Can you get into buying multi apartments with $200,000

[adamhardtryer]

Hi all you knowledgable guys and girls. I have been reading about the multi apartment deals and how good they are, if anyone can give some information on this and any deals that might be coming up that would be great.

Thanks everyone.

 

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[Sid23]

There are plenty of threads in the "Commercial Real Estate" section that deal with multi's.

Be sure to read SteveO's threads.

 

[andviv]

adamhardtryer, yours is a very good question.
Short answer:YES

The way I see it, there are two main approaches to this.

1. Take your $200K and use that to purchase a multifamily property on your own. Given the "standard" approach you can buy a property worth between $600K and $900K depending on the financing available for you. With this money, and depending on the cost per unit in the area where you are buying, you an get a property with many units.

2. Take your $200K and partner with others to go after bigger, "better" deals. You pool your money and leverage others' experience/knowledge to get a property (or maybe several properties, say, $100K invested in one property, and other two properties where you invest $50K in each).

I am following route 2.

Another perspective to consider is why are you investing?
Are you going after cashflow? If so, what is your expected rate of return?
Are you going after appreciation? This is highly dependent on the area where the property is located (location, location, location, not only at the state, county or city level, but at the neighborhood, and maybe even the side of the street where it is located).
Are you going after both?

Are you planning for a semi-passive investment?
Are you thinking of having a PM run the daily operations for you or will you be involved on a daily basis?

Are you looking at a turn-key property? or are you willing to go after properties that require rehabbing?

I hope this gives you some things to think about, and not enough info overload so I scare you

Please feel free to ask more questions, and welcome to the forum.

 

[Edge]

2. Take your $200K and partner with others to go after bigger, "better" deals. You pool your money and leverage others' experience/knowledge to get a property (or maybe several properties, say, $100K invested in one property, and other two properties where you invest $50K in each).

This approach is part of my plan and 2008 goals. I'd say that 200k is enough to get involved in whatever approach fits your plan best.

 

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[Sid23]

The way I see it, there are two main approaches to this.

Andviv, so what would your approach be if you had only $10k but "some" knowledge in regards to multis? Wait until you have the necessary funds to team up on big deals? Or get a group together, and use $100k (i.e. 10 ppl at $10k each) or so to fund the first deal and then build up from there?

 

[andviv]

I would definitively go for option 3. What? there is no option 3?

Then let's create option 3....

What if you get in a big or mid size deal where you put $10K and three other members put, let's say, $100K, $90K and $50K?

In that scenario you'd own $10K/$250K == 4% of the deal.

You could do a lot of the leg work using your knowledge, in order to increase your % of the deal.
But of course, you have to bring value to the table, as the other partners would be bringing the bigger bucks.
Say you do the research, find the property, and take care of managing the property or the PM running the show, and then you now own 10% of the deal instead of just the 4% of the contributions? If you have done things right your investors will definitively agree that you now are worth that extra 6% of the profits of the deal, don't you agree?
Take in consideration that this is just an hypothetical scenario, but I am 100% sure you can come up with a better one as you do have knowledge and are an INSIDERS for commercial real estate deals given your current job, am I wrong?

PS: I said two main approaches pertaining to the original question, given that you already have $200K. SeanS' scenario is a little bit different.

 

[adamhardtryer]

Hi andviv,

Wow thanks so much for the reply, very informative, to explain a bit more I am not a U.S citizen, I am a UK citizen. After reading this forum I have come to the conclusion that a U.S investment sounds much better than any I could find in the UK. The money is not mine, as stated in my introduction I'm not in this position financialy (Yet) the money is my parents and ready for investment, they are not bothered about looking for investments as they have already achieved what they wanted, but have this money that they would not mind putting up for me, as long as it stacks up in thier eyes.

My thoughts on the senario that I would like, would be to just invest and just be involved in a distant fashion. I am liking the idea of the second option (bigger better deals!) and looking for partners who are going for these types of deals.

The reason for investing would be to have cash flow with a view for appreciation over a given year period (period not so much of a problem, as long as there is good cash flow).

In regards to turn-key property or rehabbing, I am not familiar with these frases, if they mean what I think rehabbing being an old property that needs doing up, as I would be coming over from the UK if it is a major renovation project I could not be on location for months on end.

I hope I have answered in a understandable maner.

Once again thanks andviv for a great reply.

Ad

adamhardtryer, yours is a very good question.
Short answer:YES

The way I see it, there are two main approaches to this.

1. Take your $200K and use that to purchase a multifamily property on your own. Given the "standard" approach you can buy a property worth between $600K and $900K depending on the financing available for you. With this money, and depending on the cost per unit in the area where you are buying, you an get a property with many units.

2. Take your $200K and partner with others to go after bigger, "better" deals. You pool your money and leverage others' experience/knowledge to get a property (or maybe several properties, say, $100K invested in one property, and other two properties where you invest $50K in each).

I am following route 2.

Another perspective to consider is why are you investing?
Are you going after cashflow? If so, what is your expected rate of return?
Are you going after appreciation? This is highly dependent on the area where the property is located (location, location, location, not only at the state, county or city level, but at the neighborhood, and maybe even the side of the street where it is located).
Are you going after both?

Are you planning for a semi-passive investment?
Are you thinking of having a PM run the daily operations for you or will you be involved on a daily basis?

Are you looking at a turn-key property? or are you willing to go after properties that require rehabbing?

I hope this gives you some things to think about, and not enough info overload so I scare you

Please feel free to ask more questions, and welcome to the forum.

 

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[andviv]

by turn-key I meant that you buy the property and it is ready and fully operational, with just minor 'cosmetic' fixes (some painting, landscaping, etc)
yes, you are correct, rehabbing means major repairs and updates.

I suggest you read these two books to get a better idea of what I am talking about:
How to buy and sell apartment buildings
and
The complete guide to buying and selling apartment buildings
(yes, you can read'em online, thanks google)

I don't know how the investment rules are for "foreign investors" but for sure that should not be a big issue.

 

[Sid23]

I would definitively go for option 3. What? there is no option 3?

Then let's create option 3....

What if you get in a big or mid size deal where you put $10K and three other members put, let's say, $100K, $90K and $50K?

In that scenario you'd own $10K/$250K == 4% of the deal.

You could do a lot of the leg work using your knowledge, in order to increase your % of the deal.
But of course, you have to bring value to the table, as the other partners would be bringing the bigger bucks.
Say you do the research, find the property, and take care of managing the property or the PM running the show, and then you now own 10% of the deal instead of just the 4% of the contributions? If you have done things right your investors will definitively agree that you now are worth that extra 6% of the profits of the deal, don't you agree?
Take in consideration that this is just an hypothetical scenario, but I am 100% sure you can come up with a better one as you do have knowledge and are an INSIDERS for commercial real estate deals given your current job, am I wrong?

PS: I said two main approaches pertaining to the original question, given that you already have $200K. SeanS' scenario is a little bit different.

Andviv, great reply! I appreciate you taking the time to think through this. You are correct, in my my current job I'm exposed to deals, partners, resources, etc.

One thing I need to definitely work on is my creative thinking capacity. I tend to look at a situation or idea and I'm not able to think about creating an "Option 3." My brain is trained to only see 2 options. Posts like yours remind me to keep working on my creativity.

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