Anyone here own a 10+ unit apartment building?

Question

My goal is to buy a 12-unit apartment building for around ~1MM. I was wondering if anyone would be willing to share their experience here.

How much total cash did you put in to buy the building (down payment, possible renovations, etc.)? What loan term did you get it in? What is the annual net profit relative to the total amount of cash you put in to the building? Do you regret anything?

Thank you!

Emma Powell · Answer

I have 3: a 16-unit and 18 unit in Little Rock AR bought in a joint venture for just under a million for both, $250k rehab in progress, and a 50-unit in a 506(c) syndication in Pocatello ID about $2.3M with $450k rehab in progress. We are building 60 units in downtown Salt Lake. You'll be expecting to put down 30% right now at about 3.5% interest on long term debt, or 8-9% interest on bridge/construction debt. Will need to have a net worth at least the value of what you're borrowing, and 10% of that should be liquid (cash, equity, stocks, life insurance, etc).

Only regret is not doing it sooner!

Bjorn Ahlblad · Answer

I have a 12 unit two storey brick building, bought for 645k three years ago. Paid cash because I had the money doing nothing. I did some paint and landscaping to the building-nothing big. At turnovers, paint and flooring as needed and raised the rents heavily to the new tenants, existing tenants have had fairly light raises; revenue is up about 30k.

Property is in a small town-16k. Rents average 775. Tenants pay electricity, I pay water. So far it has been working great-no delinquencies, no major problems, I regret not doing it sooner, but I was new to the area. Make sure you get Estoppel certs, all deposits and advance rents at closing, and get a professional inspection. Walk ALL the units, laundry, garage etc. Inspect the finances as thoroughly as you can. Make that a contingency-building and finances.  All the best!

@Ray Lo

Erich Rasch · Answer

I bought a 10-unit (all 1 bed/1 bath) for 290k back in July. I had to put 25% down for the commercial loan (4.5% IR) and with closing costs came out to about 77k. I set aside 7k more for planned upgrades which included painting exterior and removing bushes out front and a few box elder trees and deferred maintenance that I knew existed. I was able to fill a few vacancies and raise the rents of the remaining tenants to increase avg. rents from $420/mo to $550/mo within 3 months. As I was able to do this 9 months sooner than anticipated, I ended up getting new windows as well for 14k. Since the deferred maintenance costed less than anticipated, I used part of the allotted 7k and the increase in cash flow to pay for the windows without investing more of my own money into the property. Along the way I also was able to get free insulation installed (~10k value) using the local utility energy efficiency initiatives as well as laid plastic sheeting in the bare crawl spaces to help with moisture and bring it up to code.

All in I have 84k invested in the 290k property, or 29% of the purchase price. I also had 10k set aside as a reserve that I did not need to touch. Through the first 6 months at the end of 2020, I'll have netted 5k or 6% of my money invested. Going forward, I'll net 20k (24% cash on cash return) each year conservatively and can still bring 7 units to market rate (625/mo).

Based on what you're trying to get for a 12 unit, you're likely in a market that will not cash flow as well. With that being said, I hope some of the percentages I shared and the actions I took can help you strategize on this deal.

Anyone here own a 10+ unit apartment building?

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