Case Study of a 10-Unit Apartment: How I’ve Added $15k+ of Annual Cash Flow in 2 Years


An interesting discussion unfolded on the Forums last week, when Mindy Jensen started a thread called “What do you like to read about on the BiggerPockets blog?

As the conversation took shape, it became clear that many folks want more actionable and specific advice from seasoned investors and less generic fluff. Furthermore, one comment indicated that series of articles is an engaging way to address different aspects of a strategy, allowing in-depth exploration of multiple aspects more so than a single post permits.

I tend to agree. After all, a series of articles allows tracking of one theme or investment over a period of time, thus providing a well-rounded perspective that is not static.

In the past three years, I’ve written several series. One series focuses on issues of buying cheap housing in the Midwest (I call them “pigs”). Another series traces the process of acquisition and re-positioning of a multi-unit, and it is this series that I’d like to add to today.

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The Symphony Deal

The original article can be found here.

The Symphony deal is a 10-unit comprised of two buildings each containing five apartments. The structures are two-story, and the units are all town homes. Built in 1980, the buildings sit on slab foundations, are covered with simple 6/12 pitch gable shingled roofs, and are wrapped with vinyl siding. The unit mix consists four 2/1.5 units and six 2/1 units.

The buildings are all electric. Units are individually metered for electricity and water. Sewer and trash are on one bill. The HVAC setup includes electric baseboard heat and through-the-wall AC.

The location is residential, with the vast majority of dwellings being single family residences. It is economically a “B” location, where all of the homes were built around 1980. What makes this location interesting, and what drives it toward B- rather than C, is that while property taxes are being assessed as per Lima City, this subdivision actually belongs to a Elida school district, which a lot of folks in town deem desirable. What this means, therefore, is that people can get into a reasonably newer home in a school district they deem desirable without spending a fortune–the definition of desirability to a lot of folks!

I bought the buildings in February of 2013 for $373,500. The financing package included a portfolio note in first position and a private note in second. The cumulative debt with both mortgages together was about $355,000 or so.

After pro-rations and credits, I brought to closing $5,300–the building was 98.5% financed. True Leybovich style. 🙂


My inspection of the leases indicated that rents were about $50 under market and that the owner was paying for the tenant’s water. The bad debt, turnover costs, and vacancy were the three big economic loss issues.

My inspection of the premises revealed about $25,000 of deferred CapEx. The roof on one of the buildings had to go immediately. A few of the water heaters were leaking. A few of the AC units were not cooling. Flooring was old in most of the units. Countertops in most of the kitchens needed love. A fair number of appliances needed upgrading. Finally, some general electrical and plumbing work was needed.

In short, the physical structures needed a few bucks’ worth of help since the owner wasn’t making enough cash flow to put back into the building. But the main issue was the tenant base. While a very nice guy indeed, the owner was sort of a nervous guy who, if you ask me, was ill-equipped for the rigors of the biz. This resulted in him letting anyone with some cash in hand into the building.

Thus, I knew that most of the re-positioning was going to be a function of the tenant base, not the physical structures. While the buildings surely needed some love, the tenant base was the big problem, and I knew that in addition to $25,000 of CapEx, I’d be sustaining serious economic vacancy.

Having said this, I assumed (very, very wrongly) that this process would take 24-36 months and that I was going to be able to upgrade the tenant base gradually, and as I did that, also gradually upgrade the units. This was my plan going in, and this would have allowed me to re-invest money out of the cash flow gradually as I went.

Related: Why I Only Pay As Much For Property As My IRR Allows Me

The Reality of 2013

Check out this post.

Mine was a good plan. It lasted for all of one month.

As history books (and my tax returns) show, however, the first eviction started in the first full month of my ownership in March. Subsequently, six out of the 10 units turned over in the 11 months of 2013.

As the result, all of those upgrades that I thought I could stretch over 24+ months (and that I thought could be funded out of the cash flow) happened within the first 11 months. Indeed, I raided my floats to fund Symphony in 2013.

That year was not a happy time for me. I called Brandon Turner many times to tell him that I hated real estate, and I did–I freaking hated real estate in 2013!

The lesson from 2013 is that I relied on my strategy too much and accounted for Murphy’s Law too little.

Food for Thought: I find it difficult to find deals, and a lot of people give me a hard time for that. Folks, especially brokers,tell me that my underwriting is ridiculous and I’ll never buy anything at this rate.

