What's Your Most Successful Apartment Deal Ever

36 Replies

What's your most successful apartment deal?

How much money did you make?

What are the problems you've encountered?

What are the lessons you've learned?

Here's mine:

The Deal

The apartment community is called Wyoming Crossing - it has 96-units, acquired in April 2014 for only $1 Million (we bought it so cheap because it has only 20% occupancy and 24 units have no water and heat as someone stole all the pipes and wires in those units!). We spent about $1.2 Million to renovate the property. So we are "all in" for $2.2 Million.

Sold it in Feb. 2017 (we actually did the entity transfer in Dec 2016 but got the cash in early Feb) for $3.7 Million for a profit at sale of $1.5 Million (not including the cashflow we pocketed during the time we held it).

Challenges Encountered

One challenge we encountered is that NO bank wanted to finance it due to the low occupancy. This actually turned out to be good for us since it became a reason for us to negotiate and get owner financing. We put down $150,000 and the seller financed the rest at 4.5% interest only, 5 year balloon.

Another challenge is crime in the area. We were able to address it by putting CCTV cameras and getting the tenants to participate in a neighborhood crime watch.

Another challenge was we found the previous owner did not install some of the roofs properly so we had to replace some of them.

Lessons Learned:

1. Don't shy away from problems. We made more than $1.5 Million on this deal because it has a lot of problems. Real estate investors who are able to solve the most problems profitably, will make the most money.

2. Be Hands on. You can't invest in real estate from behind the desk. You gotta get your hands dirty and be at the property to trouble shoot issues, brainstorm solutions with your people and implement them.

3. Turn around problems into "stepping stones". I used the difficulty in getting bank financing to negotiate owner financing and we actually used less of our investors' money (and got more equity in the deal). Other investors would have given up. 

You need some creativity, a lot of diligence and hard work...and a little bit of luck to succeed in this business.

Come on BP -specially those experienced apartment investors: share your success here on BP so together, we can inspire each other!

"Turn problems into stepping stones". I LOVE this for everything in life!

My best deal is currently in the works...but I thought I would put it out into the universe...because it will be my best deal once its done!

What's your most successful apartment deal? Recently bought a 24,000 sq foot building on 4 acres of land, that was formerly used as a nursing home before it closed a year and a half ago. The building is solid and in relatively good shape.  The plan is to create  24 high efficiency units.  I paid $135,000.

How much money did you make? TBD  :)

What are the problems you've encountered? The building was such a good deal that we bought it before we knew what we were going to do with it.  I live in Boston and the building is in a small farm town in Illinois, a mile from a fiend's winery.  

What are the lessons you've learned?  

First lesson was to calculate tax at the commercial tax rate!  

Second, it is difficult to get insurance on a vacant building - (until you search and find the right resources on BP). 

Third, commit to a plan and just go after it one step at a time.

Would love to hear more tips and tricks!


This is a deal we did a few years ago and while it's still in progress we're still pretty excited.

The Deal : 200 unit C+ class asset in Bloomington, IN

Acquired in 2016 for just over $10MM

$1,000,000 ($5k/door) value add program including: leasing office remodel, adding W+D hookups , new laminate countertops, new flooring, cabinet upgrades, new door hardware, lights, paint.

Targeted $150/m rent bumps. The average now is more around $200/m.

Just recently appraised for $18MM with our current NOI. ($8,000,000 in value creation!)

In the process of adding a supplemental mezzanine loan to return 100% of capital + profit. 

The property should still cash flow around 7% cash on cash while we (and our LPs) take our capital and reinvest into another deal to realize the wonders of compounding. The property has essentially been de-risked while we still retain ownership.

Challenges Encountered: Our team had to get the right onsite team in place that believed in the vision. Our first onsite PM didn't like change. This property suffered relatively low occupancy for some time during renovation and cash on cash dropped. PM team was able to dial in rehab expenses. Glad we hung on.


Lessons Learned: People are everything. It took putting the right team in place who were on board with the objectives and the business plan.


Now let me give a nice knock on this hotel desk while before we close on the mezz!

I'm very new to all of this so I only have 1 deal and it's my best one :) My wife and I bought our first home, a townhouse just outside of Nashville.

