Newbie in Grand Rapids, MI - small apartment buildings

20 Replies

New investor looking for advice pertaining to small apartment buildings (5-10 units) near Grand Rapids, MI. What do I need to know about my first apartment building purchase? Or mistakes to look out for?

What is the best way to find a mentor in this space?

Wade,

There is a lot to learn. How much do you want to spend? Are you financing or paying cash? Do you have a property manager and a handyman or a quality contractor? What kind of return are you looking for? What is your goal with whatever you buy? There's many things to consider. Feel free to message me if I can be of further help. I remember when I was new and it wasn't a real good feeling!!

Originally posted by @Wade Slaghuis :

New investor looking for advice pertaining to small apartment buildings (5-10 units) near Grand Rapids, MI. What do I need to know about my first apartment building purchase? Or mistakes to look out for?

What is the best way to find a mentor in this space?

 First thing is to make sure you understand the market and the laws regarding rental housing in your state and municipality. There are a lot of caveats with Covid right now so you need to be sure you understand how that can affect operating costs and issues with tenants. Bottom line it's income and expenses so you need to understand the numbers of the properties you're looking at as well as the financing and requirements to get funding.

What purchase price are you looking in? Depending on your strategy, sticking to 4 units may be a good idea since the 5-15 unit range is an awkward asset-class... 

I think you hit the nail on the head about seeking out a mentor. It's tough going from nothing to apartments, even the 5-10 unit type. Being new to investing it may not be the best idea to cut your teeth on an apartment before gaining experience unless you have an experienced investor you can at least bounce ideas off of. 

When seeking a mentor you usually have a couple options. You can network in your local market and find a way to add value to someone who invests there or you can find a paid mentorship program. A lot of people on BiggerPocket scream from the rooftops that you don't need to do a paid mentorship but everybody's situation is different so I think it is a mistake to immediately discount the idea. If you want to go the local mentor route you'll probably need to hit up as many networking events which may be difficult these days.

A lot of great advice so far. Do you have any real estate experience? Single family rental? Duplex? I do think that apartments are within the reach of a relatively new investor, but as a brand new investor, you will have more challenges. Having said that, it is doable. The most feasible way is to partner with a mentor. As @Mack Benson mentioned above, one of the best ways is to find someone that you can add value to.  It's hard to just ask someone to take you under their wing.  You need to figure out how you are going to legitimately add value to the relationship.  Depending on your situation, you may provide the hustle and/or money, and your mentor can provide the guidance/experience, etc.  I actually made a pretty big jump from 5 units to 60 units, but I had some real estate background before making that jump.  Feel free to DM if you want to connect and ask questions

I agree with Mack Benson's comments above about ways to find a local mentor. If you're looking for a paid program/group, there are a lot of options including Jerome Myers' Myers Methods or John Casmon's Capital Impact Club that are at lower price points. A lot of the other ones (Rod Khleif, Jake and Gino, Think Multifamily, Joe Fairless, Brad Sumrock...etc) can come with pretty large price tags, but can be great too. Most of these guys have podcasts, so you could start by listening to their (and others) podcasts to get a feel for who they are and what they're about. Feel free to reach out directly if you would like to discuss specifics that I've learned/heard through my own research.

Good Luck! GR is a cool area.

Hey Wade!

I've heard great things about Grand Rapids, MI. I would highly reccomend diving into Multifamily books, podcasts & youtube videos, those will help you with the basics. I myself started with small multi units like that before scaling up. One group I found really useful was Jake & Gino. They are both top notch. I'd start by checking out their podcast, Wheelbarrow Profits and reading their book which is also called Wheelbarrow Profits. 

Let me know if I can help or if you have any questions. 

Originally posted by @Eric Johnson :

What purchase price are you looking in? Depending on your strategy, sticking to 4 units may be a good idea since the 5-15 unit range is an awkward asset-class... 

 Thanks for the reply, I am interested to hear more about why it is an awkward asset-class. Is that mainly from a financing perspective?

Originally posted by @Ki Lee :

A lot of great advice so far. Do you have any real estate experience? Single family rental? Duplex? I do think that apartments are within the reach of a relatively new investor, but as a brand new investor, you will have more challenges. Having said that, it is doable. The most feasible way is to partner with a mentor. As @Mack Benson mentioned above, one of the best ways is to find someone that you can add value to.  It's hard to just ask someone to take you under their wing.  You need to figure out how you are going to legitimately add value to the relationship.  Depending on your situation, you may provide the hustle and/or money, and your mentor can provide the guidance/experience, etc.  I actually made a pretty big jump from 5 units to 60 units, but I had some real estate background before making that jump.  Feel free to DM if you want to connect and ask questions


Thanks @Ki Lee and @Mack Benson! Probably a really silly question but what are the complicating factors of a theoretical five to ten unit apartment versus five to ten single family and/or duplex doors? Seems like a common theme. I imagine it a putting proper systems in place issue but am interested in your thoughts?