I am not in the business of doing deals, folks. I don’t get tingly sensations in my spine from putting buildings under contract. I get those tingly sensations from MS, reminding me not to work too hard. Ownership of real estate is not a privilege, and I only do it if there is a clear payoff. And I’ve seen enough to know what a deal with real payoff looks like.

My underwriting assumes that everything that can go wrong, will go wrong. Symphony makes great money today, but in the first 11 months, there was 60% turnover. Try that with 150 units. This is why I underwrite the way I underwrite, and I suggest you be more conservative than you think is prudent as well!

And don’t listen to the doubters. Stay absolutely true to your underwriting at all times.

Long story short, in the 11 months of 2013, Symphony cash accounting earnings were a whopping $3,000. Think of it this way: All of my CapEx investment came back to me in 2013, plus an additional $3,000. On a cash basis, considering that down-payment of $5,300, this investment was still $2,300 in the hole on December 31, 2013.

On a positive note, $3,000 of profit meant that the building paid me back everything I put in at the start. And more importantly, I was upgrading the units and attracting a better class of tenants at higher rents. So, hard and frustrating as it was, I was moving Symphony in the right direction.

Symphony in 2014

Read this.

The cash basis cash flow in 2014 was just about $12,000. You should know that my initial underwriting indicated a minimum cash flow of $100/door/month. Symphony achieved this in 2014. However, this was the bare minimum, and the reason I had bought this project was because I saw stabilized cash flow much higher than that. I didn’t buy Symphony for $12,000 of cash flow. I bought it because I thought there was room to hit $16,000 or even $18,000.

So, while a bit disappointed that after two years all that I’d been able to do was to come up for air and hit a bare minimum target, this was nonetheless progress in the right direction. In so far as I was looking at my T12 very carefully, I knew which units were causing issues and why, and I had a plan going forward.

Symphony in 2015

As of today, the cash basis T10 cash flow sits at $18,777. That’s almost $1,900/month! Unless something very dramatic happens at Symphony in the next two months, I think that $20,000+ of cash flow in 2015 sounds reasonable. 🙂


In 2015 I was ready to refinance. The private note on Symphony, which was cross-collateralized on another building as well, was the last balloon in my portfolio–I wanted it out of the way, and I knew that my private lender would appreciate closing the loop on his IRR for this deal. I still had five years left on the note, by the way.

Symphony appraised at $450,000 on current financials at 10% Cap. I refinanced at 75% LTV on a fully amortized 20-year note. If you do the numbers, 75% LTV on $450,000 value is $337,000–this was a few bucks short of being able to wrap about $350,000 of outstanding debt. So, I had the bank do a blanket note on two assets: Symphony and a six-plex I own. This bank was already sitting in first position on that six-plex anyhow, so now they have first and second on the six-plex, and first on Symphony.

Summary of Key Events

  • Bought Symphony in 2013 for $373.500
  • Closed Symphony with $5,300 out of pocket. Starting debt of about $354,000.
  • Cash basis CF in 2013: $3,000. Very heavy turnover and re-positioning.
  • Cash basis CF in 2014: $12,000. Beginning to stabilize.
  • Refinance in 2015. Appraised value of $450,000 at 10 Cap.
  • Cash basis CF T10: $18,777. Should hit over $20,000 in 2015.

So, I guess my initial instinct was right. A hundred per door was the minimum, but Symphony is indeed capable of more when well-managed. And let’s not forget, this thing was basically 100% financed!

Rate of Return

The schedule of annualized cash flows have been as follows:

Acquisition:        – $5,300

2013:                     + $3,000

2014:                     + $12,000

2015:                     +$18,777

(These numbers do not include some finance charges)

As you can see, I’ve obviously been well paid for the initial investment of $5,300. The initial CapEx is included into the 2013 CF number, which is why it was so low. In terms of CCR, the analysis would be sorta pointless since I’ve got no money in the deal anymore–not since I recouped the original investment of $5,300 three months into 2014. So, cash on cash analysis is just silly in this case.

If I were to represent these cash flows as IRR, I would need to close the loop with the final cash flow event from the sale of the property. I am not about to sell 10 units, which generates $20,000/annum, because I don’t specifically have anything to roll the capital into that would throw off better returns.

