Apartment Investing in Indiana

[Justin Goodin]

Hello,

I am in the beginning stages of purchasing an apartment building, hopefully between 10 and 30 units in Indianapolis(or surrounding areas). I am currently speaking with a couple brokers and analyzing deals. I have done extensive research, listened to podcasts, read books, etc. 

Would anyone mind sharing the experience they had buying an apartment building. Did the property need renovations? Did you raise money from private investors? How did you structure the deal? How did you build your team with the accountant, property manager, lawyer, etc.? Any information would be greatly appreciated. Thank you!

[Spencer Gray]

@Justin Goodin 

Hey Justin - 

I've been active in apartment investing in Indy and surrounding markets (4 hour drive) for about 4 years now. We could go into a long discussion about any one of your questions but I'll try and give you my personal abridged experience (may not be for everyone or is the best). 

First though, let me just say I'm not a big fan of deals that don't support onsite management and are less than 75 units for several reasons.

There's no way when I was getting started I could go in with my partners and take down a 100+ unit property, but at the same time we knew that the larger deals are where the real economies of scale are, easier to sell, better quality product, etc. Therefore we partnered with several local operators in their syndicated deals as Limited Partners and eventually began co-sponsoring our own projects.

Most properties needed some level of critical repair if not a moderate to deep value add ($3500 - $15,000 / unit).

These deals most often involve bringing in investors either in the form of LPs or a joint venture with another real estate company, both in the form of a syndication (Reg D 506(b) or 506(c) ). Syndicating is great, but it's expensive and usually won't support a smaller deal (less than 30 units usually). So if you want to bring in OPM for smaller deals you'll probably need to do a more simple partnership with a one or two passive investors. 

I'm not a lawyer or CPA so don't take anything I've said as professional advise but that brings up your questions about your team. Some of my team I already had a relationship with (lawyer and CPA), I found everyone else via references from my existing team and through networking. Ask anyone who is in the business for references (broker, etc) and just start grabbing coffee or lunch to talk about what you want to do, and see if their expertise matches what you want to accomplish. For example I was using an accountant/book keeper in a previous business who we loved, but unfortunately she had no real estate experience and would have had to learn along with us - which is against the whole point of surrounding yourself with experts. 

Sorry if that was long winded. Let me know if you have any other specific questions.