Investing in Multi-Family Housing ?

[propertymanager]

In addition, with no experience and a normal income, no bank on the planet is going to be foolish enough to allow a newbie to start with a 50 to 70 unit building.

Mike

[pplplatinum2]

Iron Range If you read my last post after the p.s. you would see that I requested some info on how it could work. Due diligence is how you won't have to realize you paid 30% too much on a deal. Multi units it's the NOI that will tell you how much the property is worth based on a cap rate that you can live with. If you have a strong DCR you'll be fine. Take some time to find a great management company so your inexperience will not be a factor because experienced management will handle the tenants. It's super super easy to come up with reasons why something won't work.  It takes skill to figure out why something will.  I had a friend that said   "I could find something wrong with anything."   I said "wow what a gift".  So on the positive: Lets say Roadmax tried the 1 to 4 unit and was able to solve 1 or 2 tenants challenges. Big deal. How is that going to help you deal with 50 people. Once again it's just 2.  If you jump in and deal with 50 people(management team)  Guess what you learn with?   The 50.

[Rich_in_CT]

pplplatinum2,
What is your experience?  What types and sizes of property do you currently own?

[pplplatinum2]

Only 3 Multi units 112,112 and 96. That's hardly big compared to a Trump or Zel. But you get the point. I'll ask you the same question. What size properties do you own? And all the experts on why something won't work own? It would be interesting to know.

[JSD]

What can go wrong in a 50-70 apt. building, if there are 2-3 apts. vacant it is still less than 10%, if this is a case in a duplex that is 50% so it will hurt more.
Basically the larger complex it will absorb better any loss.
Would like to hear what can go wrong or where is the hidden problem?

I can't believe this is a serious post. 
If you seriously DON'T know the answer to this on your own already, you have a LOT of learning to do that can't be done overnight, or just by making an investment.

Besides that, you haven't provided any numbers for purchase, current vacancies, etc.

Tell me your kidding.... ??

[propertymanager]

If you seriously DON'T know the answer to this on your own already, you have a LOT of learning to do that can't be done overnight, or just by making an investment.

AMEN!  And as I said, it's all just talk.  No bank is going to loan someone with a normal income and no experience millions of dollars for a 50 unit building.

Mike

[Iron Range]

pplplatinum2,

I'm not saying that it can't be done, so don't try. I'm saying they should not do it. It would be foolish and EXTREMELY risky. It would be like electing an 18 yr old as President. The level of knowlege and experience is just not there.

propertymanager is right about it being all talk. No "real" landlord would ever advise this type of stupidity. 

[kdhastedt]

It would be like electing an 18 yr old as President. The level of knowlege and experience is just not there. 

...if it were like electing an 18-year old as President, then it would be illegal in its entirety!

U.S. Constitution
Article. II. - The Executive Branch Note
Section 1 - The President

No person except a natural born Citizen, or a Citizen of the United States, at the time of the Adoption of this Constitution, shall be eligible to the Office of President; neither shall any Person be eligible to that Office who shall not have attained to the Age of thirty-five Years, and been fourteen Years a Resident within the United States.

LOL...

Keith

[Matt66]

I would like to throw out an additional opinion on this one. Most of us start out small for a couple of reasons. First, we dont have the cash to do the larger deals, when we are starting in this biz. Second, we feel we have to micromanage everything (ie; control) and if we are doing that then yes we need that learning curve. - I am this type of investor.

Now picture a different type of investor. Ones that have cash to invest. Doctors, lawyers, trust fund babies. These people also dont have the control issue. They dont need to know the tenants names or how to fix a toilet. They want an investment other than the stock market. And yes, banks will give these investors millions of dollars all day long to do whatever they like, most likely non recourse, while kicking us out the door.  - I want to be this type of investor.

Now if you fit that picture of investor and you learn how to do the due diligence or pay someone reputable to do it for you, than I say go for it. If not, go back and reread all the previous posts, they fit the majority of us.

Matt

[reflex]

Matt, I am a physician and I don't think the bank will give me millions of dollars!

[Matt66]

You are quite right. If you just went in and said give me money I am a physician you probably wont get very far. But, they are not giving you the money per se. It would be for the investment. You would still need to meet basic requirements such as down payment, a sound business plan, decent credit and a property that cash flows. There are lenders on this board that would get you financed.

And if you just wanted to put the cash down, most of the posters on this board would partner with you to find a property and the financing. If you have 20% of millions of dollars the financing is there, but you still need the right deal.

Go to any real estate investor meeting in a metro area . Chances are there are people there that have never owned less than 50 or even 100 units, right next to the rest of us that started out 1 house at a time.

Matt

[Iron Range]

Buying a big 100 unit apartment with a management company running the show sounds wonderful. Unfortunitely apartment buying/managing just isn't that simple. When you go out and look at apartment buildings you will see that almost nothing will even break even, and nothing will make money. Nothing out there is more over priced then apartment buildings. They are VERY disappointing. The majority of apartment deals are made by rehabbing the property or/and the management.  So a level of "toilet" knowledge is needed. Also a level of landlording knowledge is needed.  It is not as simple as buying a big 100 unit apartment and having the existing management company continue to run the property.   

[tatertot]

At least with that many units, you might be able to hire one of the big management companies that know what they are doing.

You ask what the negatives could be:

More likely, your purchase would have a lot of deferred maintenance. Which is OK as long as you have the funds to do repairs.

The biggest problem that you are likely to find is that, because price is determined by the income of the building, that the seller has stuffed the building with worthless tenants so that he can show a full rent roll.

I've known buyers who had to get rid of 50%, or more, of the tenants in the first year. You have to have huge reserves to be able to carry the building until you get the tenants straightened out.

If the building is full of meth heads, you can't get rid of them one at a time, becasue no decent tenant will live next to them. That means they all have to go at the same time.

If you can aafford to carry the building the whole time that it is half empty, then it can still work for you to make that purchase.