Trying to pick up an apt building...

12 Replies

hey BP

I'm interested in purchasing an apartment building but not sure on a couple things. 

1) how do I get in front of "tired landlords?"

2) is the better strategy to buy and sell the building, or buy and hold? I'm going to hit up a few investors and I'm trying to get clarity on what's more attractive?

I may be interested in picking up one building, 6-12 units- but how do I scale that? Meaning if I get a 6 unit property, and my gameplan is to own a share in several much bigger buildings how do I "get started with the right strategy?"

Any advice from seasoned vets would be greatly appreciated. 

Thanks,

Leo

I'm not qualified to answer 1), so I'll skip it and leave it to others.

Your second question, as stated, is impossible to answer well. You need answers to ALL of these questions, and once you have answers, the direction to go will probably be obvious:

What is your capital budget? What size building? Mixed-use or MFR? Only in greater Chicago, or anywhere? What class of building, and what class of neighborhood? Market rate, or subsidized? Will you manage, or hire a firm, or will the manager be on-site? What will be the ownership structure of the entity that buys it? Do you plan on financing the purchase? Is the building underperforming, and if so, why? Can the current market support existing rents? Are you/the owning entity prepared for the tax consequences of a sale? Are you/the owning entity prepared for the operational consequences of ownership?

Don't even think about walking into a bank or pitching investors without at least a notion about answering these.

As for the hypothetical 6-12 unit MFR, you have a few choices. Once the building is bought, and stabilized, depending on debt/equity and ownership structure, you may be able to borrow (again) in a year or two, pledging the first as collateral. Another possibility would be to stick with the first building for a while, and once you have an operational history, create a pitch book you can show investors (before and after pictures, before and after cash flows, etc). Use OPM (other peoples' money) to buy one or several more.

Alternatively, explore the myriad of real estate crowdfunding platforms, and invest in several of the properties offered there, from SFRs in Dallas to huge student housing developments in California, to Class A office space in Manhattan. Your upside is limited, you have no real control, but neither do you have the headaches.

@Leo Goykhman

I will try to answer question #1 

You might try sending a yellow letter to anyone you know that owns property your interested in

Written on yellow paper in red ink it simply states that you are interested in purchasing the property at (address) and if they are thinking of selling supply your contact info

Sorry don't have time to answer the others

@Leon D.

 thank you very much for that! I actually had a fair amount of questions "to think through" but your answer helped add some that i wasnt thinking of yet. Thank you very much.

@Steve Smith great idea! im def. going to use those for my list. Thanks for the advice.

As to number one, if you see a for rent sign on a building you like call and tell them you are not interested in renting but in buying the building.  I made a call like that two weeks ago and to my suprise after the guy hung up on me the first time, he just called me back today.

Originally posted by @Leo Goykhman:

hey BP

I'm interested in purchasing an apartment building but not sure on a couple things. 

1) how do I get in front of "tired landlords?"

2) is the better strategy to buy and sell the building, or buy and hold? I'm going to hit up a few investors and I'm trying to get clarity on what's more attractive?

I may be interested in picking up one building, 6-12 units- but how do I scale that? Meaning if I get a 6 unit property, and my gameplan is to own a share in several much bigger buildings how do I "get started with the right strategy?"

Any advice from seasoned vets would be greatly appreciated. 

Thanks,

Leo

 Great questions and here are your answers:

1) direct mail, networking with eviction attorneys, networking with commercial real estate brokers

2) neither :-)

buy-and-hold then do a 1031 exchange so you can buy a bigger building with bigger cashflow

you can also syndicate the deal - which is what I did. I spent $5,000 as earnest money on a 133-unit apartment complex and then I syndicated the deal and raised $1M. Listen to my podcast - http://biggerpockets.com/show65 so you will know how I did it.

To scale it - you need to buy GREAT DEALS - meaning properties you can buy at a STEEP DISCOUNT. If you can buy a 4-plex at 50 cents on the dollar, turn it around so it's now worth 100 cents on the dollar, you can do a cash out refi so you can free up your capital and buy another 4-plex or bigger. Then you rinse and repeat.

The key ingredient in a successful real estate business is having the ability, the systems and the team to help you find GREAT DEALS.

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@Wendell De Guzman

 whoa! that is really good stuff! Thank you. 

I just got off the phone with someone in the city that owns a 4-unit and it expired from the market a little while ago they told me they really had a bad experience w a Tennant and wants out. im hoping to meet with the owner and see the property. i have to also see what comps are for that area for a 4-unit.

i def need to learn the process of finding these GREAT deals. I know nothing good in life comes easily, but i would like to do something i enjoy, and that has great upside potential.

btw- in your episode, you mention the 133 building. so i guess my question is this: if i find a building that is for sale and lets say its a 100 unit+ selling for MARKET VALUE, would you buy that again? would you try finding investors? would you only buy if its below market value? is there any value in finding a big building like that and purchasing for market vlaue or just under? I'd love to hear your opion about this. 

@Joseph Catalano

 thats a great idea. ill def do that. Thank you!

i appreciate all the feedback!

-Leo

If it's in a good neighborhood, and the building is performing, sure - I can pay slightly below market value for it (not necessarily 50 cents on the dollar). 8-10% cap is my goal on a 100+ unit apartment complex.

Besides expired listings another way to get to tired landlords is to go to eviction court and hand out business cards.

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