What Is Your ONE Question About Apartment Investing?

Multi-Family and Apartment Investing
6yFollow

What Is Your ONE Question About Apartment Investing?

Michael Ealy
Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes

If you're a newbie or beginner investor, I want to help you. 

What is the ONE question about apartment investing that you like to get answered? 

I have been buying houses and apartments since 1999 and have about 1,000 apartment units in my portfolio. So I think I can say that I know apartment investing ;)

I will answer the top 10 questions in the form of videos and blog posts.

To help me identify the top 10 questions to answer, please do 1 of 2 (or both) things below:

A. Which among the questions below is the one main question you need answered?
and

B. What other questions do you have that you want answered?

Here are the questions that appear most often on BP (just based on my observation - I did not do an actual count nor did a statistical analysis, and they're not arranged in any order):

1. I have no money and bad credit but I want to invest - how?

2. I have $100,000 - what's the best way to start?

3. The recession is coming. Should I buy now or wait?

4. I can't seem to find good deals. Help!

5. I want to start syndicating apartment deals, but how? (or How can I raise capital for my deals?)

6. Can I really buy apartments with $0 down?

7. Will you buy a property with negative cashflow?

8. Is it possible to invest passively in real estate?

9. Should I get a mentor? (or What can you say about apartment investing program of [guru]?)

10. Wife does not like me to invest in real estate. What do I do?

21Reply
430 views

Most Popular Reply

Frank Geiger
Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
6y

I would like to see a video on your due diligence process. There is a longer checklist with MFH and that is something I am still wrapping my head around. These videos would be super helpful coming from someone with your track record.

14Reply
See this reply in the discussion

103 Replies

Jump to latestLatest
  • Jesse Spaur
    Rental Property Investor · Titusville, FL · Member since 2019 · 10 posts · 3 votes
    6y

    @Michael Ealy

    # 3

    I have saved 75k and I am ready to purchase my first rental property but it seems there is a downturn in the market coming should I wait or buy now?

    1Reply
  • NIcholas Hamel
    Member since 2019 · 187 posts · 74 votes
    6y

    @Michael Ealy

    All of these are gonna help me immensely but at the moment #10 catches my attention the most! Thanks mike

    1Reply
  • Storm S.
    Real Estate Agent · Santa Barbara, CA · Member since 2016 · 518 posts · 283 votes
    6y

    @Ola Dantis you can get beach front student housing at an 8% cap rate here in SB, definitely more sexy than regular apartments

    1Reply
  • Shellie H.
    Member since 2018 · 11 posts · 14 votes
    6y

    Sounds like an interesting project... Thanks for offering your insight.

    A. Which among the questions below is the one main question you need answered?

    #10. Wife does not like me to invest in real estate. What do I do?

    BUT... make it a spouse/other half, etc. to include the rest of us with disagreeable hubbies, etc.


    B. What other questions do you have that you want answered?

    1.  W    hat can you do to protect those assets/acquisitions from a possible future marital breakup?  If it is looming with in the next few years, should you wait to acquire anything new, and why?  (I vote yes, but enlighten me.)  This is probably more of a lawyer question, but I am curious about your input, and want to make sure I giving accurate advice to my friends/family. 

    2.  Also, in my area (AZ) all the larger complexes seem to be snatched up by overseas investors at really high prices.  Why is this, and is a crash looming for that boom as well?

    0Reply
  • Shellie H.
    Member since 2018 · 11 posts · 14 votes
    6y
    Also, congrats on being one of the top contributors... I think you are looking to be #1 with this post. :o)


    2Reply
  • Cody L.
    Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
    6y

    “I paid for pro membership yet I still don’t own a property. Why?”

    3Reply
  • Rob Milliken
    Wholesaler · Union, ME · Member since 2016 · 148 posts · 27 votes
    6y

    @Michael 1,5,6

    1Reply
  • Mike Rutallie
    Marysville, MI · Member since 2019 · 17 posts · 11 votes
    6y

    @Michael Ealy

    First off, Thank you Michael for sharing your wisdom. 

    Here are my top questions.

    3. The recession is coming. Should I buy now or wait?

    I'm very curious of what other plays worked out well during the last 2008 recession. So what were the things in 2007 that did and didn't work to get people through the recession? Also, obviously every recession manifests itself in a little different way, but what are general things that we can expect if things go south?

    9. Should I get a mentor? (or What can you say about apartment investing program of [guru]?)

    Which programs have the best success rate, and how long do these programs typically take? What should one realistically expect out of a mentorship? Will they typically be more of a partnership on a deal, or just connecting the student to the mentors network? Is $25K-$50K reasonable (obviously depends on the mentor)?

