I quit my CPA Job to buy Large Apartment Buildings

368 Replies

@Ryan Koehler , now that is funny...My deal near Clemson is not student housing. It is a Class A asset and we get Clemson grad students and professors who want to be away from the party scene.

Originally posted by @Brian Adams :

@Ryan Koehler, now that is funny...My deal near Clemson is not student housing. It is a Class A asset and we get Clemson grad students and professors who want to be away from the party scene.

 Hmm I can't picture what this property is then. 

Brian,

Like your name as you are aware I am sure you have a famous name. Great read awesome stuff you write about. What would be just as interesting I am sure was how you put the deals together as I am sure you had some help with additional funding or investors along the way.

Great job,

@Steve Haight , thanks for your message and the suggestion. I do have a series of emails I send out to my database on the steps to put large apartment deals together.

4 years ago today I made the decision to quit my six figure CPA job to focus 100% on building my own real estate business.

Today I am so grateful on what I have been able to accomplish as I have had setbacks, failures, challenges, frustration, lost money and many other road blocks that I had to overcome.

The road to success is never easy, with passion, clarity, focus and determination, challenges can be overcome.

At the end of the day small victories need to be celebrated.

My faith in God continues to strengthen my soul, thanks to my wife, family, friends, investors and others who have supported me over the years.

I was fortunate to share my story with the BP community. To date over 60,000 people have listened to it and I have been blessed with connecting with so many people. If you need a touch of inspiration I wanted to pass along my story…

Listen to Brian Adams BP Podcast #135

Where do you get your financing? Do you use Fannie Mae of Freddie Mac mortgages? What is the typical LTV for those? How do you structure ownership? LLC? What return do you give your investors ( target)? What is your target cap rate?

@Richard Dyas, to answer your questions, my financing has been from bridge, cmbs and hud lenders, I haven't used Fannie or Freddie for my deals. 

LTV's Bridge was 84%, cmbs 72%, HUD 90%.

Structure deals using LLC's.

Returns and cap rate vary based on deal, hold period and market conditions.

Originally posted by @Brian Adams :

Dooreuhn, thanks man. The down payment can come from your own pocket or from your investors. I raise $$ from investors so that is where my down payment comes from.

I live in Pennsylvania and buy assets in Texas, South Carolina and North Carolina. One of my key metrics that I follow is job and economic growth in a particular state.

This is a simplistic view and there are other things to consider, but if someone has a job they can pay your rent. I target markets where there are significant jobs being created. 

Did you know? And what I thought is also Stunning, is that 1/3 of new jobs in the U.S. have been created in Texas since recession. http://www.aei.org/publication/822253/

I recommend structuring MF ownership as an LLC, with third party investors ( not yourself) receiving a preferred, but limited return. For example, preferred members get paid, first, in an amount equal to 10% of their investment on an annual basis. They share in sale proceeds equal to their pro-rata investment. These membership shares can be sold on Crowd Funding portals. It is costly, but if you don't have the down payment it is the best option.

Terrific thread!  I'm new here and haven't even begun investing yet.  Is there hope though for newbies who would love to be having the success you are someday? 

I would think the answer is yes because even you started with no experience at one point, but it's nice to hear encouragement. :)

Originally posted by @Brian Adams :

I have always been fascinated with real estate.

I started in 2000 investing in a couple rental houses.

My "AHA" moment came in 2008 to move away from the single rentals and graduate up to large apartment complexes.

My background is a CPA with real estate taxation and forensic accounting experience. I got to see wealth creation happen with real estate as I would advise my wealthy tax clients on various tax strategies to save them money for their own real estate businesses.

One late night when I was working at the office, I was reviewing a client tax file and they were making a boatload of money and building their wealth with apartment buildings.

Have you ever had that feeling like…"if this person can do something I know I can?"

Sometimes this feeling comes from a position of feeling pain. As a CPA and working crazy hours especially during tax season, I was barely home to see my wife and two girls. I was missing the “magic moments”. I knew I had to make a change.

