Yuba City, CA · Member since 2016 · 48 posts · 10 votes
Are there any apartment investors willing to talk about how they started in the apartment world, your first deal, any unexpected problems that may have arised and how you solved them, where you find your deals and especially how you finance them.
Financing is my biggest issue. As of now I am still in the learning process, but I know that buying and holding apartment complexes is the path I want to take. So any advice would be much appriciated and all discussion is more than welcome! Thanks!
Hi @Robert Ferrell the way I got my start in the apartment world was by 1st educating myself through podcasts such as biggerpockets, best real estate investing advice ever with Joe Fairless and etc. I listened to hours on hours of podcasts to get a general understanding of the business and then I found a mentor which I think is vital, especially if you don’t have any real estate investing experience yourself. So if you are just getting into this I would say the most important thing to do for now is to educate yourself as much as possible then when you feel ready to take steps forward, find/hire a mentor and start taking action.I’m still in the process of completing my first deal but my 2 cents is at the beginning of this your education is vital. One book recommendation that is all encompassing about apartment investing is The complete guide to buying and selling apartments by steve berges. I hope this helps if you have any other questions or want more book/podcasts recommendations feel free to message me! Good luck!
I address some of this in my podcast. But if you're ever in need of some further general guidance feel free to reach out me.
All the best to you,
Jason Cohen Pittsburgh
@Robert Ferrell - I honestly got into the apartment investing by talking with a real estate broker. I went to view a property, talked with the owner, and convinced him to consider owner-financing. "You'll never get there if you don't try" was the mentality that I went into it with.
I was up front with the owner - I didn't have the finances to go with a 20% down to the bank, so I offered 10% and I would pay him off in full after five years through a refinance. He liked how the taxes were in his favor, he got a monthly paycheck, and I would keep a maintenance account open and at a certain level in case I failed and he got the property back in poor condition.
@Jason Cohen Where can I find your podcast? Right now I am on episode 58 of the BP podcast, but I am always looking for new shows to add to my library. Especially ones pertaining to real estate!
@Ben Wilkins Hey, thanks for the reply! Had you done any prior real estate investing before jumping into the apartment scene? Also, does it cost anything to you to work with a real estate broker when looking for a property?
I like your method on owner financing and then exiting with a refi. Other than that instance, in your experience are apartment owners generally interested in financing themselves? And is the process any more or less complicated than gaining financing from a traditional bank? If so, would you mind explaining any of the difficulties associated with owner financing?
@Robert Ferrell Funny enough, we closed on our first duplex at the same time as we were going through the offer stage of the apartment. It did not cost us anything to work with the broker other than a meal at Panera
As to apartment owners who are willing to finance themselves - it's all in how you market the deal. If you ask an owner what they plan to do with the money that they make on a sale, a lot of people will say "bank, buy a house, travel" or something along those lines. Convince them that a down payment to them will cover their immediate needs, then convince them that a monthly paycheck will benefit them.
For me, the process was less difficult than traditional banking - however, it will really depend on the individual deal (not a surprise I suppose). The most difficult part for this deal was convincing the owner that he wanted to do owner financing - the broker assured me ahead of time that he hadn't been willing to consider it before. I suppose the trick was to find out what he wanted, then spin the deal to meet his needs as well as my own
@Robert Ferrell, I would suggest you check out Peter Harris's channel on youtube. Search for "Commercial Property Advisors". If you like him, sign up for his course (Free) at Udemy.com
You will gain a lot of insight into how to approach commercial property investing.
Hi Robert, the most important thing you can do is thorough due diligence. Financing is something you can research and you will either be qualified by a lender or not. A few things you will want to keep in mind when making offers and shopping.
1) review the paperwork. Is it clean and organized or are there out of date agreements, missing applications, etc.
This will help you determine how well the building is being managed.
2) Pick units at random to inspect. A lot of times the best units are cherry picked and then you don't have a good idea of how much deferred maintenance there is. This can lead to cost overruns.
3) Consider demographics. This will determine the types of challenges a building may have.
By the way, where are you looking? I see you're in California, we have a lot of people from California buy in Portland, Oregon where we operate.
I don't do any apartment investing myself, but one of the things that I see tripping people up in my area is poor evaluation of the deal.
They buy an older building in an area where there are newer buildings with more amenities. Then they expect similar rents to the newer buildings. In my area it almost seems like medium/larger multifamily is a in a bit of a bloated state.
That's just based on what I see coming on market and what I hear as I look for one now.