    10. Wife does not like me to invest in real estate. What do I do?

    This is highly subjective to each relationship, but are there specific ways that people have sold the idea to their spouse who is in doubt? My wife's biggest worry is the time it will inevitably take away from our family. I tell her that the goal is to get MORE time with the family, but from her perspective, I can see her concern. There will definitely be a time where I will have to "pay the price". 

    Another question I have is:

    In general, how much time should one expect (both per week as well as the overall length of time) to get into their first deal?

    I'm trying to determine how much time until I can bring in enough to quit my full-time job so that I can focus solely on apartment investing.

    2Reply
  • Eric Stugart
    Member since 2019 · 82 posts · 20 votes
    6y

    @Michael Ealy Thank you for posting this, #3 and #6 are really the two I am most concerned about.

    1Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Gaspare U.:

    How do you build your rehab team? Meaning if you are looking to buy a value add property how do you KNOW that the rehab will go smooth and properly. My fear is the costs go higher, takes longer, cheaper materials, shortcuts to cut costs or the builder leaves midway (which in my opinion is worse than never beginning).

    Thank you and very kind of you offering your time. We all appreciate it.

     That's a great question. This is why we are vertically integrated. We have our own construction/renovation company so our cost of renovation is way below what other investors pay. We can then pass on our cost savings to our investors. I will answer that as well.

    Thanks and talk to you later today.

    2Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Ashley Wynn:

    @Michael Ealy Thanks for this thread and your time to answer questions for us! 

    A. #1 - but I have excellent credit...BRRRRing multifamily properties is my goal moving forward (have 2 SFH)

    B. How did you build your team starting off? And what confirmations did you receive that led you to trust who you chose for your team? 

     Ashley,

    Yup will definitely answer A or #1 (and I guess, separate that to two questions:

    1-a. I have no money and good credit. How can I buy apartment buildings?

    1-b. I have no money and bad credit...

    That's a great question on building a team. Sometimes, I have that question myself. People come and go and contractors are not the easiest people to hire and manage. But, yes, I will answer that.

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Robert Wiltshire:

    @Michael Ealy thank you for taking time to field questions, this has been a very informative post.

    Not on your list and I don't want to steal a chapter from your book, but I'm curious about your planning for repositioning a property.  I've seen you reference taking some places that had immense upside, but that it takes a lot of skill.  With the market that we are in at the moment, those properties would certainly open up other opportunities. 

    Thanks for your time

     Robert,

    The answer is in my book ;) but yeah, repositioning is one of those things that is property dependent. In my book, I discussed three examples (all of them repositioning) where I made over $1M in each deal. But I will give you a "preview" of that in an upcoming blog and video posts.

    Thanks for your question.

    1Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Kris L.:

    Is there anything different to consider for a small complex (8-12 units on 2 acres, paved road access) in a rural area on the edge of town versus one in that is more centrally located?  The one thing I thought of was that it has a well and septic, but was wondering if there were other gotchas with this type of situation.

     Kris, one concern I have with rural areas is occupancy and turnover. I prefer buildings in the city or areas that are growing. It's easy to get tenants because people want to live there. Personally, I don't have experience with rural areas so I am not an expert on it.

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Hans Agarwal:

    @Michael Ealy

    What type of things to succeed? I am looking to buy a c-d and it may be too good to be true. Cost monthly appears 7500 finance costs but with 22 units which should rent for 700$ each, that is 15,400 cash flow. Double Cost.

    What am I Missing?

    Hans

     Hans,

    If I understand you correctly, the rent is $700/mo/u, 22 units so $15,400 gross rents.

    You multiply that 90% (occupancy) and since it's in a C-D area, use 40% operating income ratio.

    $15,400 x 12 = $184,800/yr

    x 90% occupancy

    x 40% operating income

    = $66,528/yr in Net Operating Income

    When you say, your finance cost is $7500 - do you mean mortgage AND operating expenses?

    How much is your purchase price? I am assuming you're using financing?

    1Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Erik Hatch:

    @Michael Ealy

    Do you self manage or did you vet a management company?

     We are vertically integrated Erik so we have our own property management company and renovation company. By having these in-house, we are able to control our costs and pass on the savings as returns to our investors.

    2Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Gokulnath Jayabalan:

    Hello,

    I would like these to be top questions on my mind, I have been investing in real estate for more than a decade but sadly not in USA (in my home country, I have close to 30 homes, half of them inherited), I own a home in USA and have been thinking about investing in apartment communities but need a place to start..

    Top Questions:
    5. I want to start syndicating apartment deals, but how? (or How can I raise capital for my deals?)
    9. Should I get a mentor? (or What can you say about apartment investing program of [guru]?)
    3. The recession is coming. Should I buy now or wait?
    Thanks,


    3. The recession is coming. Should I buy now or wait?

     Thanks for chiming in. 

