What Is Your ONE Question About Apartment Investing?

Multi-Family and Apartment Investing
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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?

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Frank Geiger
Rental Property Investor · NC · Member since 2018 · 776 posts · 777 votes
7y

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.

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  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Aaron Kovac:

    @Michael Ealy

    #1 without the bad credit!

    I just bought my first home. Primary, single family home in a suburb of Austin.

    My knowledge is basic on multi family investing, but I am a mortgage loan originator with 2 years experience now. I’m not worried about the underwriting involved, but my main concern is funds due to my recent purchase.

    I’ve heard and read of various ways people can be creative with financing or partnering up, but I think it’s just information overload and my brain being stuck on Fannie/Freddie deals I normally do at work.

    I would like to see #1 answered, but with AND without bad credit!

    Where can I find your videos when you post them?

     Hi Aaron,

    Yup - I will post a video about that. I will have the video on Youtube and probably add a link to a forum post or blog post. Thanks for chiming in.

    How does the mortgage industry treating you nowadays? IS there a fear of lower mortgage applications as interest rates rise?

    0Reply
  • Aaron Kovac
    Investor · Austin TX (austin, tx) · Member since 2019 · 34 posts · 14 votes
    7y

    @Michael Ealy

    Great, I will be on the lookout!

    To answer your question, I think it’s fate to say we definitely expect to see this little refinance boom dissipate with less refi applications. But I think purchases will still happen regardless. Austin is a bit of an outlier in that regard, as the area continues to grow on the backs of the tech industry here. There is definitely an urgency right now with rates being so low.

    Make hay while the sun shines!

    1Reply
  • Vladimir K.
    Real Estate Agent · Wheaton, IL · Member since 2008 · 66 posts · 32 votes
    7y
    Originally posted by @Michael Ealy:
    Originally posted by @Shardae Robinson:

    Thanks for offering to share your wisdom @Michael Ealy. My question is more about neighborhoods. The deals that I can realistically pursue today are mostly in C to D neighborhoods. What is your position on areas/quality of neighborhoods to invest in? Thanks in advance! 

     Shardae,

    Good question as well. I started with F (war zones) and actually made a lot of money with it (although I don't recommend it). And C & D are good but you need several things to increase the chances of succeeding in those areas.

     This one is interesting.  If you don't mind my asking, what kind of a turnover do you have in a F zone multi unit and what is the management like?  How much would  a property manager charge for managing a property in that location?

    Thanks.

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Vladimir K.:

     This one is interesting.  If you don't mind my asking, what kind of a turnover do you have in a F zone multi unit and what is the management like?  How much would  a property manager charge for managing a property in that location?

    Thanks.

    Vladimir,

    I self-managed those properties in F areas. That's how I started because I didn't know any better.

    It was tough. Collecting rent is tough. There was crime, drama and a lot of stress. Those were the days I worked 12-14 hours/day.

    I had to get creative in a lot of deals. One deal, (although in a D area), I got it 100% occupied 60 days after taking over because I got it filled with tenants who are under a housing subsidy (not section 8) by a government agency. I gladly sold it after 6 long years.

    That deal is my first $1M PROFIT deal. But as I said, it's tough. Here's the experience and what I've learned:

    https://www.biggerpockets.com/forums/311/topics/644570-how-i-made-over-1-million-on-1-deal-after-6-years-of-headaches

    But as I said, I don't recommend it. There's more to life than money.

     

    0Reply
  • Jeremy Sea
    Hagerstown, MD · Member since 2019 · 12 posts · 2 votes
    7y

    Hey @Michael Ealy,

    Thanks for the great post and discussion you have created. I am new to real estate investing and my goal is to learn and acquire multiple 10+ unit apartments in the NoVA/DC area. I am transitioning from the Navy next year and hope to find a professional mentor in the Apartment value add and new apartment construction field.

    I would like to know more on your view of CRE mentors in the DC area.