 

Originally posted by @Harper Jones :

Hey Wade!

I've heard great things about Grand Rapids, MI. I would highly reccomend diving into Multifamily books, podcasts & youtube videos, those will help you with the basics. I myself started with small multi units like that before scaling up. One group I found really useful was Jake & Gino. They are both top notch. I'd start by checking out their podcast, Wheelbarrow Profits and reading their book which is also called Wheelbarrow Profits. 

Let me know if I can help or if you have any questions. 



Thanks @Harper Jones and @Adam Lacey! I have been spending a lot of time on YouTube recently, have listened to an episode of the Wheelbarrow Profits podcast now and ordered the book.Thanks for the advice! 

Originally posted by @Adam Lacey :

I agree with Mack Benson's comments above about ways to find a local mentor. If you're looking for a paid program/group, there are a lot of options including Jerome Myers' Myers Methods or John Casmon's Capital Impact Club that are at lower price points. A lot of the other ones (Rod Khleif, Jake and Gino, Think Multifamily, Joe Fairless, Brad Sumrock...etc) can come with pretty large price tags, but can be great too. Most of these guys have podcasts, so you could start by listening to their (and others) podcasts to get a feel for who they are and what they're about. Feel free to reach out directly if you would like to discuss specifics that I've learned/heard through my own research.

Good Luck! GR is a cool area.

Thanks @Harper Jones and @Adam Lacey! I have been spending a lot of time on YouTube recently, have listened to an episode of the Wheelbarrow Profits podcast now and ordered the book. Thanks for the advice!

 

Originally posted by @Adam Daneff :

@Wade Slaghuis

Know your numbers. I am in west Michigan as well and have a couple mid size apartments in Michigan if you have any questions

 Thanks for the reply @Adam Daneff. If interested I would love to connect and hear more about your experience here in West Michigan.

Originally posted by @Wade Slaghuis :

New investor looking for advice pertaining to small apartment buildings (5-10 units) near Grand Rapids, MI. What do I need to know about my first apartment building purchase? Or mistakes to look out for?

What is the best way to find a mentor in this space?

 Welcome aboard Wade.

Originally posted by @Wade Slaghuis :
Originally posted by @Eric Johnson:

What purchase price are you looking in? Depending on your strategy, sticking to 4 units may be a good idea since the 5-15 unit range is an awkward asset-class... 

 Thanks for the reply, I am interested to hear more about why it is an awkward asset-class. Is that mainly from a financing perspective?

Yes. Depending on the debt service ability of the building and the location, they can be harder to finance. However, still possible, but the money will probably be more expensive, especially being a true small balance deal. Feel free to shoot me a DM, maybe I can assist. Good luck

 

Welcome Wade! I am also in the Grand Rapids area and have been involved in REI here for a while. In the 5-10 unit space here in Kent County we have some opportunity. Those in my network makes mistakes by not knowing their market, in not having their team in place (commercial lender, structure, and representation). Also, many don't have a clear goal. is this a value add buy or are you looking for something turnkey?

Mentors- Books are the fastest way to get there. LinkedIn is a great tool and asking to connect over zoom

Also, since we are in the same market I'd be happy to connect and chat. let me know if you would be interested!

@Wade Slaghuis

Personally I would do 2-4 to stay residential fixed 30 year financing. 4-8 you get no economies of scale and likely stuck with 5 year balloon 20 year amortization. I would rather have two 4plexes than an 8 unit honestly. Only real benefit then would be getting a commercial relationship started with a bank but they would also prefer you have some rentals before jumping right into multi with no experience.

@Wade Slaghuis

Another thing but if you are not paying your mentor, people typically don’t jump to be your mentor if that is your first instinct starting out. Put it this way, look at the value of the time of your mentor. We are always looking for mentors and if you are asking a mentor a question that takes them 5 minutes to answer

but only take you an hour to figure out the answer I’d find it out yourself. There is a good chance 5 minutes of their time is alot more valuable than an hour of yours and they will think you are not respectful of their time.