But let’s just say I hold for two more years, and cash flow $15,000 each year ($5,000 less than 2015), at which point I sell for $425,000 ($25,000 under current appraised value):

IRR Claculation 157

As you can see, the projected IRR in this case would seem to be 157%. Even if I were to discount the IRR by 3% cost of inflation via MIRR, the returns are still out there.

What is driving the IRR more than anything else is the no money down nature of this deal.

If you read my comments on the Forums, I say quite often the CCR is not a great way to analyze returns. There are several reasons, but most important is the notion that by definition, in order to underwrite to IRR, we must project the exit in order to project the distributable capital upon that exit (the last cash flow event). This is not merely useful from the standpoint of underwriting the ROI, but more importantly this requires us to think far ahead into the future in terms of strategy and to underwrite a plan to mitigate all kinds of things that could potentially take place.

It has become common on BiggerPockets to view a long term hold as just that–long term hold. As in, who cares when and how you exit… you are buying for the cash flow.

That line of thinking is especially prevalent among TK providers–understandably. I could tell you that money in real estate is made at the time of purchase, and I would be right. But there is a more profound argument here:

It’s All About Safety

Safety of any investment is personified by 2 elements:

  1. Ability to hold forever and thus out-wait the market cycles, and
  2. Ability to exit at a moment’s notice if need be.

While TK guys (and others) are right in that you are ultimately buying a positively cash flowing asset (we hope), and this gives you peace of mind of being able to hold for as long as necessary, this is only one half of the “safety equation.”

Related: A Real Life Example That Proves the Importance of Underwriting Multifamily Numbers

An ability to exit at any time without a loss, and preferrably with a profit, is a function of value add and not over-paying on the purchase. Regrettably, while I could exit Symphony at any time, it is not so with some of the junk I bought early on. You see, I used to think that since I am buying for CF, all I care about is the CF.

Not at all!


Was Symphony “no money down”? Well, the acquisition might as well have been. And I was paid back entirely in less than 18 months. However, I deployed roughly $40,000 between now and then, and while all of it came out of the cash flow in 2014 and on, in 2013 I needed to fund the initial deployment of about $25,000.

Is no money down possible? I think so. But I wouldn’t advise you to go for anything bigger than a duplex or triplex unless you have access to some larger floats.

When will I buy another one? When I find one that’s worth my time and my investor’s capital!

P.S. Aside for the links herein, there were other articles in which I made references to Symphony. But for those of you who want less generic, more actionable content, with less fluff, is this what you had in mind?

Have any questions about this deal? Would you have done anything differently?

Leave your comments and questions below!

About Author

Ben Leybovich

Ben Leybovich has been investing in multifamily residential real estate since 2006. His area of expertise is creative finance. Ben works extensively with private as well as institutional financing. Ben is a licensed Realtor with YOCUM Realty in Lima, Ohio. He is also the author of Cash Flow Freedom University and creator of a cash flow analysis software CFFU Cash Flow Analyzer.


  1. Wilson Churchill

    I like your articles about commercial deals. I don’t know if I will ever try commercial or not, but it sounds promising.

    BTW, the $5,300 could have been financed with a credit card, but I suppose it doesn’t really matter when you are talking about such a small amount of $$ relative to the deal.

  2. Curtis Bidwell

    Ben, I appreciate your detail in this transaction. I’m with you on conservatively underwriting and being patient for the right deal to materialize. I haven’t bought anything for a number of years, but I just went under contract for a 10 unit this week (scheduled to close end of Nov.). It will be fun to compare numbers on yours and mine as it progresses! If inspections and financials come in “as expected” it will be a home run! Here’s some basics:
    Units: 4 1/1; 6 2/1
    Purchase Price $399k 11 cap
    Current rents: $5650
    Market rents: $7400
    Expected CapEx $40k (subject to inspections this Friday)
    Value after stabilization @ 11 cap $560k (market @ 9 cap $680k).
    Financing: 20% down from loc at 5.25%. 80% at 4.25% (letter of commitment in hand from lender). 0 out of pocket!! (As you stated, CC does not apply!)
    Cash flow at purchase: $1500. Stabilized $3k.
    My target is 18 months to stabilize.

    Building relationships is how it happens. I competed with an all cash offer and won due to relationships, with the banker, agent, community, inspectors and contractors. (Also make sure your agent has good relationships with other agents). Both offers were full price!

  3. Brandon Hall

    This is awesome Ben! I also checked out the other articles (not sure how I missed them before) and they are great too. I like getting in the minds of experts and seeing how they think – this article is a great example of that.

