with real estate brokers, real estate attorneys, contractors, title, insurance and other professionals in the industry. Eventually you will start hearing the same name pop up of a reputable firm to work with.

You can also go to a website called the Institute of Real Estate Management (IREM). There you can search management companies in your area. Just like doing due diligence on a property, you will want to do due diligence on the management company. If you have a Class C property and the management company only manages Class A product, these worlds of management are so different as the Class C requires more oversight and direction.

Today (5/20/15) I am actually holding a training call on working with management companies with large apartment complexes. The best advice I can give is to make sure you and the management company are on the same page and you communicate regularly about expectations, budgets, goals and profitability. Managing a property and residents can sometimes be a overwhelming so you want a management company who has the same vision of the property as you do and isn't afraid to push rents when needed and be firm when resident issues come up.

Very inspiring post Brian. You give great value to the community and I thank you greatly for that.

Just want to share a few things along the line of Brian's initial post...

As a big believer in getting what you attract in life,  in my experience, you'll cross paths with people you truly need along the way to your goals. It seems crazy that as a bartender by trade, when I chose a while back to focus on MF investments, it seemed that more and more I heard people talking about investing in commercial properties. 

I started to expand my resources of people with a lot of money and the same interests in MF specifically. I'm now in the process of getting financial commitments by sending them sample packages of my deals as Brian mentioned earlier in this thread.

It really helps a lot with building trust and credibility when you can show that you know what direction you're going and have build up a credible team. I've met with Prop managers, attorneys, Brokers, etc...and getting them familiar with what I'm doing. Some will relate more with what you do then others and it's good to get them ready to roll before the tide comes in. As the investor, I feel better as well and more confident knowing I have a solid experienced team behind me to help in the journey of the transaction(s).

We cross paths with people everyday. Most people we just let pass by...but if you are truly dedicated to your ultimate "WHY", you will meet and start to expand on valuable contacts you never thought possible. It's happening to me almost daily now. Just wanted to share.

Don't doubt your ability to get deals done. It has nothing to do with looks, past failures, or your current bank account. The only thing it has to do with is "YOU". Your mindset is the most powerful asset you have. It can make any dream a reality.  

"Where attention goes, energy flows and results show." - T. Harv Ecker

@Joe Fairless , thanks for the message and happy help. 

Since you are also an active investor and close deals, the biggest thing in my opinion that holds people back from getting starting in real estate is taking focused action. Focused action is actually doing things that matter and focusing on two things - Deals and Dollars. 

You need the deal opportunities coming into your business and when the deals come in you need the dollars to close. It is that simple....

Dustin, thanks!!

In July 2014 I bought an off market 200+ unit apartment complex in Dallas, TX. I bought for $6 million and it appraised on day of purchase at $7.4 million.

I am rehabbing the property and spending $750,000, on an ARV basis the asset appraised at $8.3 million, so a real nice deal.

The asset was 86% occupied at purchase and after evicting 35+ people, increasing rents over $70 per unit, as of Friday 5/22/15 we are 100% occupied.

Now that this deal has stabilized, I am looking for my next acquisition of 100 to 400 units up to $15 million.

I am currently looking for one acquisition assistant to help me analyze and underwrite deals, put in offers, do market research, etc.

If you know of anyone please send me a private message. 

@Brian Adams

 If you are 100% occupied, then you need to do a better job!  Time to raise those rents again.  Congrats on your success.  Are you solely looking at value plays with C +/- properties?  Or, are you looking into applying the same strategy to B's and trying to get them up to A-?

@Jimmy Wilson , excellent point and 100% agree. Market occupancy is 94% so we are now pushing rents to maximize NOI.

Primarily I like C's where we can force value and take to a B. I also own a A deal I bought for $10.3 million. I raise private capital from investors and what I do is match up the investors risk tolerance and financial goals to the type of deals they want to fund. I go out and find the right deal for the investors and it makes raising private money so much easier.

@brian, I work directly with a lot of major apartment/commerical investors. Just curious how do you structure most deals with them? 

Do you aim to pay back full invested money in a short term with interest and then they are out of the deal? Basically you make zero income for the first year or two. Or are they apart of the deal long term? Where they get monthly or quarterly returns?

@Thorney Gibson , each deal is different based on the overall exit strategy of the deal. My minimum take of any deal is 25% where I share in cash flow, allocated tax benefits, and back end profit. 

Earning zero income doesn't make much sense as it is a lot of work putting these large deals together.

Investors usually receive cash flow payments on a quarterly basis.

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