  • Paid $137,500
  • Remodeled and replaced HVAC for $15,000
  • Reappraised for $165,000
  • Got a HELOC for $12,500
  • Purchased a new $300,000 house 10 miles from downtown with the Heloc as the down payment.
  • Our mortgage/escrow/HOA on the original house is $1,000
  • We rented the house to a family for $1,550.
  • 2 years later it's valued at $200,000.
  • We just expanded our HELOC by $20,000 to help us purchase a mobile home park that has a $400-500k upside
  • Our current house value has grown $25-35k.

Pretty sweet deal for a grand total of about $25k original investment to create all the above deals.

I will play :)

First deal- sold a small (3000 sq ft) warehouse in SoMa in San Francisco and was able to purchase 10 units new construction  in Eugene OR using all cash except a small loan) 

now 4 years later I am working on selling the 10 units and buying 20 new construction units in portland OR 

if this works (knocks wood like crazy) I will of doubled my net worth in 5 years and will also cash flow nicely! 


Originally posted by @Erin Connors :

"Turn problems into stepping stones". I LOVE this for everything in life!

My best deal is currently in the works...but I thought I would put it out into the universe...because it will be my best deal once its done!

What's your most successful apartment deal? Recently bought a 24,000 sq foot building on 4 acres of land, that was formerly used as a nursing home before it closed a year and a half ago. The building is solid and in relatively good shape.  The plan is to create  24 high efficiency units.  I paid $135,000.

How much money did you make? TBD  :)

What are the problems you've encountered? The building was such a good deal that we bought it before we knew what we were going to do with it.  I live in Boston and the building is in a small farm town in Illinois, a mile from a fiend's winery.  

What are the lessons you've learned?  

First lesson was to calculate tax at the commercial tax rate!  

Second, it is difficult to get insurance on a vacant building - (until you search and find the right resources on BP). 

Third, commit to a plan and just go after it one step at a time.

Would love to hear more tips and tricks!

Erin, that's a lot of building and land for $135,000. Congrats!

I think it will be virtually impossible NOT to make money on that one.

Thanks for sharing.

 

Originally posted by @Spencer Gray :

This is a deal we did a few years ago and while it's still in progress we're still pretty excited.

The Deal : 200 unit C+ class asset in Bloomington, IN

Acquired in 2016 for just over $10MM

$1,000,000 ($5k/door) value add program including: leasing office remodel, adding W+D hookups , new laminate countertops, new flooring, cabinet upgrades, new door hardware, lights, paint.

Targeted $150/m rent bumps. The average now is more around $200/m.

Just recently appraised for $18MM with our current NOI. ($8,000,000 in value creation!)

In the process of adding a supplemental mezzanine loan to return 100% of capital + profit. 

The property should still cash flow around 7% cash on cash while we (and our LPs) take our capital and reinvest into another deal to realize the wonders of compounding. The property has essentially been de-risked while we still retain ownership.

Challenges Encountered: Our team had to get the right onsite team in place that believed in the vision. Our first onsite PM didn't like change. This property suffered relatively low occupancy for some time during renovation and cash on cash dropped. PM team was able to dial in rehab expenses. Glad we hung on.


Lessons Learned: People are everything. It took putting the right team in place who were on board with the objectives and the business plan.


Now let me give a nice knock on this hotel desk while before we close on the mezz!

 Spencer, nice - $8M in value creation!

That's why I like "C" properties also - it allows me to create a lot of value by bringing it to "B" quality and increasing the rents significantly.

And now you can pull all of your investor capital to do another one.

Awesome man!

Originally posted by @Mary Mitchell :

I will play :)

First deal- sold a small (3000 sq ft) warehouse in SoMa in San Francisco and was able to purchase 10 units new construction  in Eugene OR using all cash except a small loan) 

now 4 years later I am working on selling the 10 units and buying 20 new construction units in portland OR 

if this works (knocks wood like crazy) I will of doubled my net worth in 5 years and will also cash flow nicely! 

 Nice one Mary.

I like new construction too - very low expenses (35% instead of the 50% rule that people here on BP talks about - and that's really for older buildings).

Hope your upgrade to 20 units work and given where the market is at, it probably will.

Congrats on your success and thanks for sharing!

