Purchasing a 200 unit complex

40 Replies

Would you guys ever consider buying a 200 unit apartment complex, that’s section 8 as well as it only having 1 bedroom floor plans?

If I could and it made sense, yes!

Is it a project or tenant based contract?

I am not a fan of section 8 and I do not like strictly one-bedroom units. I would not make that acquisition nor have I ever in my lifetime. I have owned and do on apartments at the present time.

As long as the property management company is willing to accept the job and like @Patrice Penda stated if the numbers worked- why not!  My concern would be what value add opportunity exists.  How much are you allowed to raise rents?

It depends where it is and whats the market is like with demand for 1 bedrooms. 

also at what price and if the 1 bedrooms can be easily converted to 2 bedrooms - or at list some of them. if its near university in prime campus area then possible yest.

Over all i like better unit mix of majority 2 bedrooms over 1 bedrooms.

I have two medium-size apartment buildings, 128 units and 164 units, and my one bedroom units are always the highest turnover and most difficult to rent. They are not small units either. No ability to increase them to to the bedrooms.

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I should also add that I sold 154 units in July of last year and the story was the same on one-bedroom units.

The one bedroom thing really depends on where you are. If you are in between a military base and a college then it's a strong buy, if not, YMMV.

I remember owning a couple buildings in Fort Collins Colorado hundred years ago, the colony and the Bellavista. There was an Army base there and I remember my attitude was the same toward one-bedroom units. Too much turnover too much delay in re-renting. Just one guys opinion.

I have 2 duplexs- 4 one bedroom units that haven't had a vacancy in over 7 years. (I've just owned them one year). It's 4 older men. 

I have 2 other side by side 4-plexes near the Uni that have turned over six of the 8 units in the last 20 months They rent quickly once I market them but we've spent the last 20 months renovating each unit that turns over.

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I would say that it depends on the make-up of the population in that submarket. Personally, I prefer a mixture of configurations, which can have a much larger tenant base.

(919) 434-3132

I believe in the math. Numbers tell me yes or no.

Is section 8 a good thing?  Some people have been very successful with it, and others hate it.  If you know how the situation works, you are comfortable with it, and there is a good return, it may work.  I think results vary depending on location.  I would suggest getting information from other Section 8 owners of projects of similar size in this area.

Only if the cash flow supports the stress of dealing with section 8

I believe @Joe Fairless bought one like this, but also the complex next to it with more bedrooms per unit.  Is that a possibility?

Also would like to get @Percy N. opinion.  He plays in this space as well.

I have 13 1-bedroom apts.  The older singles (40+) stay for the most part.  Younger people in school and with similar vocations/purposes turn more often.

@Steve Vaughan , thanks for the heads-up.

@Garison Clemens , as others said, it would depend on the market. Are there many similar apartments with just 1 bdrms? If so, what is the historic economic occupancy? This unit mix would not excite me.

Would the deal cash-flow if there is even a temporary drop in the housing benefits program? Do a stress test to see how much of a reduction in benefits you can absorb.

I have heard of special lending programs and maybe even some tax benefits, but would need to research more to validate them.

Originally posted by @Steve Vaughan :

I believe @Joe Fairless bought one like this, but also the complex next to it with more bedrooms per unit.  Is that a possibility?

Also would like to get @Percy N. opinion.  He plays in this space as well.

I have 13 1-bedroom apts.  The older singles (40+) stay for the most part.  Younger people in school and with similar vocations/purposes turn more often.

Yeah I remember listening to the podcast that he was on talking about the neighboring complex that he got with his deal that was able to offset the strong 1 bedroom floor plan. The seller told me that the HUD contract is coming due, so I could see that as a value add. But then again, I am not sure that I would want to deal with section 8 housing (nothing against them). It seems like an extra headache, but I also say that with ignorance of how section 8 truly works. I am sure that a lot of investors have made a killing off of Section 8. I am torn.

Originally posted by @Percy N. :

@Steve Vaughan , thanks for the heads-up.

@Garison Clemens, as others said, it would depend on the market. Are there many similar apartments with just 1 bdrms? If so, what is the historic economic occupancy? This unit mix would not excite me.

Would the deal cash-flow if there is even a temporary drop in the housing benefits program? Do a stress test to see how much of a reduction in benefits you can absorb.

I have heard of special lending programs and maybe even some tax benefits, but would need to research more to validate them.

 Hey Percy. I took a look and the economic occupancy is strong (95%+) for the last few years, and I will definitely do a stress test. I appreciate the idea. I am new to apartments and specially a section 8 housing property.

I like my section 8s. They are in 2 specific apt buildings that it works well for. Once I got them in my 1 beds, turnover slowed waay down.

A lot don't have a car so more parking available and less snow removal headaches. Just screen like you would anyone else. I don't rent to smokers, SEC 8 or not. Cut down on my bs a ton when I started that policy.

@Steve Vaughan I think this really depends what area... as in some areas HUD will be almost all single mothers with Children and then the dads coming and going.. it can make for a pretty interesting PM challenge.. collage kids don't have hud usually..

we had a few hundred hud tenants and by and large fine but I can't see how you could have 200 1 bds all hud.. that would be something.

Originally posted by @Jay Hinrichs :

@Steve Vaughan I think this really depends what area... as in some areas HUD will be almost all single mothers with Children and then the dads coming and going.. it can make for a pretty interesting PM challenge.. collage kids don't have hud usually..

we had a few hundred hud tenants and by and large fine but I can't see how you could have 200 1 bds all hud.. that would be something.

 The nice thing with 8s and 1 beds is occupancy limits. The lazy lady sitting at home screaming at 5 kids hanging on her myth can't happen.

Mine are HUD VASH (disabled vets) or have a disability of some sort and all are over 45. One couple is married, but kids are grown and gone.

I don't screen to be with or without children or an SO, obviously. Occupancy limits help with that on the smaller places, my stringent screening across the board takes care of the rest. None of mine smoke, drink or do drugs. They are happy and dont  move much. 2 Ive had for 6 years+ in small apts that used to turn constantly. Bonus, local Hud office and people are great. Electronic ach rent deposits once for all with itemized list on the 3rd every month with one annual 1099 to my mgt co.  Their files are a little thicker with annual inspections I don't have to attend and financial determinations but no biggie. Easy peasy.

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