    My parents picked up a 10 unit earlier this year and are going through the same headaches. They wanted to slowly turn the units, but once there’s a new sheriff in town, everyone bails!

    Good stuff. Keep up the good work!

  4. Ronald Perich

    Your story reminds me of what I am currently going through. I purchased a nine-unit in August. Had some deferred maintenance similar to what you had. A little under market rent. Owner who was “sickened” when she had to go to the property and didn’t screen anyone.

    I planned on turning over the units slowly and repairing as I go.

    I think you know how the rest of the story goes because you wrote about it just now.

    • Ben Leybovich

      Haha – I think I remember you talking about this on the forums this summer, Ron. Yep, that’s how it goes…I remember starting to think that I made a mistake. But, as it turned out I just needed to figure out the tenant class.

      Keep us posted on yours!

  5. Mario Alexandrou

    Great article Ben, I’m in the process of buying 3×4 plexes with the intention of re positioning with up grades and new tenants. Just the news of us having a intrest in buying, has scattered a bunch of tenants. So here begins the nightmare. Appropriate for Halloween.

  6. Rob K.

    Hi Ben,

    Great job, I think I recall visiting this project with you when I was in Lima back in 2013.

    I’m curious, do you include a management charge for yourself when you calculate CCR and IRR? If so, what is the charge you use to value your own time?

    • Ben Leybovich

      Hey, Rob!

      No, I do not include the management charge. I manage my own portfolio, which is what it takes to grow $3,000 into $20,000+. There are managers at the syndication level who can do this on 150-units, but they are not interested in small stuff like this, not could I afford them. And as to mom and pop management, this project would never have happened the way it did…:)

      Thank, Rob:)

      • Shaun Reilly

        I get that you manage it yourself anyway, and that in year 1 you needed to keep it lean and that the level of work needed to get it turned around would not have been easy to out source.
        However do you not put in a management fee when evaluating the deal (without regard to if you will be utilizing it to start)? I always advocate running your numbers on any level of rental with reasonable management fees even if you do it yourself. There are 3 simple reason for that:
        1) At some point you might not be able to do it anymore.
        2) At some point you might/probably won’t WANT to do it anymore.
        3) Even if you can do it and are a sick freak that loves doing PM it is still a job and you should pay yourself (even if just as a line item in excel) like anyone else doing that job.

        I also assume that if you don’t have this in your NOI calculations that the back is knocking that number down on you when doing the Refi. They won’t really care if you love PMing and plan to always do it, they like to hyper focus on my point #1 and will want to make sure the deal can support the debt if other management needs to be brought in.

        Now in this project you clearly had the right vision for the long term and after the initial turmoil and repositioning you have an asset that throws off great cash. So you could step out at anytime and still do fine. Now if you are willing and able to do the work and want to retain that additional money that is great since it is a choice and not a necessity.

        I know you get this but since we want to keep it real for people it is an important fact a lot of new BP guppies that are still green around the gills miss.
        Few things sadder than seeing a new investor overpay for a property then get hit with a double whammy of not being able to sell it without taking a big lose and also having cash flow so tight they can’t support the negative cash flow a modest 10% PM fee would cause.

        • Ben Leybovich

          Good points, Shawn. A few thoughts:

          1. If newbies did everything i tell them, but omitted management, they would be much better off than following most other advice on BP. Every 3rd conversation is about TK – lots of people are about to lose lots of money 🙂

          2. You’ve given me an excellent topic for next week:) But for now:

          – I do not believe in mom and pop management. There are few things as destructive!
          – Buying holds is a job – people need to get over it. Focus on buying assets that lend themselves to passivity of management. My time commitment to my portfolio is 5-6 hours per month, and a lot of that is book-keeping. Why lose 12% effectively on management…
          – If you are going to trade stocks, would you source the process out? The difference of success or failure in this sport is management!
          – If I can’t manage, my wife can. She may not be able to structure new acquisitions, but she can manage what we have.
          – I have a handyman who handles most of the day to day stuff for me.

          In other words, newbies should know that management will sink their investment as quick as anything else. They should know that they will spend more time trying to manage a mom and pop manager than if they’d just managed the building.

          Good points, Shawn.

