Apartment Building But No Money. Tell me your thoughts!

6 Replies

Hello Everyone!

I've got an interesting property in my area that has come available that I don't see too often. It's a 54 unit apartment complex listed for $3,000,000. I still need to get more details but it looks like they are mainly filled with 2/1 & 2/2's Rent appears it could be between $700 - $800 per unit. 

Little bit about my real estate experience. Over the last 4 years I have had multiple opportunities to manage multifamily units. At the peak I was managing 45 units and working a full time job. The units that I manage consisted of townhomes, condos & apartments. I would say I have B to C- properties. Knock on wood but I've only had to evict one tenant! Woo! My education and main work experience is in accounting and love the numbers game.

Main question and concern to my post is the money issue. I have some money but definitely no where the amount needed for a down payment. What have been some of your guys' strategies to get large properties like this with little money? Bring in other people? Owner financing? etc. 
Anything is greatly appreciated. I'll try to get more info on this property. 

Thanks! Logan

@Logan Marienau You bring some desirable talent to the table.........accounting and PM. The property has potential, and as you know someone with deep pockets needs to help you out. 

As you have intimidated you need partners; which is not unusual-MF is often a team sport. You need to develop contacts at a local REI forum. It may not work out for this opportunity but start laying the ground work now.

@Logan Marienau , the equity partner play is the most common, and those early partners are going most likely going to be people you know, or friends of theirs.  

Your second issue is going to be securing financing. At $3mm, the most common UW standards will be 75% LTV max, AND the guarantors of the loan will need a combined 1:1 net worth to loan balance and typically 10% liquidity. In this example, that means a 2.25mm net worth and 225,000 of liquid assets. Local lenders may vary, but then you will likely have a personal guarantee. Additionally, you might need to bring on 3rd party management. I am not sure how a lender would view someone going from 45 units managed to a total 99 in one transaction, particularly if you are not managing anything larger than a 4plex.

As noted, this deal may not work out, but is a good starting point.  I would use this as a sample deal to be talking to friends that might be interested in investing and/or asking for referrals. I would start talking to lenders and mortgage brokers to get color on the underwriting standards.  If you can qualify for the loan yourself, great, but if not, you will need to line up someone that will sign as well.