Hi @Robert Ferrell the way I got my start in the apartment world was by 1st educating myself through podcasts such as biggerpockets, best real estate investing advice ever with Joe Fairless and etc. I listened to hours on hours of podcasts to get a general understanding of the business and then I found a mentor which I think is vital, especially if you don’t have any real estate investing experience yourself. So if you are just getting into this I would say the most important thing to do for now is to educate yourself as much as possible then when you feel ready to take steps forward, find/hire a mentor and start taking action.I’m still in the process of completing my first deal but my 2 cents is at the beginning of this your education is vital. One book recommendation that is all encompassing about apartment investing is The complete guide to buying and selling apartments by steve berges. I hope this helps if you have any other questions or want more book/podcasts recommendations feel free to message me! Good luck!
@Ben Wilkins Great advice! That sounds like the perfect outcome for any deal, satisfying the sellers needs as well as your own. I will be sure to remember this when negotiating for my first apartment building!
@Nicholas Cook I absoluetly agree. Nothing is more important than the due dilligence. It seems that is where most wannabe investors fail. I don't plan to make that mistake. And thankfully, the BP community is helping to make sure I won't. Also, great point with number two.
At the moment, I am primarily looking around my area in northern California. I am wanting to keep it local for my first deal so I can really keep an eye on my investment and refine my strategy. Definitely open to the idea of out of state investing after I have a good system in place and have acquired more knowledge about rental in general.
I now own a 20 unit "C" class apartment complex in Indiana and a 9 unit apartment building in Berwyn, Illinois which would be classified as "B" class. The difference in the tenant pool is incredible to me. This is not something I was evaluating when I first began looking at apartments, but a primary market like Chicago is full of very qualified tenants. Our first tenant in Berwyn had an 806 credit score! In our Indiana property, we would be excited to see one applicant be in the upper 500's... This has been a very informative process, and I have absolutely loved owning a "B" class property! The "C" class... check back with me at the end of the year!
@Robert Ferrell tell me what the last three multifamily (or finance) books you read, courses you've taken and/or deals you've done. That'll help me better understand where you currently are on the path.
I got mine through hard money, was the only option. I put everything I had. Fixed up the curve appeal and the common areas. Neighbours have thanked me many times for turning it around and how smoothly I ran it.
I take no crap from any tenant, you are building a culture and if they sense your weak they will push you. They always try but I'm super firm, give one some slack they all want some slack. Zero tolerance is the best policy.
Robert - I started in MF less than a year ago and about to close on a 284 unit prop this Friday. My advice is to link up with those that are more experienced than you and provide VALUE. I always try to think about ROT (return on time) more than ROI. Can you provide those around you with a greater ROT than they could do alone?
What are the pieces of the puzzle that you do have? Can you underwrite? Find deals? Find equity? Once you find out what you have to offer you'll be able to put all the rest of the pieces together. Remember that MF is a team sport!
@Chibuzor Nnaji I agree, education is paramount to future success. That is why I have been spending a few hours a day not only listening to the BP podcast but also browsing the blog, reading books, and trying to be active here in the forum. I've also recently discovered there is a local REIA that meets once a month in my town, so I'll be attending the next meeting and introducing myself to as many people as possible. And I'll have to check out that book you've recommended as well. Thanks for the advice, and good luck closing your first deal!
@John Warren Property and location class is something that I too never thought to evaluate up until very recently when I learned the distinctions in Brandon Turner's book on Rental Property Investing. This knowledge hasn't completly deterred me from considering lower class areas, but it has definitely opened my eyes to some challenges that I may face depending on where I decide to invest. Although, if possible, I would much rather stick within the higher grades!
@John Warren Also, if you wouldn't mind discussing how you worked the financing for those deals, that would be great. As my pockets have yet to become bigger, I am trying to learn and understand all that I can about RE finance and especially creative financing strategies. I don't want lack of funds to be my excuse for never taking action.
@Federico Gutierrez Hey, thanks for the comment, I've got a few questions if you don't mind. What was your experience like using a hard money lender? How did you locate the lender? What did your down payment look like? Did that go to the lender, the seller, or to the renovations? What was your term with the hard money lender like? And also, if you have already refinanced out of the hard money, how did you go about that?
@Abel Sng Wow, 284 units, that's incredible! Did you come from a background in RE or was this all a new venture for you? Great advice about the ROT. I've long struggled with how to provide value because I've associated cash as being the only way to do that. Do you think that having the ability to find deals is valuable enough, though? I've recieved mixed opinions on this. Some say that bringing a mentor a deal is a great way to offer value, while I've seen others say that simply supplying a deal is not enough as they could have easily found a deal themself. What is your opinion?
Also, if you dont mind me asking, what role are you playing in your MF team? And how did you find/build this team and get to the point that you are at so fast?