Originally posted by @Trent Chance :

I'm very new to all of this so I only have 1 deal and it's my best one :) My wife and I bought our first home, a townhouse just outside of Nashville.

  • Paid $137,500
  • Remodeled and replaced HVAC for $15,000
  • Reappraised for $165,000
  • Got a HELOC for $12,500
  • Purchased a new $300,000 house 10 miles from downtown with the Heloc as the down payment.
  • Our mortgage/escrow/HOA on the original house is $1,000
  • We rented the house to a family for $1,550.
  • 2 years later it's valued at $200,000.
  • We just expanded our HELOC by $20,000 to help us purchase a mobile home park that has a $400-500k upside
  • Our current house value has grown $25-35k.

Pretty sweet deal for a grand total of about $25k original investment to create all the above deals.

 Congrats Trent!

Now let's add one more zero at the end  - I will teach you how soon! ;)

Thanks for sharing.

Originally posted by @Michael Ealy :

What about the more experienced apartment syndicators like @Brian Burke , @Greg Dickerson, @Tj Hines , @Ola Dantis , @John Casmon , @Alina Trigub ...what's your most successful apartment deal ever? Please share it here so others can benefit from the lessons and be inspired by your success. Thanks!

That’s an easy one. It was my first major deal 22 years ago. I did this deal on my own with no investors.

I bought a hotel for $1.2 million and raised it to build a 36 unit. I flipped the whole thing and made a couple million dollars.

That was a good hit at the time but the most valuable thing is that was the project that catapulted my career and validated me as a successful developer.

That one deal has resulted in hundreds of millions of dollars of development deals over my career.

@Michael Ealy Nice work with overcoming the challenges on your 96 unit! 

For me the best deal so far has been the one I'm in as an equity partner, where we received about half of the capital back in about 18 months. The challenges operator had to overcome is low vacancy and a ton of deferred maintenance, which they did by hiring the right team members and rolling up the sleeves to expedite the process. 

Completely agree with you @Michael Ealy about looking at the challenges as opportunities to make more and take the tasks that no one else wants to touch! 

Originally posted by @Michael Ealy :


 Nice one Mary.

I like new construction too - very low expenses (35% instead of the 50% rule that people here on BP talks about - and that's really for older buildings).

Hope your upgrade to 20 units work and given where the market is at, it probably will.

Congrats on your success and thanks for sharing!

 I buy for cash flow as i live off my rentals. So i kind of treat these investments as bonds. Stable long term income where I dont need to bring any of my cash to the table for renovation etc. 

i did not put numbers on the above but the bldg i started with appraised for 1.3M and my current deal is 6.8M w/ apprx 55% LTV

This play is becuase i want more income while staying as safe as possible. 

On the side i buy and resotre old early 1900s houses :) 

The leverage aspect of all of this has been nervre wracking since as a cash buyer I am used to keeping all my cash flow.  To be able to keep what I currently make with potential for growth I will do 3-5 yrs int only on long term debt 

This has been an education for sure! 

Originally posted by @Greg Dickerson :

That’s an easy one. It was my first major deal 22 years ago. I did this deal on my own with no investors.

I bought a hotel for $1.2 million and raised it to build a 36 unit. I flipped the whole thing and made a couple million dollars.

That was a good hit at the time but the most valuable thing is that was the project that catapulted my career and validated me as a successful developer.

That one deal has resulted in hundreds of millions of dollars of development deals over my career.

 That's awesome Greg! It's amazing how one deal can lead to another.

Originally posted by @Alina Trigub :

@Michael Ealy Nice work with overcoming the challenges on your 96 unit! 

For me the best deal so far has been the one I'm in as an equity partner, where we received about half of the capital back in about 18 months. The challenges operator had to overcome is low vacancy and a ton of deferred maintenance, which they did by hiring the right team members and rolling up the sleeves to expedite the process. 

Completely agree with you @Michael Ealy about looking at the challenges as opportunities to make more and take the tasks that no one else wants to touch! 

Congrats Alina! Getting half the capital back in just 18 months is awesome.

Being hands on and getting your "hands dirty" is really how money is made with apartments. It's not passive from the sponsor side. 