I took to the internet learning about apartment buildings.

I read books.

Any chance I had I was educating myself, listening to trainings in the car, etc. It was a priority to figure out the education side so I knew the nuts and bolts of buying apartment buildings.

Once I felt comfortable, I went out and bought a duplex. Based on the numbers the property was already cash flowing, but one of the units was vacant. I filled that vacancy and the additional rent went directly into my pocket.

It was definitely a cool feeling.

Now granted this was a small property, but working with my tax clients who were making money with large apartment deals, I knew the model worked and it was scalable.

Although I was still working full-time as a CPA, I went from buying the duplex in 2008 to trying to acquire a 130+ unit deal in 2009. The deal at the end of the day didn’t work out. Using my CPA background, apartments are all based on the numbers. The deal just wasn’t good enough for my investors.

In 2010 my partners and I bought a 270+ deal. The deal was bought for $4.5 million and it appraised for $12 million.

In 2011, I decided to quit my CPA job at a top 100 law firm in the world to pursue my real estate business.

Was I scared – you betcha.

Did I have fear – yep.

Did people think I was nuts and crazy – Oh yes.

Getting a real estate business started is tough. But with determination, passion, commitment, desire, focus, I know what my end result would be.

In 2013 I bought a 140+ unit deal for $10.3 million.

In 2014 I bought a 200+ unit deal for $6 million that appraised for $7.4 million at purchase.

In 2015, I will be closing on a 100 to 400 unit deal.

So if you ever want to “graduate” up to buying large apartments, my friends, it can be done.

Just know going in that the road and pathway has challenge. There is no easy button.

I believe that with a clear understanding on your “WHY”, anything can be accomplished.

 Hello Brian!

I know the conversation has changed a lot since this was first posted, but I wanted to say congratulations! That is such a great story and one that many people can relate to! I know many people in the finance (and other) fields who has decided to take the great leap into REI. There are many options out there and once you get started you almost feel like you can't stop! I commend you on your success and wish you the best in the future.

@Jerry Weber , thanks so much for your message.

I believe there is hope for new investors. BUT the pathway to buying your first deal can be challenging. This business is not easy - although I know some experts who make it seem so. The best exercise I can share with you, (and I think I shared in this thread already) but is to get really clear on your WHY.

WHY do you want to acquire apartment buildings. Put a lot of emotion around your specific outcome. Your WHY will keep you motivated and engaged as you will hit roadblocks and challenges.

Also thanks @Tom Ott for your message re-posting my first message in this thread. My WHY was when I was working so many hours as a CPA I was not engaged with my family and missing family time with my two girls. For me during tax season I was working 12-14+ hour days 6 to 7 days a week. My WHY kept me motivated to get up an hour early to look and analyze deals. 

Finally, and I have gotten this personal message from some people so wanted to address in this thread, you don't need to be a CPA, accountant or have a financial background to buy apartment buildings. All of us have a story that makes us unique, use what you have, your passion and people you have in your network to move your business forward.

Originally posted by @Brian Adams :

@Jerry Weber , thanks so much for your message.

I believe there is hope for new investors. BUT the pathway to buying your first deal can be challenging. This business is not easy - although I know some experts who make it seem so. The best exercise I can share with you, (and I think I shared in this thread already) but is to get really clear on your WHY.

WHY do you want to acquire apartment buildings. Put a lot of emotion around your specific outcome. Your WHY will keep you motivated and engaged as you will hit roadblocks and challenges.

Also thanks @Tom Ott for your message re-posting my first message in this thread. My WHY was when I was working so many hours as a CPA I was not engaged with my family and missing family time with my two girls. For me during tax season I was working 12-14+ hour days 6 to 7 days a week. My WHY kept me motivated to get up an hour early to look and analyze deals. 