        • Shaun Reilly

          Ben I agree that management can be quite expensive to small portfolios of single or smaller multifamily buildings.
          To get things running well and then to maximize income it does make sense to do your own management (and for those that are handy and willing to do your own maintenance as well).
          However I would still argue the deal should be ABLE to support management if needed.
          If the only way it can make money (once stabilized) is to do everything yourself it is not a good deal.

        • Ben Leybovich

          Shaun, we agree. The deal should be able to support management! But, this building looks like $20,000/annum in 2015 on about $65,000 of Gross. It takes very little time to manage – 5 or 6 hours per month, and all of it on the phone. I just don’t see the wisdom of giving $6,500 to property management just because I can.

          Newbies need to get over the idea that RE is passive – it’s not. However, what you buy, where, and how greatly impacts the time commitment. I don’t buy PIGS for a reason – management nightmare I don’t need, Shaun.

          Besides, no mom and pop management could take Symphony from $3,000 to $12,000 to $20,000. And professional management companies aren’t interested in 10 doors.

          And there you have it. Buy right, so management is easy, and keep property manager’s hands completely out of the pot 🙂

  7. Jeff S.

    You did a great service Ben to those that might consider getting involved in something when they don’t have the capital to sustain them when surprises happen. Know a guy that had lots of property but had borrowed from everyone and was very extended. The story was all good until he bought an apartment house with a central boiler that went out in the winter. The fix was 25k and he couldn’t get his hands on it. No heat, no rent.

    He had bought the property with a hard money loan in first position with the elderly seller carrying the note second place. He had been buying properties that way taking out cash at closing. When a young feisty lady attorney got hold of him it was game over.

  8. Jason Manning

    Ben, thank you for taking the time to write as much as you do. I don’t think you can really calculate how much you and everyone else contribute to the success of others when you take the time to document your deals.

    I appreciate that you don’t just write about your successes but you “bake in” your mistakes as well. It’s not necessarily ‘shiny’ but man is it pure gold!

    Thanks again.

  9. I’ve got an 8-unit 2/1 that I am looking at now that is in the vicinity of these numbers. Costs $338,000, appraises at $410,000. It’s an 11year old building that houses primarily sec8 tenants (fully rented), no known major capex upfront. Roof is midlife now, HVAC is serviced yearly. I am working on zero down also with the seller taking a 2nd. I am concerned about the amount of management needed to keep the sec8 tenants in place and my perception of frequent turnover. I think it is under rented now with rents on average at $550, thinking it should be 600-650. CF could be a home run depending on how I allot capex, mgmt fees, etc… I’m hoping it’s a no-brainer buy with a 75/25 set of notes. Music to your ears?

  10. Michele Hall

    Hi Ben, I enjoyed your article! Glad to know others have experienced similar situations and come out successful. We bought a 10 unit apartment complex earlier this year and planned to sit tight for 3 months but that did not work out due to the illegal activity that had to go as well as non-paying tenants. The upside is we got to know the undercover cops in our area! Also learned that sec8 is not all it is cracked up to be. After evicting drug dealers, cleaning up roach motels, repairing collapsed steps and falling in floors, replacing plumbing and completely repainting the units things are finally looking up. We are almost done with the renovations and the CF numbers still look good given the CapEx investment. It’s been a fantastic learning experience. It was interesting to see the details for your project. Thanks for sharing.

  11. One more thing, I highly admire your long, slow and steady approach to real estate. It seems like the common theme elsewhere is to get as big as possible as fast as possible.

    It seems like you are the only one saying to take your time, and wait for not just an “okay” deal, but for the best deal.

    • Ben Leybovich

      Hah – well, I’m glad I’m making sense to someone…:)

      REI is one of the shittiest businesses ever. It works, but the amount of pain we go through to get to anyplace worth being is just remarkable. Unless the deal is truly a deal – thanks but no thanks… And then it’s a matter of being able to know what a deal looks like 🙂

      That’s how I think about this, and that’s what I teach.

      • Hi Ben,

        I am starter in this exciting journey and learning from people like you.. Will appreciate if you can analyze my last buy and guide me how can I improve my future transactions: Here are the details (Please excuse me if I am not using right terms in discussion).
        Property Type – Townhome
        Buy Price -$125k, current market price is 155k.. I bought it in foreclosure and fixed.

        Fixing and closing cost – $16 k so total is 141k
        Out of pocket – 40k, remaining 100k loan at 4.5%
        Expected Vacancy Rate – 8%
        Expected Rent – $1350
        Cash Flow – $350 p.m.

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