    I will definitely answer all these questions.

    Is the recession coming? Yes. When - no one knows.

    Should you wait and not buy? I buy even now but I focus on buying great deals anyway.

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Bjorn Ahlblad:

    @Michael Ealy great project! I wrestled with these along the way.

    How do I know If I can manage a MF building, say 10-20 units.

    How do I know I can make a profit with a long term hold on this property.

    Why Syndicating is a completely different business from being a LL. Don't confuse the two.

     Thanks Bjorn.

    Those are great questions and you're the only one who can answer the first question - on whether you can manage a 10-20 unit building. I can tell you this though: it depends on the area and the kind of tenant-base a property can attract. A/A+ - you can give them to anyone and they can manage the property. D & F - even experienced investors and PMs struggle with those.

    On your second question - I will add that to the list. When I buy a building, I KNOW for certain I will make money with it because I always add value and get the rents to increase.

    Yup - syndicating is different than being a landlord. There are more moving parts to the former but with scale and with a good team, syndicating is actually easier ;)

    0Reply
  • Hans Agarwal
    Investor · Falls Church, VA · Member since 2016 · 3 posts · 1 vote
    6y

    @Michael Ealy yes the cost is about 1.3M and assuming 5% financing, it appears monthly finance is 7K. I hav 

    0Reply
  • Hans Agarwal
    Investor · Falls Church, VA · Member since 2016 · 3 posts · 1 vote
    6y

    @Michael Ealy yes the cost is about 1.3M and assuming 5% financing, it appears monthly finance is 7K. I haven’t figured out what good reserves is required for fixes, vacancies, etc. general rules. Newbie

    0Reply
  • Noah Mccurley
    Belfast, Northern Ireland · Member since 2018 · 128 posts · 56 votes
    6y

    @Michael Ealy

    How do property taxes work on large apartment complexes?

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Andrew Massie:

    @Michael Ealy I would choose #6

     Andrew, I am surprised not many people wonder how one can buy an apartment building with $0 down?

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Jesse Spaur:

    @Michael Ealy

    # 3

    I have saved 75k and I am ready to purchase my first rental property but it seems there is a downturn in the market coming should I wait or buy now?

     Jesse,

    If you find a great deal, don't wait. Just pull the trigger. They've been predicting a recession for 6 years now. If I listened and stopped buying, I would have missed out on MILLIONS of dollars of profit and several tens of thousands of dollars per month in cashflow!

    Also, in 2007 at the peak of the market, I bought apartments. When the market was down from 2008-2011, I continued buying. I did not lose money even during the Great Recession. And I am not worried even if another recession happens. Why?

    Because I buy right.

    1Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Shellie H.:

    Sounds like an interesting project... Thanks for offering your insight.

    A. Which among the questions below is the one main question you need answered?

    #10. Wife does not like me to invest in real estate. What do I do?

    BUT... make it a spouse/other half, etc. to include the rest of us with disagreeable hubbies, etc.


    B. What other questions do you have that you want answered?

    1.  W    hat can you do to protect those assets/acquisitions from a possible future marital breakup?  If it is looming with in the next few years, should you wait to acquire anything new, and why?  (I vote yes, but enlighten me.)  This is probably more of a lawyer question, but I am curious about your input, and want to make sure I giving accurate advice to my friends/family. 

    2.  Also, in my area (AZ) all the larger complexes seem to be snatched up by overseas investors at really high prices.  Why is this, and is a crash looming for that boom as well?

     Thanks Shellie. Yes - I will tackle the problem of a spouse opposed to real estate investing.

    As to your other questions, #1 is more of a legal question and frankly, I don't think you can protect your assets from a marial breakup unless there's an agreement beforehand on how the assets will be split in case of a divorce.

    And on #2 - I will discuss the details when I answer the question: "The recession is coming. Should I buy now or wait." The bottomline is: don't wait until after the recession...but buy great deals today.

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Hans Agarwal:

    @Michael Ealy yes the cost is about 1.3M and assuming 5% financing, it appears monthly finance is 7K. I haven’t figured out what good reserves is required for fixes, vacancies, etc. general rules. Newbie

     This does not sound like it's a good deal at all. 

    By the way, the financing, monthly payment I am getting is $6K/month - based on 5%, 25 years to amortize and 20% downpayment.

    Regardless, I've shown you in a previous post what the NOI is based on the typical ratios we use (10% vacancy, 50-60% expense ratio).

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Noah Mccurley:

    @Michael Ealy

    How do property taxes work on large apartment complexes?

     Noah, it works the same way with single family homes. They can escrow it together with your monthly mortgage payment or you can pay it quarterly, or semi-annually.

    What do you mean exactly with your question? Hope the above answered it.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free