BP Podcast 212: Buying a 115-Unit Apartment Complex for No Cash Out of Pocket with Brian Murray

by | BiggerPockets.com

How much does it cost to buy a large apartment complex? Millions? Think again! On today’s episode of The BiggerPockets Podcast, we’re excited to welcome back Brian Murray to the show. Brian, who was last seen on episode 126, has done some pretty amazing things over the past several years — including purchasing a 115-unit property that cost him nothing out of pocket (and, in fact, he walked out of closing with a massive check!). Whether you are looking to buy one house or a 100-unit property, this podcast will inform, motivate, and inspire you to massive action.

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In This Episode We Cover:

  • What Brian has been doing since his last episode
  • The definition of “value-add” in real estate
  • Different ways to add value to a property
  • The story of how he turned an old motel into studio apartments
  • How Brian gets his tenants and the kinds of screening he uses
  • Why he focuses on keeping rents low
  • The location of these rentals
  • Why you should consider the “transient work force
  • Details on how he got this deal
  • A discussion on raising money and working with partners
  • Tips for finding properties
  • How to handle agents and brokers
  • The story of the 115-unit Section 8 apartment complex
  • How a HUD contract crushed him
  • Whether you should consider managing a HUD property or not
  • How Brian sold the property for $3.2 million
  • His advice for aspiring investors
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “It’s about the journey and I definitely don’t want to feel that I’m lock into something, like some arbitrary number.” (Tweet This!)
  • “You don’t want to take on more debt than you can handle.” (Tweet This!)
  • “If somebody says no, don’t give up. Try somebody else. Keep trying.” (Tweet This!)

Connect with Brian

Show Preview

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners -- without the non-stop pitch prevalent around the industry. With over 80,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!

23 Comments

  1. Patrick Liska

    This was a good Podcast, as they all are. does get you thinking that there are always different approaches and different ways of doing things to make real estate work for you. Thinking outside the box may just be beneficial to you, just like Brian’s Hotel / Motel conversion I turned a SFH that was a split entry Mennonite church into a 2 family student rental where i rent 8 bedrooms out of it. The main thing as Brian points out is to know your market, area and zoning as pertains to the different areas. Reaching out to the homeowners and listing agent is a good piece of advice for everyone to try.

    • Brian Murray

      Hey Patrick! Thanks for listening and posting! Love your creativity with the church conversion – that’s awesome!! When prices are high, this kind of creativity can reap great dividends- I bet you’re doing well renting out the 8 bedrooms. Renting out by the room can yield some pretty great income per SF!

  2. Joshua Feit

    Hi!

    Josh here — I really did enjoy listening to this episode. It was amazing to hear your story. Though, I have to admit to feeling a little paralyzed by the time it was over. The story of your apartment complex was so good, so inspiring. But I just haven’t had any successes with real estate that start to come close to a grand slam like that.

    I have been plodding along, saving up and buying rentals whenever I can ( I currently have seven apartments here in Atlanta). And they are moving along fine — not great, but fine. They make a little cash each month, generally seem stable, etc.

    The dream for me is to eventually have an apartment complex — somewhere in the vicinity of 30 units — to create a nice passive income stream. After hearing your story, I feel like I’m miles away from a ‘win’ like that, and I’m not sure how to get there. If you have any ideas for a newer investor like me, I would be excited to hear them.

    I am so excited to learn about your successes — cheers to your victories!
    -Josh

    • Brian Murray

      Hey there Josh! So glad you enjoyed the podcast! Don’t get discouraged. I’ve been pouring everything into real estate for 10 years and you heard the story of my biggest success. But I just didn’t have time on the podcast to go over the hundreds of mistakes and setbacks. I’ve had projects that were complete disasters. You just can’t give up. I hope you’ll find some encouragement and ideas in my book, and I’m also glad to answer any questions you might have- just shoot me a private message! It sounds like you’re off to a great start to me. It’s a long path and you need to be patient- YOU WILL GET THERE!!!

  3. Julie Marquez

    Great information on this podcast! I am intrigued about converting a motel/hotel into apartments, because I feel like there needs to be more of that smaller sized spaces in the efforts to contribute to the “affordable housing” need. Kudos for you for keeping your prices low even when you could get more.

    • Brian Murray

      Thank you Julie! Glad you found the podcast informative! I agree with you that there might be more opportunity to convert hotels into apartments- not only are the smaller units more affordable, but it seems to fit with with the larger trend toward downsizing and simple living. By the way, I just checked out your BP blog- great stuff! Best of luck to you in your real estate endeavors!

  4. Adam Ulery

    Brian, thanks for sharing your experiences on the podcast. I learned some great lessons from you and am inspired by your story. I love your inspirational disposition and your positivity. I am a beginner buy and hold investor with one rental property under my belt and actively seeking my second. I want to grow into multfamily and am trying to formulate the best strategy to get there. The challenge I’m trying to overcome is lack of experience that lenders require me to have for multifamily commercial loans . My current plan is to build a portfolio of sfr and small multi-families in the next year and then to use that to demonstrate experience when I go for a 20-30 unit apartment. Do you believe my strategy is a good one? Thanks in advance for any advice!

    • Brian Murray

      Hi Adam! Thanks for the feedback- so glad you enjoyed the podcast! Yes, I think your strategy is a great one! When you start borrowing on larger properties, the bank is looking more and more at the property as opposed to the investor. Yes, they want to see that it will be managed by somebody with experience, but is more of a business loan and they’re really looking at the numbers. So if the property is strong enough, you should be able to get somebody to lend. I have a chapter in my book on working with banks that might offer some guidance. But if you have any questions, feel free to drop me a note here on BP. Best of luck to you and thanks again!