    Thanks again for the insightful post,

    Jeremy

    0Reply
  • Jose Diaz
    Rental Property Investor · Philadelphia, PA · Member since 2019 · 9 posts · 1 vote
    7y

    @Michael Ealy

    Knowing what you know now, what would you do differently?

    With the tools you have access to, how would you start from scratch? SFH to MFH to large MFH?

    Thanks for taking time to share your experiences!

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Jose Diaz:

    @Michael Ealy

    Knowing what you know now, what would you do differently?

    With the tools you have access to, how would you start from scratch? SFH to MFH to large MFH?

    Thanks for taking time to share your experiences!

     If I lose everything tomorrow, I will not start from scratch. Knowing what I know this is what I will do - I will seek out business partners whom I can leverage on, so together, we can buy big apartment buildings and hotels. In other words, I will continue doing what I am doing.

    Even if I lose all my money and net worth, what I will not lose is my know-how and know-who. And those two, specially know-who - are worth MILLIONS (if not BILLIONS) of dollars.

    0Reply
  • Jose Diaz
    Rental Property Investor · Philadelphia, PA · Member since 2019 · 9 posts · 1 vote
    7y

    @Michael Ealy

    I'm sorry if I communicated my question incorrectly. I meant how would you advise someone who is starting from scratch?

    Do you recommend starting with SFHs and building up tp apartments or partner up, assemble a team and tackle an apartment out of the gate?

    Thanks again!

    0Reply
  • Sri Chakravarthy
    Rental Property Investor · Frisco, TX · Member since 2019 · 9 posts · 3 votes
    7y

    @Michael Ealy

    Michael - thanks for the questions. I have the following:

    1)What approach you do start with $100k to invest - SFR, MFR (small units <60 ) vs large units (60>)?

    2) What is the #1 thing to NOT do to accomplish in question 1 in your experience?

    Thank you!

    Sri

    1Reply
  • Ryan Hall
    Rental Property Investor · Tampa, FL · Member since 2019 · 74 posts · 27 votes
    7y

    @Michael Ealy

    Thank you for sharing your knowledge Michael.

    I vote for detailed answers on #2, #3, #4 in that order.

    Best regards!

    Ryan

    1Reply
  • Timothy Newton
    Rental Property Investor · Tulsa, OK · Member since 2019 · 13 posts · 9 votes
    7y

    @Michael Ealy I would love to hear #2 and also something on apartment investing out of state. #2 Is my exact scenario right now so I would find it very helpful. I have 18 now mostly in B-C areas but 2 in F war zone areas. But I’m from one so it doesn’t phase me. Would love to hear about how you took a F apartment complex and turned it. I’m looking to do the same where I am.

    1Reply
  • Ladè Baruwa
    Rental Property Investor · New York City · Member since 2019 · 90 posts · 122 votes
    7y

    @Michael Ealy I would like questions # 2 and 4 answered.

    My other question is, there is so much education regarding MFH investing.

    If one wanted to get a straight shot education on them (MFH) and begin investing right after, what content would you suggest that can give a newbie investor all or most of the tools needed to go for it?

    (I have read many books and listened to many podcasts. I just dont want to get caught up in the phase of thinking I need more education and never pull the trigger.)

    Thank you for taking time out to give advice!

    1Reply
  • Michael Lewis Lee
    Wholesaler · Dallas, TX · Member since 2017 · 306 posts · 133 votes
    7y

    Hello again Michael!  Location is probably #1.

    Best wishes!

    1Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Dylan H.:

    @Michael Ealy

    I unfortunately don’t think there is a recession coming anytime soon that will drastically affect real estate costs or rents. Especially no where near what we experienced in 2007-9. It would be great (obviously a very selfish outlook) if it did since I’m young and could take advantage of it, but I think people are missing key economic factors that show that our market has adapted significantly since the last crash. Times have changed and people learn, but I hope I’m wrong.

     Hi Dylan,

    I hope you're right: that there's no recession coming soon. 

    I believe it will come, but we just don't know when. 

