All Forum Posts by: Bruce Petersen

I only own apartment complexes and own my own management co. so probably not the best to weigh in here but it seems to me that it would be easier to keep up with just one and you may even get a better rate if you give all of them to one PM.

Take your NOI an divide by your CAP rate, that is how you value an apartment complex, you don't just add zeroes.

NOI = All operating income - all operating expenses (do not include any load payments but you do include your taxes and insurance)

256 unit

If, and it sounds like it may not be, it's listed by a large brokerage they should have an offering memorandum that will spell a lot of that info out for you.

If not then as mentioned, you need to your own due diligence and research.  Do your own market survey, drive the property and neighborhood.  You should be able to find tax info on the appraisal districts web site.  You need to be able to construct your own proforma to determine cash flow as you will have your own unique loan.

Many of your answers will come from the financials packet (P&L and rent roll).

If you are seriously looking at this property I think you should ask the listing agent/broker for the financials and OM and then drive the property yourself.  If you still like it you should be able to set up a tour of the property with the agent.

Lending for MF is a longer vetting process for you and mainly the property but:

1) Net worth needs to be equal to or greater than the loan amount 

2) post closing liquidity for a bank or credit union loan will typically be 30% of the loan amount.  This is the amount the lender will want you to have in liquid funds remaining after you close the property to make sure you have the means to carry note if something comes up.

3) As mentioned already, experience helps but isn't necessary if you hire third party management company 

4) Annual NOI and not just rents need to be 125% of of the annual debt service (principal and interest).

Lots of great advice here but a couple of points:

MF is only 5 units and larger, never 2-4 units, this is still considered SF.

There is a lot that goes in to underwriting a deal.  You are now buying a business and not just a house that should come with full financials but unfortunately often doesn't in the smaller properties. Many times smaller properties (under 50 units believe or not) are mom-and-popped and have poor or no real financials to go by.  You really need to find someone to learn from in MF.  In the 5-12 or 24 range you should be able to at least get their utility bills and in some cases you can ask for bank statements to verify what they are telling you in regards to income.  

To find true MF, I would contact brokers in your search area and get on their email list and they will start sending properties that fit you search criteria. For 5-20 units you can sometimes find them on MLS and believe it or not I actually have a friend that found one on craigslist.

I think the advice from @Oren K. is good with you lack of time and experience.  Try to find a knowledgeable partner to work with or join a syndicated deal, just be careful when vetting your deal sponsor.

@Matt Buchalski how large is the deal?

@Adam Acord what I'm seeing right now in SA is 5-6 CAP and many are 90-100k per door or more.

I've tried one or two in the past but nothing that I found all that helpful.  What topics are you interested in?

Hey Christopher,

I own apartment complexes in Austin and San Antonio, feel free to reach out to me as well.