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Owning an Apartment Complex

Discussion in 'BlackHat Lounge' started by Allie Albatross, Aug 7, 2009.

  1. Allie Albatross

    Allie Albatross Junior Member

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    I've been bouncing the idea in my head for awhile, about getting a loan from my bank in hopes of constructing an Apartment Complex somewhere in the city. It does sound pretty easy, and the re-occurring income of the tenants would easily re-pay my loan. Anyone have any experience with this?
     
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  2. playercool

    playercool Junior Member

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    LOL

    Didn't I read a post by you saying you went to Austin and was overwhelmed by the city? Didn't I read somewhere that you were basically broke?

    I am not knocking your big dream. That is awesome. I dream big unrealistic dreams all the time.

    So let me put this into perspective for you real quick.

    An apartment complex if I am thinking of the size you want to build is litterally xx,xxx,xxx's millions of dollars to build. So yes that is in the 10's of millions of dollars. Anytime you see a huge gigantic apartment complex it is almost always owned by a company that is publicly traded that is worth billions.

    But let's just say some joe blow wants to build an apartment complex. He can. Assuming he has at least a 20% down payment and huge reserves in the bank. So it isn't totally impossible.

    I would say start small and figure out how to buy a single house, condo, townhouse and worth your way up. And to even just build something this small takes a ton of knowledge.
     
  3. Allie Albatross

    Allie Albatross Junior Member

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    Your right, I am broke, and Austin does overwhelm me, and I have no idea what I'm going to do when I move over there, but it did make sense in my own mind, that what better business to own, than an Apartment Complex? It requires no car to drive to, it provides a free roof over my head, as well as a social environment, and not only would impress my family, but would get me something other than flipping burgers.

    I had no idea it took millions of dollars to build those structures. They really don't look that expensive, but of course, what do I know? What about going door to door to neighborhood residents, asking them to provide a room for future college students, somehow fitting in some commission for me? That sounds more of a viable option.
     
  4. blindgrdn

    blindgrdn Newbie

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    asking strangers to provide a room for college students? where would the commision come from? the students?
     
  5. Allie Albatross

    Allie Albatross Junior Member

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    It was just a crazy thought. Asking if they had a spare room, such as a basement, and if they wanted to earn some easy money. I would get paid with "Misc" fees, it's in the fine print.
     
  6. bizzybee76

    bizzybee76 Junior Member

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    As far as buying an apartment complex, yes, you can do it. I would look for foreclosed properties, as they will be cheaper. This is something I am planning to do when I have the cash saved. It is a good idea, but you need to know what you're doing.

    You will need a minimum of 20% down and really good credit to get a bank loan of that size. So, if the apt complex is $800,000 plan on having no less than $160,000 in the bank. I've found smallish sized apt complexes where I live for around $800,000-$2mill. Depends on the size, age and condition of the property.

    You can search around and find properties for sale, and they will tell you how many units and what the rent is for each. Keep in mind depending on the size of the complex that you will have to pay an apt manager (unless you want to do it yourself) as well as a maintenance person. Either full time or on call. Again, unless you can do all that yourself.

    So, if you find an apt complex with 10 units, 6 rent for $950, 3 rent for $850, and 1 rents for $750. That's what $9,000 a month gross income. Not bad, what do you have to pay for the mortgage? taxes? maintenance? If you did a 20 year loan at 7% your mortgage payment on $640,000 would be $4,961.91. Leaving you with 4038.09. Not bad, after taxes and other costs, you could clear maybe $3000 a month profit...

    These figures aren't necessarily realistic and depend where you buy, etc...its just to show that there is a lot to consider.
     
  7. indexyoursite

    indexyoursite Jr. VIP Jr. VIP Premium Member

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    Lol, Allie. Don't go to Austin. Come here (South America). :p
     
  8. uma4guma

    uma4guma Newbie Premium Member

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    You may want to look at apartments with 4 or fewer units. Here is why. Apartments with more than 4 units are considered to be commercial properties. Lenders typically require a down payment of 50% or more on commercial properties. Apartments with 4 or fewer units are considered residential property. Lenders typically require a down payment of 20% or less for residential properties.
     
  9. LaveymorT

    LaveymorT Registered Member

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    Sometimes I sit on my porch, with a nice cold beer....I close my eyes for a few minutes and dream all kind of things, somedays I am a hot businessman, other days am I the worlds best pool player....I remember once dreaming I was the owner of multiple buildings in NY.

    Then I wake up, finish my beer and go back to what I know and what I can :)
    Boring? not really - I call it "Being realistic"

    Good luck, with the apartment or basement.
     
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  10. JayHussle

    JayHussle Newbie

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    Just by the way you are thinking, I can tell you don't have the capacity to take on this type of a project. I am not trying to offend but, I am just saying you will come out with millions in debt and, most likely some prison time. LMFAO
     
  11. thehilitereel

    thehilitereel Registered Member

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    Don't let the comments get to you, you can do anything that you want if you put your mind to it.

    It doesn't hurt to dream or imagine what you'll be doing tomorrow, if we didn't have that ability we wouldn't even be able to walk upright.
     
