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 @Lena M.:

    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

     Lena,

    Turnkey is good but you're basically paying market value for a property and I wouldn't call it passive. It's really more semi-passive since you'll still be dealing with the property through a PM.

    Syndication is good but it all depends on the sponsor. And it's totally passive.

    Will syndication allow you build wealth? Yes.

    Is it scalable? It depends on the sponsor and the returns that their projects make.

    Some sponsors when they stabilize the property and refinance to give you your capital back, they basically "buy you out" - meaning, now you no longer own part of the property. You took the risk, you get some profit/return but now you don't own it anymore.

    We don't buy out our investors even after returning their money through a refinance. Instead, they can choose to roll over their refi proceeds to another project and continue adding property after another. In other words, you can invest, say $100,000 one time and you can literally have equity (and cashflow share) ownership in 3-4 apartment complexes or hotels over a period of 7 years.

    Send me a PM and let's talk details if you want.

    Thanks for your question!

    0Reply
  • Sri Chakravarthy
    Rental Property Investor · Frisco, TX · Member since 2019 · 9 posts · 3 votes
    7y
    Originally posted by @Michael Ealy:
    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?

    Michael,

    Thank you so much for the reply. I'm from Dallas and focus is on Frisco, Plano and adjoining areas which have seen tremendous growth in past few years.

    Could you expand more what you mean by over leveraged? I guess you are referring to debt, but what thoughts you have in mind when investing with leverage?

    Thanks again for the inputs. That helps a lot.


    Sri

    0Reply
  • Michael Ealy
    OP
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ 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

     Shawn,

    Sorry for the late reply.

    My answer to you is this: start where you can. If you can only buy buildings $900K, then do that.

    Start somewhere.

    You can make BIG money even with smaller apartment deals.

    For instance, I bought an 11-unit apartment building last December for $275,000. I bought it because the rents are way under market. I turnovered 2 units and increased the rents. 3 months later, I put it on the market and sold it for $410,000. By the time I pay all the costs (including rehab, etc), my NET PROFIT on an 11-unit deal is just a little over $100,000...in 3 months!

    Once you get the experience, you can do bigger deals.

    Or if you don't want to do the work, you can go ahead partner with someone who can qualify for a bigger loan. You can't get a $5M loan unless your net worth is $5M. So, partner with one with a networth of $5M.

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