    • Benton Middleton

      As Brian said here, lenders look more at the numbers and performance of a property as opposed to the investor. But when they ask for management experience, it may behoove you to seek out an RE management company with many years of experience (5-10+yrs), have a preliminary contract with them and a portfolio list of all their members with their respective experience and credits.

      A good exit plan and marketing plan for the complex will also help, but you probably already have that. Hope this helps.

    • Mike Dymski

      Hey Adam, great feedback from both Brian and Benton. I had a couple of duplexes and an SFR (and flip experience) and then purchased a 25 unit complex. That’s a good path for both you and the lender. Benton is also correct in that having an experienced PM firm will be important to the lender. What’s ironic is that my experienced PM firm ended up not being very good but they met the upfront criteria for the lender (and the PM was not so bad that they would have made the property problematic from a debt service standpoint; so, the requirement is there for a reason).

      Brian, great podcast. Your podcasts and book are littered with real life examples, which make them more enjoyable (and real). I just shot you a PM to get some feedback on how you are typically rolling rehab into your financing….sounds like you described a construction/perm product for the property on this podcast.

  5. John Menton

    I’ve listened to all of the podcasts and I’ve found Brian’s to be particularly inspiring. I ordered the new book “Crushing it in commercial real estate” right away and have already finished it. Thank you so much for sharing your knowledge and really sparking the fire to venture into commercial!

  6. Kenny Chen

    Dear Brain. Love your interview and love your idea how you change huge office complex into apartment units. It really open up my brain different level. I just started learning REI not to long ago. I’m still process learn it and I just also order your book on amazon. Can’t wait reading it. If you by any change in Jersey, I would like to buy you a lunch talk about REI.

    • Brian Murray

      Thank you so much for the feedback Kenny. And thank you for ordering the book- I hope you enjoy it and find it useful. Good luck on your real estate journey. Wish you all the best. And if I find myself in New Jersey, I will remember your invitation!

  7. Benton Middleton

    I haven’t listened to ALL of the podcasts on here…. YET, but in time I will. As I and my company are seriously researching the opportunities in commercial apartments, I found this episode of deep particular interest. The Hotel conversion was an approach I had not heard before and will pin on the blackboard in my mind for future reference.

    However, as a businessman myself, I found it disturbing that Mr. Murray got stuck with the 20-year HUD contract and yet said he couldn’t do anything but accept the contract. There ARE things he could have done, and had it been me, I would have embarrased the living hell out of the Housing And Urban Development official(s) who shoved this deal down my throat.

    Here is what I would have done;

    1) – Direct my attorney to transfer ownership of the complex into a land trust. Then change the name of the complex, ever so slightly.

    2) – Transfer the beneficial interest in the Land Trust over to MY company.

    3) – Have my attorney to “kindly” inform HUD that the entity and company who signed the contract with them is no longer solvent or in business, therefore effectively, AND LEGALLY, rendering the contract null and void.

    Then Brian could have kept the property for many, many years as a market-rent complex and NOT affordable housing.

    When it comes to business and either another business entity, or even the Government as in this case, forces an unacceptable deal down your throat, it should be considered an act of war. And as Captain Kirk of Star Trek fame once said, “I don’t believe in un-winnable scenarios”.

    • Brian Murray

      Thank you very much Benton! Really appreciate the feedback, and also the ideas regarding other potential creative solutions that could be explored in situations like the one I found myself in. It was frustrating and I can tell you understand that. It’s always a challenge to figure out what the best thing to do is, especially when emotions are riding high. But in the end it all worked out well, so I consider myself fortunate. Thanks again, and best regards.

  8. Nathan Gesner

    Brian, I really enjoyed your podcast, particularly that you are honest and transparent about your mistakes. As you pointed out, everyone makes mistakes but we reduce the chances of those mistakes and increase our rate of success by staying involved.

    I lived in Watertown for two years while stationed at Ft. Drum in 1994 – 1996. It was a mess at the time but seemed to be on an upward trend. I haven’t been back since 2004 and would love to see how it changed.

    Question: did you do anything about the theft of equipment, files, etc? You seem like a pretty easy-going guy but I can’t imagine you just let people walk away with what amounted to tens of thousands in property! A property with 115 units would take 5-6 employees so it should be pretty easy to track down the responsible parties. I love to see justice done and hope they are printing plates at Rikers!

    To wrap up, I am buying my first commercial property with 11 units. It’s definitely a value-add purchase and I’ll be sure to write about it one we close. I am heading over to purchase your book and hope to learn more as I prepare to get into the big leagues!

    • Brian Murray

      Hi Nathan! Thanks for the feedback – glad you enjoyed the podcast! It’s a small world and I’m glad to hear from somebody who lived in the area. Yes the market underwent a fair amount of growth in the years immediately following your stint here, though it has stagnated over the past 5 years or so.

      With regards to the theft, I first contacted the seller. He requested that I allow him a couple of days to figure out what happened and get the equipment back before contacting the police. Since I had a good relationship with him I agreed. In the end, he got some of it back, and offered a cash settlement to compensate me for the rest.

      Congratulations and best of luck with your 11 unit investment! Drop me a note here on BP to let me know how it goes!

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