  12. pooty

    pooty Registered Member

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    This is also my dream and me and my partner are on our way. Right now we have 10 single family homes 8 of them are on a line of credit but it paid off 2 of them. We started with ONE foreclosed house. Cheap labor and access to the MLS and you're golden. Keep your head up this is possible if you follow through with the rehabs.
     
  13. asoduk

    asoduk Registered Member

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    as with most autopilot incomes, apartment complex ownership is generally a side income to let others build up equity for you. its hard to make something profitable enough to live on until you have multiple complexes.
    just think of the maintenance.
     
  14. Allie Albatross

    Allie Albatross Junior Member

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    Well, bizzybee76 said it's possible to make $3000/month from just one complex, that's enough to live off of for me.
     
  15. concentustech

    concentustech Junior Member

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    Take a shot at it i would. I took over a complex with 14 apartments in Arizona a few years back and i was always getting enquiries for rentals and very rarely had any being empty more than a week. Although the initail outlay will be steep in putting down a deposit these days with the credit crunch it can be achieved.
     
  16. JayHussle

    JayHussle Newbie

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    Yes, but you can also make 3000 a month from IM, You want to build a Million dollar apartment complex and make 3000 a month off it. You need to sit down and do some math (or learn it) and get a good grasp on reality. Now, you can get rural commercial zoned land, that is either foreclosed or tax defaulted VERY cheap and have it Re-Zoned for public housing use (Apartment Complex)
    But the cost of construction will be so high that it will take you a couple years to return much profit at all. Another thing you need to consider is how much money do you have now? Is your credit VERY good? Can you count to 10? If you don't have a down payment of at least 10-20% and a Outragiously great business model, you will not be getting a loan big enough to build an apartment complex. Probably not even a loan big enough to buy a #7 at Jack In The Box.

    Things to consider:

    *Turn around time (how long will it take for construction to complete)
    Big buildings don't grow as fast as asparagus does.

    *How long will it take for you to actually profit from this?

    *How much capital do you have to start this project?

    Another thing to consider would be flipping an already existing vacant property, the market is in a really good state right now for buyers (Meaning you can get VERY cheap foreclosed/taxdefaulted properties right now)
    You wont return any good cpital in this market though, soyou would wait till you were in a sellers market to sell the property.

    All in all you have to have at least HALF a brain before taking on any type of project/investment that can leave you broke or in debt for the rest of your natural born life.
     
  17. yamahafzr

    yamahafzr Regular Member Premium Member

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    we just got new neighbors at my grandparents and the guy is 35 and he paid 1.2 mil in cash... no loans or anything and all he does is owns a few apartment complexes
     
  18. Afflicted

    Afflicted Regular Member

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    Thanks BizzyBee for the understandable post.
    I've been looking into this. It seems like everyone is assuming the OP wants a skyscraper 4000 unit complex.
    But I was thinking more realistic, a 12 to 24 unit complex.
    Depending on the area, this would be anywhere from ?600k to 3mil?
    A 20% down payment wouldn't be too hard. But what are the chances of it coming to a net-loss? Slim to none?

    I like the fact that it would be paying off a mortgage over time while making a profit and at the same time, the value of the property would most likely go up. (Buy complex for 800k, 5 years from now it could be valued at 1 mil, depends on city, etc)
    Correct me if I'm wrong.

    Any more information please? It will get my +Rep
     
  19. playercool

    playercool Junior Member

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    Funny this popped back on top.

    I am too starting to look at purchasing apartment complexes now. Being in real estate gives me a leg up but it is still a daunting task.

    My bank told me they would loan up to 70% LTC(Loan to Cost). So that means I have to come up with 30%. Banks are getting very tough these days on their loan requirements. 20% was 1-2 years ago 30% is the new 20%.

    There are ways around this though. It is not uncommon to get the owner to carry back a second. So say the owner carries back a 10% second you put down 20% and the lender gives you the other 30%.

    I am trying to skip the small stuff and go straight to the big complexes. 150-500 Units. This is going to be extremely hard as I am going to have to come up with $Million+ down payments. Not exactly sure how I will do this just yet or if it is even possible. Almost ever single huge apartment complex I have looked at has Assumable loans with pretty favorable rates. So if you can come up with the DP you can get it.

    The reason I don't like a 12-24 unit complex is you will basically end up being a landlord. With a huge apartment you have the revenue to pay for on site management. There is no way a 12-24 apartment complex could afford to pay for on site management. Your best bet would be giving someone free rent or 1/2 rent to manage it for you part time and I would advise this. You might also find your handy man in the same manner. I am not trying to sway you from this. Just trying to give you some tips. If you have huge income owning real estate could really help you shelter your income. You get to depreciate your real estate each year. With a 24 unit complex your depreciation would offset your 100k+ income and possibly cancel it out. Meaning you go down to a 0% tax bracket. You will eventually have to recoup your taxes down the road when you sell the property. But it is always in your best interest to defer your taxes as long as possible. Just make sense.
     
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  20. MsMoneyMagnet

    MsMoneyMagnet Registered Member

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    Hi! If you want to learn about buying and managing apt. complexes, I think a good course on this would be the one below:

    Code:
    [url=http://hiderefer.org/?http://www.rementor.com/products_apthouse.shtml]Hiderefer URL[/url]
    This is of course my humble opinion and NOT an affiliate link of mine or anything like that.

    I've been wanting this course for some time myself. ;)