All Forum Posts by: Hubert Washington

My goal is to purchase my first apartment building before the end of 2016 and I have been studying, reading, and listening to everything I can get my hands on. Recently I have come across information from a few different places suggesting that the apartment market is at or near it's peak. As a new investor, I thought it best to reach out and get some feedback from the community. A few specific points that I've heard are:

• Many markets are far into the Expansion stage with Hypersupply being the next phase of the cycle
• CAP rates are compressing
• Great deals are harder to come by
• Many deals selling for more than the NOI warrants or at lower CAP rates
• Moderate to high new construction in many areas
• Many investors going outside of their normal markets to find opportunities
• Interest rate hikes on the horizon

What are your thoughts on the current state of the apartment market? Is now a smart time to get in? What things should investors keep an eye out for? Are there certain strategies that work better in times like this (i.e value adds, repositioning, longer loan maturity)? What are some of the obvious traps that a new investor might miss? Are certain classes better to own in the event of a downturn? Any other relevant advice?

Thanks in advance for all of your valuable insight!

THINK BIG...THINK BIGGER...THINK MASSIVELY!

@Pat Antonio

I can't say that I know exactly what your "mentor" is saying. However, what I think he means and what I have heard repeatedly from experienced apartment investors is:

1) The effort necessary to close on a small apartment vs a large apartment is pretty much the same
2) It's more challenging to afford quality, onsite property management for smaller apartments (<50 units)

Those that I have been receiving guidance from are encouraging me to start in the 60-80 unit or larger range. I'm guessing this may be what your mentor is getting at?

THINK BIG...THINK BIGGER...THINK MASSIVELY!

@Kevin Guo

Welcome to REI and BP!

If you are interested in the 5+ unit side of multifamily / apartment investing, I would highly recommend the following 4 books:

1) ABCs of Real Estate Investing by Ken McElroy
2) Wheelbarrow Profits by Jake Stenziano & Gino Barbaro

3) Multi-Family Millions by David Lindhal

4) The Complete Guide to Buying and Selling Apartment Buildings by Steve Berges

This will give you a "crash course" in apartment investing. You will find 90% of what you need to know to get started in these books.

THINK BIG...THINK BIGGER...THINK MASSIVELY!

@Tanner Waite

Read and listen to everything you can find here on BP about "House Hacking". I did this when I was in college. Back then it didn't have a fancy name but the process was the same. I bought a 5 bedroom house and rented out 4 rooms to my college buddies. If I had to do it over again, I would have bought a duplex, triplex or quad that I could have continued to rent out after I graduated.

Good Luck!

THINK BIG...THINK BIGGER...THINK MASSIVELY!

@Soren Thomsen

Welcome to BP and good luck on your journey!

If you and your partners are interested in the 5+ unit side of multifamily / apartment investing, I would highly recommend the following 4 books:

1) ABCs of Real Estate Investing by Ken McElroy
2) Wheelbarrow Profits by Jake Stenziano & Gino Barbaro

3) Multi-Family Millions by David Lindhal

4) The Complete Guide to Buying and Selling Apartment Buildings by Steve Berges

This will give you a "crash course" in apartment investing. You will find 90% of what you need to know to get started in these books.

THINK BIG...THINK BIGGER...THINK MASSIVELY!

@Ayodeji Kuponiyi

Great post! I have very similar goals (minus the turnkey part). I would offer a few recommendations on some great multifamily / apartment investing books that I have read so far:

1) ABCs of Real Estate Investing by Ken McElroy
2) Wheelbarrow Profits by Jake Stenziano & Gino Barbaro

3) Multi-Family Millions by David Lindhal

4) The Complete Guide to Buying and Selling Apartment Buildings by Steve Burgess

5) It's A Whole New Business by Gene Trowbridge

Good luck on your journey!

THINK BIG...THINK BIGGER...THINK MASSIVELY!

@John Craig

Great job on finding a potential deal!

First, make sure it is truly a good deal. Hopefully your analysis looks something like this:

Income:

Gross Scheduled Rents
- Vacancy Allowance
- Concession/Bad Debt Allowance
+ Utility Reimbursement
+ Other Income
= Gross Income

Expenses:
Taxes
Insurance
Repairs & Maintenance
General/Admin
Property Management
Marketing
Utility
Contract Services
Payroll

Gross Income - Expense = NOI

NOI / CAP RATE = VALUE

Secondly, I would recommend partnering with an experienced commercial multifamily / apartment investor. If the numbers prove that it is a great opportunity, you can work to acquire private funding for the downpayment.

Good Luck!

THINK BIG...THINK BIGGER...THINK MASSIVELY!

@Joel Owens

Thank you for your response! The path you laid out with regards to NOT being an owner/operator is exactly the direction I desire and plan to go. How would you recommend going straight to 80+ units for someone who is looking at doing their first multifamily / apartment deal?

@Account Closed

I know this is an old discussion but I just came across it and found it extremely helpful. I am new to the world of apartment investing and my goal is to purchase my first 25+ unit before the end of the year. I was wondering what your thoughts are on the market today a year later. What additional advice would you have for a newbie?

Thanks!

I moved into a house will mold and if made my family very sick. I know first hand the damage that mold can do to people, especially if it is in large quantities.

It just exposes you to another area of potential liability so I would hope the deal justifies it. If you do go forward, I would recommend requiring the seller to use a remediation company and get something signed from the company saying that the property is safe to live in.