I recently reached a goal. I closed on my first multi-family apartment building. There were a few things that I learned in the process. There is little that is a better teacher than getting in the trenches and gaining experience. I hope that these lessons that I learned will give you insight for when you venture into this sector.
Reach Out
Reach out to people around you who can help you. I don’t recommend that you go at it alone. Talk with those who have done it. Reach out to other local investors. You are stronger and more successful with a community cheering you on. With investing in my first apartment building, I called Gino Barbaro and Matt Faircloth and other local investors that I know from the site biggerpockets.com. Reaching out is a way to build from others successes and mitigate your own risk. Remember though, always give back and bring value to any exchange.
Take Into Account What Needs To Be Inspected
With my apartment building, we walked every single room and square foot of that property and we had the inspector do the same thing. The building had 46 units and the report that was returned had close to 100 pages of repeat information. Yes, this took time, and our cost doubled, because we had the inspector walk through every unit as well. What I recommend is that you always walk through every single inch of a building, but it isn’t necessary to have the inspector inspect all of the units. Have the inspector only inspect a select few.
Prepare For The Amount Of Work
My partner and I have been in a large number of single-family home transactions; over 1,000 in fact! We know difficult deals and have experience to back a deal of this magnitude, but acquiring an apartment building is no easy feat. Although it took a fair amount of time to get a hold of a 46-unit apartment building, it still took less time than buying forty-six single family homes. In order to find and underwrite the deal, it took a large investment of time on our end. Next time around, that will be shortened due to the learning we gained from this deal.
Be Conservative In Underwriting & Trust The Numbers
Although we went above-and-beyond in the inspection, there were still situations that popped up that we couldn’t have anticipated. A couple of units experienced fire damage, and for this, we simply re-wrote the ‘fixing’ costs more conservatively. Point is— when viewing a property— do not try and squeeze the rehab numbers. Calculate for a worst case scenario most often, because most of the time (not to sound like a pessimist) the worst case scenario happens.
Practice Patience
We started talking with the seller in mid-October. The property did not close until February. There were weather delays. The seller began replacing the roof on one of the buildings in the complex, which had to be completed before closing. We debated over the price before we finally agreed. At that point, we went under a contract, but all of this took patience. You have to be in real estate investing for the long haul.
Allow Your Team To Do Great Work
You cannot do everything yourself. It is physically draining and incredibly stressful. You will also feel like you are constantly failing. When you let your team do what they are good at, things will get done, and they will get done well. I wanted to be involved in every aspect of this buy, and I was for the most part, but as renovations begin, I have to step back and let the team members with the right expertise handle the work.
