First Apartment Complex Advice??

11 Replies

I’ve finally put together my first deal! A customer of mine, from when I had a small construction company, had a property to sell. Her and her husband previously had nearly 40 properties and one of the last ones left is a small apartment complex that sits on two acres of highway frontage. There are 6 total units, each Is separate, solid slab, and cinderblock home. There is one 3/2, one 2/1, and four 2/2. All but one unit has been vacant for nearly five years. After her husband passed away she did not ever re-rent the units. Because it seems she is not hurting for money due to having sold the previous properties, and she does not care to fix up this property, she made me a really great deal. Even though I believe this is still a low appraisal, the county is giving the property a valuation of $105,000. My customer told me that all she wants for it is $60,000. Yep, $10,000 a unit. She will also carry the note with no down payment, and no interest. Simply $1000 a month for the next 60 months. The property is in a highly desirable location known for its oilfield population. I think with $150k I can rehab all 6 units for a total of $4950 in total rents. My question to anyone willing to lend advice, would be, how to finance the rehab while not having to lose out on the 0% interest owner finance arrangement??

What you have is an "installment loan".

Not enough info to say whether this is a good deal or not but if it is, you can partner with someone for the rehab money or if some of the units are cashflowing, do the rehab over time, or refi or.....

@Brad Dickinson What a great find! congrats. 

If it were me, I would use the loan offered to complete the rehab. You are not under a time crunch with no interest which gives you a lot of freedom and can do this thing right! if its your first time, this is a huge advantage. 

Once the rehab is finished, and units are being rented, I would refi into a bank loan at 30+ years and ride it out. Take your $60-$100k in equity and put that into your next project. Sure you are paying more bc you now have  a bank loan but you are also able to put to work the equity you made to make up for that interest payment. 

Do you your numbers. Figure out what you can rent it for. Determine ARV. See what type of finance options are out there. You can map this thing out and figure out best solutions. If not, reach out to me directly and ill be happy to help.

@Ellis Hammond Thank you so much Ellis for the advice. I do agree cash flowing the rehab costs on this one could work out great in my favor. Being my first property I can expect to have surprises and not having deadlines to make for financing, relieves a lot of stress. Thank you again for the advice, and I may have to take you up on that offer!

Are any of the units "rentable" right now? Being close to an oilfield should give you renters easy to find.  If  only half of the units can be rented out quickly, you can use one unit to cover the mortgage and use the other rentals to split between recurring expenses (utilities, etc.) and reno expenses, if you are doing the reno yourself. 

My brother was a pipefitter who traveled a lot and ended up staying in total dumps for a lot of money, due to the lack of adequate "temp" housing available for those workers. If you are going to rely on oilfield workers, make the place clean and safe and working. They really don't care what color the bathroom is painted or if the fridge is white or stainless. 

I personally would try to do as much work myself to start with, just to get 3 of the units rented asap. If they are temp workers, you can charge by the week which always brings in more money. And advertising is as simple as going to the "office" or lunchroom and posting a hand written ad. I've done it at a hospital and it works.

Sounds like a great deal, good luck!

@Karen R. Thank you so much Karen for the advice! Yes, one of the unit are rented and we don’t expect it to take much to get at least one more available. Our monthly payment is $1000 a month and with two rented we would easily clear that. I forgot to mention that 5 of the 6 units were previously 1/1 duplexes that have been converted to 2/2. I know the math makes sense to convert them back because a 1/1 will easily rent for $600 a month in our area. But I’ve heard two bedrooms are more desirable. Any thoughts on converting them back?? It seems like it could VERY easily be accomplished.
Originally posted by @Brad Dickinson :
@Karen R.

Thank you so much Karen for the advice! Yes, one of the unit are rented and we don’t expect it to take much to get at least one more available. Our monthly payment is $1000 a month and with two rented we would easily clear that. I forgot to mention that 5 of the 6 units were previously 1/1 duplexes that have been converted to 2/2. I know the math makes sense to convert them back because a 1/1 will easily rent for $600 a month in our area. But I’ve heard two bedrooms are more desirable. Any thoughts on converting them back?? It seems like it could VERY easily be accomplished.

Brad.. I think it depends on who you will be renting the apt to... for example is it to elderly, workers, families etc.? Families tend  to want the 2/2 but if its for workers you'd probably be best with the 1/1 unless its cost prohibitive. If you can get a third unit rented for now, use that for paying utilities, insurance and the rest towards reno. Good luck!

@Karen R. Karen, again thank you so much for the advice. In the area I’m purchasing these, there is a high volume of oilfield workers, who are usually from out of town. I have checked local short term rentals, and some are currentIy 100% occupied and going for $280 a week. It seems thIs approach Is more ”hands on“, but even If I started at $225 a week, I couId potentially get $1,800 a month for the same unit that would only bring in $800 a month, as a single family 2/2. Because of the floor plan, there is only a set of doors that separate the two units. I am thinking that if the amount of workers in town slowed down, I could always remove the kitchen out of one unit and simply go back to being a 2/2 single family. Is there any real problem of going this route??
Originally posted by @Brad Dickinson :
@Karen R.

Karen, again thank you so much for the advice. In the area I’m purchasing these, there is a high volume of oilfield workers, who are usually from out of town. I have checked local short term rentals, and some are currentIy 100% occupied and going for $280 a week. It seems thIs approach Is more ”hands on“, but even If I started at $225 a week, I couId potentially get $1,800 a month for the same unit that would only bring in $800 a month, as a single family 2/2. Because of the floor plan, there is only a set of doors that separate the two units. I am thinking that if the amount of workers in town slowed down, I could always remove the kitchen out of one unit and simply go back to being a 2/2 single family. Is there any real problem of going this route??

 Brad,

There is more money and probably a lot less hassle in renting by the week to oilfield workers. These people work long and hard and when they get "home" they just want a shower and a meal and a bed. You won't find many complaints from them. If and when the oilfield slows down then going to a 2/2 family rental sounds very easy if it's just a matter of doors. 

You're welcome Brad... I would spruce up the avail. apts for the oilfield workers. For example, new linens, shower curtains, toilet seat, kitchen coffee pot, toaster oven, curtains... even a new tv. As soon as its ready, go down to the oilfield bulletin board and post your apt for rent. You don't have to charge that much less than the others, maybe ten to twenty bucks will do. Even though you charge by the week, you can collect every two weeks for most workers. Easier for both of you. I had a ten unit building that I rented winters only and it was a great experience.. no lease, no hassles. If you are a good landlord to the first tenant, word of mouth will get you all the renters you need. This sounds like a great deal, wishing you the best of luck. Feel free to connect with me or message me with anything I can help you with.