Should I buy small apartment 20 1-bed Units?

Question

I have an opportunity to buy a 20 unit apartment in the St. Louis area.  My primary concern is that its all small 460 square feet 1 bedroom units.  Looking for the forums thoughts concerning small one bedroom units.  The apartment currently has 14 of the 20 units occupied.  although this is a foreclosure it appears that the vacancy was high the 2 previous years as well.  Thoughts?

Cameron Norfleet · Answer

Absolutely not!! The turnover is gonna drive you insane.... RUN FORREST RUN!!!

Raymond B. · Answer

@Bill Morillo,

To make the @ work, do the following: Hold down the shift key and type @? Look below this Window, and you will see a list of names of people that have posted in this thread. Click on the name of the person that you want notified via an email, that you responded to them. If you are a Colleague with anyone that has NOT posted in the thread, and you want them to see your post, hold down the shift key, type the @ and the first 4 letters of their First or Last Name. Then look below this Window and click on that person's name. Raymond

Jeni L. · Answer

How are you as a property manager? Are you good at vetting your tenants? Do you have a list of reliable contractors ready to respond to work orders? Or do you have a property manager that you can trust and afford?

I have a 14-unit complex of 1 bedrooms and I love it.  Love love love it. The complex is in semi-rural northwest GA, all 1 bedroom and roughly 575 sqft, located about 6 miles from "downtown".

When I bought it under foreclosure, the units weren't in good shape, the vacancy rate was high, repair costs were high, and eviction rates were ridiculous.  I rehabbed each unit adding manufactured hardwood floors, new fixtures, new countertops, new bathrooms, and fresh paint.  I raised rent.  Within a month of completely the rehab, I was at full occupancy and on a waiting list. My tenants are mostly single.  About 1/3 are retired on fixed incomes; they've been with me years and don't foresee moving any time soon. About 1/4 are young newlyweds who only stay a year or so with me. The remaining half are average working folks who love the community I've built. Three have told me they intend to stay for life. Two tenants have not renewed their lease in the past year, but their units were filled in less than 24 hours.

Multi-family properties in lower rent ranges are not for the faint of heart.  But I love what I do and my rent roll is more than worth it to me.

Cal C. · Answer

Ask for  a copy of their tax returns at least schedule e for those apartments for 2012 and 2013. Profit and loss statements are easily doctored.

Curtis Bidwell · Answer

I have a building with 38 units in an historic downtown location. 30 studios and 8 1-bedrooms, 160-440 sf. We have experienced very low vacancy (2-3%) primarily due to excellent on site management.  Yes, we deal with lower income folks, fixed income, some elderly, even a few employed folk ;)  What we know is there is a market at every socio-economic level.  The question is, can you price your units to make them attractive and still make money?

Bill Morillo · Answer

Raymond,

By pressing quote by your name brought it up with the highlight..  thanks for the information!  Do you happen to know how to do this from your mobile phone?  No shift key to press.

Joe Fairless · Answer

@tony

Tony N. you can make money with 1-bedrooms but I stay away from them. I'd take a look at what type of demand the market has for 1-beds but based on your 14 out of 20 rented report it doesn't look promising (unless it's mismanaged or in transition).

Martin G. · Answer

I'm with Cal on this one. I would look to substantiate any claims of the current owner(s) with actual documentation that passes the smell test, too.

Also, I like to walk neighborhoods and strike up conversations with people that are most likely experienced in my niche in that particular neighborhood. Just today I went to look at a smaller building with 10 one-beds two blocks from a good university in Cincinnati. On paper, it looked really great, but I walked the neighborhood and saw a few more vacancy signs in lawns than I would hope for. I decided to walk into the nicest of the buildings and have a conversation with the leasing office. The daughter of a father/daughter outfit told me that had bought the building a year ago and had a solid year of NO renters. (Sounds like the previous landlord had been playing fast and loose with the pro-forma numbers and not been forthright in other ways.) Just hearing that they'd been through that made me feel like I'd been kicked in the stomach. And the overhead with radiator heat (i.e. no way to regulate zones in a 4,000 sq ft converted mansion of 12-14 units) would be enough to ruin most people after a winter like the one we just had.

If you can walk the neighborhood and make friends/strike up a conversation, you'd get a lot more information than you'd expect. I've made some great friends with other landlords on my street that way. My experience is that most people are incredibly friendly and generous with information, especially if they've had to grapple with hard-learned lessons.

Tony C. · Answer

Wow.  some very useful advice!  The numbers work, but my primary concern was the relationship between 1 bedrooms and turnover.  thanks for all of the good information --

Should I buy small apartment 20 1-bed Units?

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