What would be a typical apartment complex size for a 1st time apartment investor,sizes of maybe 30 to 50 units,im thinking maybe a turnaround project thats vacant? looking for any and all suggestions as far as property managers,etc.
I have heard that 12 units is generally the maximum size for a first investment. I personally think you could do one a bit bigger, but the people that recommend 12 have much more experience than I do.
Turnaround projects are not for the faint of heart. I would advise against that as your first project.
A new investor for apartments? A turn around empty project with 50+ units?
Do you have years of experience in the real estate arena, may like construction or management and now you are new to being an investor for your own properties?
Or do you mean freh off the street, no eperience, but maybe fresh out of college reday to set the world on fire with really deep pockets?
Just to answer with my opinion, I'd say a on elevel 6 unit building no older than about 15 or so years, in a good condition in a good location with tenants in place would be the best for a newbie for at least a year. That should give you at least a couple move outs/leases to do, some maintenance, upkeep, social interactions, maybe a police call to get your feet at least damp.
Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com
Yes i do have a lil bit of time in real estate,just not owning any apartments,I do have some cash as well,but would leverage opm to finance any project. I look on loopnet at deals all the time and wondering to myself coudl i pull the trigger or one of these steals,but i dont want to overwhelm myself basically.
stephen, is it going to be local or long distance? will you self manage or hire a PM? i wouldnt' recommend a rehab on your first apartment building to be honest...just my opinion, but it's going to be quite an experience just dealing with tenants...getting the property leased up as you get an apartment or 2 ready while managing a rehab (which i'm assuming would be new for you as well) is just another headache that i'd try to avoid for now...honestly, i'd start with a 4plex or something..i know you have big goals and wanna go big fast, but there's nothing wrong with buying a 4plex now with conventional financing...the economy isn't changing that quick...the deals will still be around in a few months...just my opinion :)
Well my first is going to be local until i get the hang of things,then i'm going to venture out for the deals that i know of in other areas,yes i do have a lil bit of experience in. Yeah you're right about the big goals. I'd rather do things myself and then hire a pm to make sure im not getting screwed out of anything cause of the landlords that own apartments that i talk to on a daily basis tell me about how they are getting the deep end of the stick by these shady guys. Managing a rehab wouldnt be new to me as well.
Also reason i said turnaround project is because i know thats where the real discount deals are.Thanks for the good advice Bryan and everyone else as well
loopnet at deals all the time and wondering to myself coudl i pull the trigger or one of these steals
A "steal" on loopnet? That would be a first! Not sure I'd want a 50 unit for my first deal, let alone a 50 unit rehab project.
Keep in mind building codes are stricter once you get over duplexes and inspectors are going to sticklers for everything being absolutely correct.
Jon Holdman, Flying Phoenix LLC
It really depends on the property and location that will determine the type of tenants you might have, which will have a direct relationship on the headaches you'll be dealing with.
If you have experience in rentals, you can interact with tenants as a landlord and have the basics, you may be ready for the apartment gig.
Look for stories here by Mike OH, for the war zone management techniques (lol) and what caliber gun to carry. Many others have shared experiences with, let me say, more upscaled properties. You might read up and see how you feel about putting yourself in those shoes.
While I have had apts and SFDs (and really prefer SFDs, BTW) I was a Commissioner of a large public housing authority, with over 1200 units. So, at least in that population, I would not say that the size of the complex had much to do with much at all. Some properties were duplexes and some highrise apts. While those are extremes in size, the degree of real oversight, per unit, did not vary that much.
To me, buying an apartment complex, from 6 units to 60 or 600, is nothing more than buying a job with a retirement plan. You get paid for what you do, for what you manage, what you fix and improve, that's about it. The manager at McDonnalds gets XX dollars, the district manager gets XXXX dollars, while the DM concentrates on other aspects at a higher level, he's still in the resturant business.
Starting out with the thought of doing turn-around projects of that size requires extensive knowledge in building regs, community relations, understanding the political environment, marketing, law as well as purchasing aspects. It's not just being a landlord!
Larger complexes, IMO, will be harder to manage with respect to marketing the project, the public perception of the project, advertising and in keeping it a desireable environment. That's why you will see a club house, tennis courts, swimming pools and other amenities at larger projects, it is a community within a community, a town within a town, so to speak.
Your competition can be alot tuffer too, most projects of 50+ units are held by larger corporate entities that hold several similar projects.
Now, to be competitive with the big boys you're talking about economies to scale. At their office headquarters, they have an accounts receivable staff to collect rents in the accounting department. The maintenance guys are on salary and they drive company trucks. One of the general partners is probably an attorney.
They contibute to political parties, donate to community efforts and support the local teams. They can call the congressional representative on the phone and they will take the call!