    I agree with you though: that what caused the 2007-2008 Great Recession are not in play right now: lenders are more conservative in their underwriting. But as always, any market cycle goes through the same 2 factors: GREED and FEAR. Greed will cause a bubble to form and fear will pop that bubble. And people will always be greedy when times are good and fearful when times are tough so there will always be market cycles.

    1Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Austin Mudd:

    As a CA based person who wants to be prepared to take down small multi/commercial deals and syndicate the equity, should I create a single member LLC now (i.e. is Delaware the most advantageous) now and then deal with creating the necessary legal structure after the deal has been tied up? Also, I don't meet the loan covenants for the deal sizes I'm looking at, but In my network I can bring in someone to meet the guarantees... but I would like to have a deal first tied up before I run through the weeds on that.

    I guess my question is about the chicken and egg question. Do you get the deal first and then figure the structure out, or do you find the partner(s), figure the structure out, and then find the deal?

     Austin, get the deal first. You can always put on your purchase contract "Austin Mudd and/or entity to be decided at closing through entity transfer" as the name of the buyer.

    1Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Jose Diaz:

    @Michael Ealy

    I'm sorry if I communicated my question incorrectly. I meant how would you advise someone who is starting from scratch?

    Do you recommend starting with SFHs and building up tp apartments or partner up, assemble a team and tackle an apartment out of the gate?

    Thanks again!

     Jose,

    Sorry for the late reply. I am organizing a seminar, which we will do tomorrow and I can't believe there's so much work that goes in it.

    Anyway, the answer as always is "it depends". If the newbie investor has very little capital, start with a duplex (smallest multi one can find). Maybe even do a house hack - live in one unit and rent the other unit. It gives a newbie some landlording practice while living rent free (or almost rent free). Once the newbie investor proves to himself or herself that he/she can manage a 2-unit profitably, then move on to a 4-unit, and move larger and larger from there.

    Makes sense?

    Do you own properties now or you're in the beginning stages?

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Jeremy Sea:

    Hey @Michael Ealy,

    Thanks for the great post and discussion you have created. I am new to real estate investing and my goal is to learn and acquire multiple 10+ unit apartments in the NoVA/DC area. I am transitioning from the Navy next year and hope to find a professional mentor in the Apartment value add and new apartment construction field.

    I would like to know more on your view of CRE mentors in the DC area.

    Thanks again for the insightful post,

    Jeremy

     Jeremy, thanks for chiming in and thank you for your service my brother!

    I cannot tackle specific mentors in the DC area because I don't know them. However, I can provide some guiding principles so you will know exactly what to do. I will discuss that in the upcoming weeks probably after Thanksgiving.

    1Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Sri Chakravarthy:

    @Michael Ealy

    Michael - thanks for the questions. I have the following:

    1)What approach you do start with $100k to invest - SFR, MFR (small units <60 ) vs large units (60>)?

    2) What is the #1 thing to NOT do to accomplish in question 1 in your experience?

    Thank you!

    Sri

     Sri,

    Sorry for the late reply. We are organizing our Apartment Investing Partnership seminar (which we will do tomorrow) and I can't believe all the work that goes on with it.

    I will answer question #1 in more detail but the answer is "it depends". There is no one answer. I own both houses and apartment buildings. I can see the pro's and con's of each. How active can you manage your properties given your work/family situation? If you want to do it totally passively, apartment syndication is the way to go. If you can work 10-20 hours a week on your real estate venture, start with houses or small multi's (2-4 units) and work your way up.

    On your question #2 - on what NOT to do....I believe I am an expert on that one ;)

    Quick 3 answers:

    1. Do not buy properties at market value

    2. Do not be overleveraged

    3. Cheap properties are cheap for a reason and are not necessarily good deals. The good deals among cheap properties in bad areas can make you money but they also rob you of your time which you can utilize in buying more deals. Meaning: you have opportunity costs by buying buildings in the wrong areas.

    Where do you invest now? How's your market?

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Timothy Newton:

    @Michael Ealy I would love to hear #2 and also something on apartment investing out of state. #2 Is my exact scenario right now so I would find it very helpful. I have 18 now mostly in B-C areas but 2 in F war zone areas. But I’m from one so it doesn’t phase me. Would love to hear about how you took a F apartment complex and turned it. I’m looking to do the same where I am.