This is why I am beginning to like owning hotels more and more. We have an experienced hotel operator who does everything. We have proven systems from the hotel franchisor. Because of these two things, hotels are easier to own and manage. No wonder, hotels and Class A properties in A locations (100+ units) are "institutional-grade" assets.

Originally posted by @Michael Ealy :

What about the more experienced apartment syndicators like @Brian Burke, @Greg Dickerson , @Tj Hines , @Ola Dantis , @John Casmon , @Alina Trigub ...what's your most successful apartment deal ever? Please share it here so others can benefit from the lessons and be inspired by your success. Thanks!

My highest multifamily IRR was a 54-unit property I bought from a bank in 2011 and sold 21 months later for a 63%+ deal level and 43%+ net investor-level IRR. My highest dollar gain is probably coming next year as I'll be selling around a thousand units, so stay tuned!

These days I'm playing it safe and swinging for base hits.  No longer chasing grand slams--there's just too much heat in the market adding to the risk.  I'm too old to start over (again) and my investors are used to decades of never losing money, so capital preservation trumps the quest for another "most successful ever."  My motto for the future is slow and steady wins the race.

Originally posted by @Brian Burke :
Originally posted by @Michael Ealy:



My highest multifamily IRR was a 54-unit property I bought from a bank in 2011 and sold 21 months later for a 63%+ deal level and 43%+ net investor-level IRR. My highest dollar gain is probably coming next year as I'll be selling around a thousand units, so stay tuned!

These days I'm playing it safe and swinging for base hits.  No longer chasing grand slams--there's just too much heat in the market adding to the risk.  I'm too old to start over (again) and my investors are used to decades of never losing money, so capital preservation trumps the quest for another "most successful ever."  My motto for the future is slow and steady wins the race.


Congrats Brian! 63% IRR is very nice indeed. And that's super exciting - selling 1,000 units! Must be a high 7-figure or even an 8-figure profit I can imagine. I just wholesaled a 353-unit portfolio with a group of partners and we should earn $1.8 Million by the time we close.

I agree with you about taking on less risks.

Me and my partner Nate used to do a lot of heavy repositioning deals - deals like I described here. BUT, in today's market, even though we are vertically integrated and our cost of construction is significantly lower than our competition, we are focusing on quick, low risk, cashflow from day 1 super light value-add deals.

For example, we recently got a 42-unit building that cashflows the day we acquired it as it's 90% occupied. We recently improved the parking lot and starting to improve the interior finishes. We budgeted about $6800 per unit and we're now increasing the rents $200-$300/month as the units turnover.

Low risk, high return, easy repositioning.

My investors are quite happy and like you, I have not lost money for them since starting raising money from private investors since 2006. 

Hope the younger syndicators take notice about what experienced sponsors like us are doing. I see a lot of marginal deals floating around from these inexperienced syndicators who didn't go through the Great Recession and I fear for their investors. 

I hope I am wrong...I am hope I am wrong...

Originally posted by @Michael Ealy :

What about the more experienced apartment syndicators like @Brian Burke , @Greg Dickerson , @Tj Hines , @Ola Dantis, @John Casmon , @Alina Trigub ...what's your most successful apartment deal ever? Please share it here so others can benefit from the lessons and be inspired by your success. Thanks!

 Interesting thread to start... 

In the current cycle of a 150+ deal we acquired in Texas, and we are on track to hit our goal of 2.0x EM for our investors! 

The most successful apartment deal (Not in dollars but in appreciation % / time frame) was my 1BR/1BA 900SF Co-op apartment that I bought for $83K. I put 20K down and financed for 30yrs @ 5% for $340/month.  The place was already remodeled so all I did was finish the existing hardwood floors and paint. I lived in the apartment for almost 5 years and sold it for $260K.  

@Michael Ealy

What a cool opportunity and project!! I look forward to the day where I have the connections and capital to invest like this!

My success story is much smaller but I’m really proud of it.

I spent 1.5 years looking for a 4 plex in Anchorage, Alaska. I put in 1 offer (terminated after inspection found poor foundation) before getting laid off then started working again and put another 2 offers in (one needed all tenants evicted and a total remodel and the other was a lipstick remodel with scary inspection findings). All 3 wanted top dollar.

