Investor · Phoenix, AZ · Member since 2015 · 346 posts · 170 votes
Like the title says I want to acquire a 20-30 unit apartment complex in the Phoenix area the problem is that I only have $80,000 in capital.
What can I do to get what I want with this money I have?
I welcome all ideas or strategies.
Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
8y
Cara Lonsdale
I purchased a nice 16 unit apartment complex for less than $2000 out of pocket (upfront insurance and $1000 earnest money) and received over $14k at closing and then collected another $8k in rents the first week I owned it. It was seller financing with no realtors involved. I’ve done many smaller deals with very little money out of pocket as well.
To get these deals you just have to focus on off-market properties where you can develop relationships with the seller and really build a win-win structure for both parties.
Realtor and Investor · Scottsdale, AZ · Member since 2017 · 1k+ posts · 1k+ votes
8y
The cheapest project in Greater Phx with a minimum of 20 units is priced at $850K. With $80K, that is less than 10% down. I don't see it happening.
I think you need to re-adjust your expectations, and concentrate on SFR, or if you MUST have a multi-unit, that kind of seed money could get you into a 4-6 unit.
4-plexes start in the $200K range. There are some 6 units that can be found in the $275K-$300K range.
Investor · Morrisville, NC · Member since 2012 · 1k+ posts · 673 votes
8y
@Carlos Gonzalez ... I would agree with both previous posts. Be patient ... The first deal is the one you are more likely to screw up (because of inexperience). I wouldn't go so big with so little means and so little experience.
@Ali Hashemi made some great suggestions for finding another way to finance the property. Definitely try those ideas out if you haven't.
Essentially, there are two ways to approach investing:
1) Deciding on the kind of property you want, and then gathering the resources needed to acquire it.
2) Finding a property that matches the amount of resources you already have.
So, you can either see what $80k can get you in Phoenix (most likely up to $320k and no more since that's 25% down)...
Or, you can still get your 20-30 unit building, it'll just be in a different state.
Like the others have said, be patient. This is wealth building, not get rich quick.
Think of it like the game monopoly... you start out with the little green houses, and then eventually trade up to the big red hotels. You don't start there.
You might have a little trouble getting a commercial loan anyways since you only own one other rental property (fourplex on your profile) and have only owned it a little over a year. Some lenders may want you to have more experience before lending on such a large operation where a lot more can go wrong.
There are some nice 5-6 unit properties for that price in AZ ($320k assuming 25% down) but you're nowhere near the 20-30 unit mark.
One idea you might want to explore is seller financing on a mobile home park. I think you're a lot more likely to find seller financing in that scenario. There's currently one down in Chandler for sale with 6 normal units and 4 mobile home pads. That might be a possibility.
Or, you could try looking elsewhere (probably out of state) to get the 20-30 units. Hope this information helped. Best of luck!
Phoenix, AZ · Member since 2015 · 345 posts · 138 votes
8y
Might be best to find someone who owns or has owned those size buildings in the areas you are targeting. Use that 80k as part of the investment along with maybe a portion of their money to acquire the asset... Offer to do the legwork as he or she calls the shots. Give them a higher portion of the returns to sweeten the offer. Learn all that you can and eventually do it on your own. But at the very least I would partner with someone experienced if this is your first multifamily investment. There are just a lot of different variables that someone with some experience can help you watch out for.
Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
8y
Cara Lonsdale
I purchased a nice 16 unit apartment complex for less than $2000 out of pocket (upfront insurance and $1000 earnest money) and received over $14k at closing and then collected another $8k in rents the first week I owned it. It was seller financing with no realtors involved. I’ve done many smaller deals with very little money out of pocket as well.
To get these deals you just have to focus on off-market properties where you can develop relationships with the seller and really build a win-win structure for both parties.
I purchased a nice 16 unit apartment complex for less than $2000 out of pocket (upfront insurance and $1000 earnest money) and received over $14k at closing and then collected another $8k in rents the first week I owned it. It was seller financing with no realtors involved. I’ve done many smaller deals with very little money out of pocket as well.
To get these deals you just have to focus on off-market properties where you can develop relationships with the seller and really build a win-win structure for both parties.
Seller financing would be the only way to get that kind of deal. OR sometimes wholesalers will partner with a hard money lender to offer a project with a reduced down payment.
In either scenario, the deals aren't always as good as they appear....either the price is elevated, the Seller was having a hard time selling it, and/or a Buyer can't get traditional financing on it because of it's condition, and decided to offer Seller financing. I would be cautious about making an offer on something like that because you will have a difficult exit strategy.
I am not trying to discourage you at all, I just hear your story and scratch my head wondering what kind of Seller let's go of a property that gives him $8K per month AND gives the Buyer $16K at the closing, and only gets $20K to unload it so he can carry the note. It just doesn't add up. Either it had a ton of deferred maintenance, it wasn't a cash flowing property and the Seller thought that they would make more on the note, or the tenants are on their way out.
A seller that is savvy and is looking for a tax-advantaged exit without having to 1031 and continue to deal with some sort of real estate. These deals are done all the time but rarely with agents involved because it’s nearly impossible to negotiate a deal like this with one or most often, two agents relaying back and forth. I didn’t overpay....it’s not a distressed property with lots of deferrred maintenance and it cash flows like crazy. I cleared $26k last year, which was my first full year of ownership and I should clear $30k this year due to raising some rents and cutting my insurance cost by $4k
The deals are out and they’re being done every day in this country. There just isn’t a realtor sitting at the table.
Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
8y
And as a disclosure.... @Cara Lonsdale....I’m an ex-realtor myself. I’m not bashing agents...I’m just stating that it’s rare to be able to do this deals with agents involved. Two main reasons...the commission is a hurdle that needs dealt with. In a no money down deal it’s just not feasible to expect an agent to take a note for their entire commission. The other reason is that MOST agents just aren’t capable of wrapping their head around the out-of-the-box structures involved in these creative deals.
And as a disclosure.... @Cara Lonsdale....I’m an ex-realtor myself. I’m not bashing agents...I’m just stating that it’s rare to be able to do this deals with agents involved. Two main reasons...the commission is a hurdle that needs dealt with. In a no money down deal it’s just not feasible to expect an agent to take a note for their entire commission. The other reason is that MOST agents just aren’t capable of wrapping their head around the out-of-the-box structures involved in these creative deals.
I don't doubt your story, and to be fair/clear, I am not a typical agent relying only on the MLS. I have a whole network of wholesalers, past investor clients who we do off market deals for. I have even been to trustee sale with clients. So, I am all about out of the box deals, and am happy to hear of your success.
My whole point is that YOU may have found a 16 unit somewhere...but my guess is it wasn't in Greater Phx. Am I correct? The OP is looking for a 20-30 unit multi-family in Greater Phx with only $80K. I am just saying that if it were HERE, in Greater Phx, it would most likely have the issues I mentioned.
If you find good deal, the money will follow. I would look to partner with someone, and perform the day to day management for a fee. You can also charge an acquisition fee and roll that into equity.
That's the easy part. The hard part is finding a deal that will perform. I'm sure you would find investors/partners on this platform.