     Timothy,

    How are you my brother? Turning around a building in an F area is tough. Sometimes, when I think about it, I realize I was just lucky. I mean, the area has turned around so a buyer paid me $400,000 for one of my buildings in an F area - 2x what I paid for.

    But to answer your question: you got to be creative with buildings in the war zones. If you can get a government/non profit housing program and get 100% of your units leased - then do it. That's what happened to one of my buildings in a D area of Cincinnati. Here are the details on how I made $1 MILLION on that building (my first million dollar profit deal):

    https://www.biggerpockets.com/forums/311/topics/644570-how-i-made-over-1-million-on-1-deal-after-6-years-of-headaches

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Ladè Baruwa:

    @Michael Ealy I would like questions # 2 and 4 answered.

    My other question is, there is so much education regarding MFH investing.

    If one wanted to get a straight shot education on them (MFH) and begin investing right after, what content would you suggest that can give a newbie investor all or most of the tools needed to go for it?

    (I have read many books and listened to many podcasts. I just dont want to get caught up in the phase of thinking I need more education and never pull the trigger.)

    Thank you for taking time out to give advice!

     Lade,

    Nice name brother!

    My answer is biased: I am putting up a free seminar on MF investing (basically free - you just pay $50). It's my way of giving back to the real estate community and at the same time, it's my way of finding my future business partners. I educate people but I give them 4 real estate challenges over the next 12 weeks after the seminar. Those who make money during those 12 weeks are worthy enough to be my business partners.

    Implementation is the key. 

    1Reply
  • Shawn Ahrabi
    Member since 2018 · 8 posts · 0 votes
    7y

    Hi Micheal

    My issue is that I can only could buy buildings less than $900,000 in value,

    When I am approaching banks and credit unions, they are asking for my personal tax return in order to

    consider loaning.

    Their explanation is: that they want to know in case necessary I could afford to pay the payments.

    I am looking for banks that provide loans for apartment buildings 80% to70% of the value and considering only the income of the apartment.

    Any advice and referral are appreciated greatly.

    Thanks

    Shawn

    0Reply
  • Ladè Baruwa
    Rental Property Investor · New York City · Member since 2019 · 90 posts · 122 votes
    7y

    @Michael Ealy

    Thanks for the compliment! Okay cool, I love a challenge! I will reach out offline.

    0Reply
  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    7y
    Originally posted by @Shawn Ahrabi:

    Hi Micheal

    My issue is that I can only could buy buildings less than $900,000 in value,

    When I am approaching banks and credit unions, they are asking for my personal tax return in order to

    consider loaning.

    Their explanation is: that they want to know in case necessary I could afford to pay the payments.

    I am looking for banks that provide loans for apartment buildings 80% to70% of the value and considering only the income of the apartment.

    Any advice and referral are appreciated greatly.

    Thanks

    Shawn

     Partner with someone who can take a role in the deal and help sign on the loan

    0Reply
  • Lena M.
    Bay Area · Member since 2019 · 10 posts · 7 votes
    7y

    Hi @Michael Ealy,

    I'm glad that you are in the process of writing your book. Looking forward to reading it.

    I would like to venture into multi family. But given the market I am in, it only makes sense for me to invest out of state. And I do not have experience dealing with contractors. The way I see it, I only got two choices either buy multi unit property through a reputable turnkey operator or participate in syndication.

    If you're in my situation, which direction would you recommend? Can you create wealth through syndication as a passive investor? And is it scalable?

    Thanks in advance for taking your time to answer.

    Lena

    1Reply
  • Dennis Hill
    Investor · Leonardtown, MD · Member since 2014 · 18 posts · 0 votes
    7y

    @Michael Ealy Thank you for taking the time to provide answers to our most thought provoking questions!  I would like answers to questions (in order of importance) 1, 4, 6, 5, 3.

    0Reply
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