I ended up looking in Wasilla, AK (45min north of Anchorage) at new construction. I pulled the trigger and used FHA on a $600,000 building with 1 acre of land in an 8 unit complex. After vacating, the last unit ($1350/mo) is total cash flow. I managed to save enough from the passive income to pave the driveway this summer and still have 6 months of expenses saved.

Now I just have to decide what to do with the cash flow: pay down the principal or save for the next one.

Biggest lesson learned:

1) Hold builders and contractors to the fire. I got screwed with a few things but the worst is bad interior wall insulation. The inspector didn’t say anything and I didn’t know what to look for. Now my poor tenants hear EVERYTHING in the adjacent units. I feel awful!

@Michael Ealy great thread lots of learning and experience here. I retired 4 years ago and we moved from Ca to the PNW. We have a 12 unit 2 story apartment building 8x2 bed and 4x1 bed plus garages. We also have duplexes. 

We bought the apartment building 2 years ago, paid 645k in cash. The gross rents were 78k at the time and the building had been very well taken care of. We have turned over half the units and done some cosmetic improvements each time as needed; basically paint and flooring. The gross rents today are at 106k and we have spent maybe 20k making some improvements. 

The CF is helping to fund our retirement. We are looking for another building to buy, even made some offers, but unfortunately there is not much around at a price we are willing to pay. We invest in our immediate area-max 1 hour away. Look forward to seeing more on this thread as it unfolds. All the best!

@Michael Ealy

I'm not on your level yet good sir but would love to share my best deal Thusfar.

It's a 4 unit complex located in central ohio in an upper C class neighborhood. We acquired the property off market in early 2017 for $105,000 with 50% occupancy. I purchased all cash in order to secure the off market deal and have since refinanced pulling out 70% of what I paid. Renovated each unit ($5k per unit) and paved a private 4 space parking lot at the rear of the building and rents are now at market. ($600 per unit)

Fast forward to today October 2019 and the property has maintained 100% occupancy and has been appraised at $180,000 positive cash flowing very nicely.

Lessons learned: trust but verify, there were some minor fibs from the contractor during renovation but after showing face and being a part of the project that quickly changed. As you mentioned you cannot run real estate from a desk. I personally visit all of my properties once per quarter.

Of all the properties we own, the ones that needed some attention that are most profitable.

We will likely sell within the next 5 years once the loan is almost paid off In order to trade up to the next one but for now, the cashflow is nice.

We're currently closing on a 4 unit in North Austin Texas this Thursday so hopefully a similar situation but on a bigger scale with the growth there.

Best of luck to all!

Originally posted by @Jo Ballagh :

@Michael Ealy

What a cool opportunity and project!! I look forward to the day where I have the connections and capital to invest like this!

My success story is much smaller but I’m really proud of it.

I spent 1.5 years looking for a 4 plex in Anchorage, Alaska. I put in 1 offer (terminated after inspection found poor foundation) before getting laid off then started working again and put another 2 offers in (one needed all tenants evicted and a total remodel and the other was a lipstick remodel with scary inspection findings). All 3 wanted top dollar.

I ended up looking in Wasilla, AK (45min north of Anchorage) at new construction. I pulled the trigger and used FHA on a $600,000 building with 1 acre of land in an 8 unit complex. After vacating, the last unit ($1350/mo) is total cash flow. I managed to save enough from the passive income to pave the driveway this summer and still have 6 months of expenses saved.

Now I just have to decide what to do with the cash flow: pay down the principal or save for the next one.

Biggest lesson learned:

1) Hold builders and contractors to the fire. I got screwed with a few things but the worst is bad interior wall insulation. The inspector didn’t say anything and I didn’t know what to look for. Now my poor tenants hear EVERYTHING in the adjacent units. I feel awful!

 Jo,

Congrats on that awesome deal. No great deal is "problem-free". So I commend you for not giving up and plowing through even when times were difficult. I also commend you for being patient for the right deal.

As far as paying down the loan faster or saving for the next one - it's really up to you (your risk tolerance, your goals, etc) and the availability of deals in your market. 

But if you saw the benefits of owning that 8 unit (cashflow), why not buy another one? Of course, be patient in searching for a good deal. And if you can't find one, you can always pay down your mortgage.

Congrats again and thanks for sharing!

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