Finally, and I have gotten this personal message from some people so wanted to address in this thread, you don't need to be a CPA, accountant or have a financial background to buy apartment buildings. All of us have a story that makes us unique, use what you have, your passion and people you have in your network to move your business forward.

Exactly what you said is perfect! Anyone can be in REI! You don't need to be a finance background. My company specializes in the everyday investor. Your story is inspirational to anyone who want to take that leap!

Been working hard to find the next deal for my investors.

240 unit under contract - Class B, in a B- area in Atlanta, GA.

Purchase price $9.4 million, property appraised at $9.9 million.

Raising $2.8 million and closing 3/7/16.

By the way my goal is buy $40 million this year (2016). If you are a deal hound and can find awesome deals, pm me. You need to be direct to the seller and I target 100 to 400 unit deals in TX, GA, SC, NC.

@Brian Adams

I have been going through the podcasts from the start and recently listened to yours.  Excellent information.  

My question to you is this (in hoping you didn't answer it and I didn't see it).  If you have a good lead on an apartment building, what is your next step?  Travel to view the apartment?  Have someone local check it out first?  I am just curious what your steps are before finalizing an offer.  Thanks. 

@Luke F. , my next step when I have a lead on an property is to get financial information  from the seller/broker (T-12, past 2 years historical, capex report) and a current rent roll. 

By the way if you are not familiar with the term "T-12", T-12 is the last rolling 12 months of financial data.

For me the numbers don't lie and I slice and dice them. Once I get comfortable and come up with a strike price, I will contact the broker/seller to gauge price sensitivity.

If we are close in our numbers, I will schedule someone to go see the asset - one of my property manager's. They will take pics and video.

Before I spend any money to go see the property, I do as much as I can tapping local resources, using online research, Google Earth, etc.

Good luck!!

@Brian Adams thank you for the great post and the great podcast. The information you provided is very inspirational. I want what you have now and more. I wanted to know if you have any more criteria for the properties you are looking for. In the pod cast you said that you where looking for 100-400 unit apartments with atleast a 5k NOI in a growth area. That have value added opportunities.

@David Schwan thanks for your kind words.

Some of my other criteria:

  • Properties built after 1970
  • B/C class property in B area
  • Pitched roofs
  • Individually metered
  • Value plays such as low rents, poor management, deferred maintenance, above average expense per unit.
  • Target deals greater than 70% occupancy
  • Motivated/flexible seller
  • Target assets with a 8.25 cap rate or greater, but they are hard to find.
  • Currently shopping in TX, SC, GA, NC

@Brian Adams Wow! Your success is admirable and highly sought after for most of us here! Hats off to you! Your first post was nearly a year ago looks like and you're still keeping the thread alive! That's good to see!

I have a question that I hope you can assist me with. I'm a brand new investor who just started with my first duplex and plan to focus on MF properties from here on out leading to larger apartments in the future. I recently came across  one of the investment opportunities you present to your investors. It's a brand new 17 unit townhome community being built in which the presenter is giving opportunities to invest in the project. I looked at it as an opportunity to invest in a 1.8 million dollar deal but at the percent I would be able to invest (3%) I don't think its worth it to even get into it when I would have such little stake in such a large project and I can use that capital to purchase another duplex or so of my own until I can make a significant investment into a deal like this. Am I right in assuming this or is there an aspect that I'm overlooking?

@Ramon Smothers thanks for your message. If I am understanding your question, you can buy in on the 17 unit deal and have an ownership stake of 3%. 

Are you buying in as an equity partner? Meaning if the town homes are sold in 5 years for $5 million, as an example, do you share in the upside? 

If you invest $50k in this deal can you get a better return investing the same amount by doing the duplex yourself? 

With your goal of getting into MF's, by being a partner in a 17 unit deal could get you more traction with brokers and other investors.

Also depending on who you are working with on the 17 unit deal, could building a relationship with the operator help you with credibility in this space.

I am not sure if I am helping you...

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