Do you really wnat to own a 50+unit, all your eggs in one basket and compete with that? Really?
Unless youplan on leaving your business to your grandkids, you need to think about the exit strategy. Large projects are very hard to sell on a per unit basis from a cash flow standpoint. Your real market to dump a project like that is discounting it to that corporate entity you competed with. Good luck with that!
But, there are always investors from Cali or Japan, (lol).
Not saying you would not make money or a living, but it's a tuff way to do it in my mind. If you really want 50+ units, I suggest you find 4 12 unit apts and a duplex, better yet, 8 6 unit projects and a 4 plex. Good luck
Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com
As I was reading through the thread I was going to make the same response that Jon already did. If you think you are finding steals on Loopnet you need to work on your education a bit first.
i didnt necassarily mean that their steals on there but that i get from being on various brokers email alerts list that i have set up on.I do need to work up on educating myself on some things more as well though.
There are some deals on Loopnet just like there are some deals on the regular MLS.Both are gone very fast and what lingers as listing is overpriced crap or quality properties that the sellers or in some cases the banks just are not ready to get realistic on yet.
Case in point.140 Unit apartment built in 2008 that is 1 mile from my house.
Developer was losing it to the local bank so at 10% occupancy he didn't care.Original appraisal was 18 million.New value was 10 million when they put on Loopnet.
Over time they dropped it to 9 million.Middle of last year I put an offer for a client of all cash of 5.6 million.
Bank said they couldn't take the hit at that time.Fast forward about 1 year later and they dropped to 7 million and it's under contract probably for 5 to 6 million.I am not involved with it now and it's listed by someone else.
So this is a quality building that took over a year for the bank to get realistic that was on Loopnet.
I don't care where it is listed on if it's a property I think would be a great investment at my price I will watch it over time and see what happens.
Investing with control and only buying with your game plan in place will produce the best results.
Size of building will depend on skill level,goals,money to invest with,will you be living off the cash flow,etc.
So there is not one right answer to the question.
I bought a small apartment complex off of a Loopnet listing in '08 after looking on there for 6 months. It certainly wasn't a "steal" though.
Are you new to apartments, or new to real estate? If you have ran 50 SFR'S then you can jump into somethin bigger. If you have 1 double, you may wanna crawl before you walk.
I do not know your entire situation. I am not sure if you have a family with kids, but if you are single, you may wanna apply for a job at a large complex as a manager. Many times, you will get free rent plus pay for showin units! You can learn the game on a bigger guys dime!
Plus if you do a great job, you can maybe go to him or her for backing to buy a building of your own! Good luck!! :mrgreen:
Rob Gillespie, Rob The House Guy, LLC | [email protected] | 330‑800‑9090
new to apartments not to real estate,and the scenario did run across my mind before as well,
I havent found any steals on Loopnet.. however i have found that it can be useful as a tool. I am trying to get into larger multi fam myself but i spent the last 6 months trying to educate myself more... my advice would be to learn as much as you can before leaping in
I look at LoopNet like I look at MLS. There may be some deals, but you really need to know what you are looking for and see quite a few to get to that deal. I recently saw apartments on LoopNet for just over half the price that was asked a year ago. Deal? Possibly. Would the highly motivated seller take even less? Almost certainly.
I agree with the other that I would not recommend an apt building that big. Look at it this way if you rehab a single family home and don't find a buyer right away or tenents either you could probably handle the monthly note. But if you have a multi unit building with that many apts and have trouble renting it you will probably have trouble keeping up with the monthly payments. Just my thoughts if you are going to do an apt building start with a small one and work your way up through the years or start with single family homes first. GOOD LUCK!
Looking at lots of sold Loopnet listings in my target markets in the prior 12 mths for 8+ unit properties, the sale/list price ratio was less than 80%. So keep that in mind when looking at apparent "high list prices" there -- discounting can be aggressive.
I too have also heard of the 12 unit max for apartment investors starting out. That said, I personally believe that anyone starting out should stick to anything under 24 units and the first one not be a project requiring a full rehab and or anything with a 40% or greater vacancy level.
I am by no means as advanced an investor as many of the guys in this forum, but we do own a small apartment that we rehabbed. Trust me, you're far better off starting small and working your way up. We made plenty of mistakes, and I'm glad they were made on a small and relatively cheap building than on a big expensive one. I think the best strategy is to start out rehabbing a single-family house or two, then move up to a triplex or fourplex. Once you've done a few of those and have learned the ins and outs of managing apartments, then consider taking on a bigger project.
I would have you start out with less than 20 units. You should have atleast 25% of purchase price in cash (let this be your ultimate guide) plus monies for closing costs. You should have a 680 plus credit score and the property should debt service atleast 120%.
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