Why I Walked Away from This 118-Unit Apartment Complex Deal [Video!]

by | BiggerPockets.com

My partner and I recently made the decision to pass on purchasing a 118-unit multifamily apartment complex.

There were multiple factors that led up to us not making the deal, including very expensive roof replacements that was discovered during our due diligence.
Some of the most important steps in evaluating a multifamily purchase include lining up contractors to place bids as soon as possible and delegating due diligence to qualified members on your team.

As much as we wanted to move forward with the deal, the numbers told us to pass. Yes, it was difficult to walk away, but the best deals oftentimes are the ones you walk away from.

What I Learned From Turning Down a 118-Unit Apartment



Related: 5 Reasons Single Family Investors Are Turning to Multifamily Apartments

What deals have you evaluated then passed up lately? What did you learn?
Let’s talk below!

About Author

Sterling White

Sterling White started in the real estate industry at a early age back in 2009. The company he co-founded Holdfolio is a real estate crowdfunding platform based in the Indianapolis market. Before founding Holdfolio Sterling and partner Jacob Blackett were involved in the purchasing and selling of 100+ single family homes nationwide. In his free-time he trains for a World Record.

23 Comments

  1. Ken Konecny

    Hey Sterling, Great tips. The last one is easily forgotten. I worked on an apartment deal earlier in the year and of course the inspections took all day. Did you try to renegotiate price with the seller in light of the roof repairs?

  2. Gulliver R.

    Sellers that don’t work with you on reasonable requests such as taking care of deferred maintenance on a huge cap ex item like roof replacement is a big reason to walk. I’ve done the exact same thing on a multi fam where the seller was not willing to lower purch price or take care of the 40-year roof. Oh well, onward and up! Thanks for sharing!

  3. This is a great point. I passed on an opportunity with a property that I had known well for a long time, and would loved to have taken forward as a profit enterprise. But I also knew well that the seller had deferred maintenance on absolutely everything. What she had been forced to replace over the years she did on the cheap. She didn’t face up to the effect on the property value then, or when she was selling.

  4. Sterling, thank you for your video. There is a property that I really want to purchase. the seller is (HUD-Regional Housing Authority). I had an appraisal done to try and make a better decision about the purchase. The appraisal cited many things that was wrong with the property, but the final appraisal was based upon the After repair value (ARV), which was basically the same amount as the purchase amount the seller is asking for. I don’t know much about real-estate and I feel so helpless because the neighborhood is not that good, most of the homes are vandalized, yet the appraisal cited none of those properties as comparisons, but found homes that had sold (in other areas) after being fully repaired and used those as comparators. I have another property on the same street where I raised my children and a vacant lot that I purchased from the State and really wanted the property I am talking about. But, listening to your article, I understand that sometimes you have to “walk away.” To purchase and fix the property would nearly wipe out my budget. The seller is convinced that his Executive Director will take nothing much less than the asking price and I know in that neighborhood, I would never be able to recoup my money. My heart is broken and I am disappointed with the appraisal because I know its not worth the dollar amount that’s on that paper, let alone the hidden costs of repairs that I can’t see. Anyway, thanks for the video.

  5. Sam Shah

    Hi Sterling, I have a quick question about this. Since you found this out during your due-diligence, this deal mean you lose the money for inspection as well as any earnest money you put up? I’m not sure. I’m asking I guess. I’m guessing you do lose something. It’s not completely free to walk away. Correct? If so, how do you avoid this going forward? I can imagine that the cost to walking away from a deal can also add up overtime. Though, I do understand that in this case, there was no other option.

    • Sterling White

      Funds and time was lost on the deal. Cost towards real estate tuition. The way to avoid in the future is points #1 & #2 in the video.

      The deal was very appealing initially and this led to due diligence fundamentals being side stepped. Lesson learned.

      Hope that helps.

      • Ian tuttle

        Sterling do you know if you could have brought the roofers out for inspection before working non financing?

        Do you mind sharing the address of the property you are speaking of in this video? Unless the building you are in front of in this video is the property you are talking about.

        Thank you 🙂

  6. Mitul Rana

    Bring a snack??

    I would suggest a video camera to take a video as you’re walking the property. When you enter a unit, say out loud the unit number so you know which one you’re looking at when you go back to review it.

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