I am a 26 year old single family investor who wants to switch to apartments what steps do I need to take

The single family deal is ok but I need more cash flow and I have been trying to figure out how to get into apartments for a couple of years but I do not know what steps to take. I can figure out how to buy a single family home every couple of months but when it comes to the bigger deals I get stumped
In Buying Property - Asked by NIck F. - May 19, 2009
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Answer(s)

pat r.
Corporate Investor
Lockhart, FL

I would love to help you! I feel if I can help people in what that are doing it alway seems to come back in ten fold! I would need to know what it is that you are getting stumped on! Feel free to call me and we can talk and figue out where it is that you are getting stuck. The best time to call and get a hold of me is 9:00pm estern time, my # is 407-253-7216 or email me at usadllc@gmail.com my name is Pat

May 19, 2009
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DURWOOD M.
Broker/Agent
Olive Branch, MS

David Lindahl

May 20, 2009
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Dan M.
Broker/Agent
Peotone, IL

Buying an apartment building is vastly different from buying a single family home. Single family homes are necessarily purchased close to home and can be managed by the owner. When considering purchasing a multi-unit apartment, the location and the size of the apartment building will play heavily in your property management decisions. Also, there will be different criteria in determining the value of the property (for an apartment building versus a single family home) when you make your decision to present an offer to purchase. To discuss your investment objectives and how to best attain them, please call me at 708-204-2064 or visit my website at www.firstmetrorealty.com and register. Best Regards, Dan Murray, Broker/owner, First Metro Realty Company

May 20, 2009
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Jan F.
Broker/Agent
Santa Barbara, CA

In the current financial market, if you have never owned multi-family units before, you should start by being willing to live in one of the units of a 4plex and then move on from there. Good time to buy this year as we in Santa Barbara County, CA seem to be at the bottom - lots of interest in 4 plex properties if they are priced right. Soon you would be able to trade your 4plex for a 5+ apartment building and you are on your way.

May 20, 2009
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Paul S.
Broker/Agent
Glendora, CA

If you stick to 1-4 units the financing is much easier than 5+. Once you go over 4 the lending criteria changes. While not impossible, it is quite different. Usually over 4 carry a debt coverage ratio (DCR) requirement and a higher down payment requirement that 4 or less does not. Depending on caps, the DCR could raise the down payment requirement. 4 or less usually can be done with less down but will still be determined by cash flow among other things.
Once you recognize what cap it takes to meet the lending requirements you can hone in on properties that might fit the bill. On 4 or less the lender looks mainly at your qualifications (they will discount the cash flow probably 25%). If, after the discount the property is positive, you are probably good to go? If it is negative they will look to see if you qualify based on your other income and debts. Over 4 they will look at the debt coverage ratio, which today, will probably need to be 1.25 after they deduct a management and vacancy percentage?
What that means is that for every dollar of monthly debt the property will need to generate $1.25 in income after the management and vacancy deductions are made. A property selling at a 6% cap may require 65% down to meet the DCR requirement? The same property at a 10% cap would meet the 1.25 DCR requirement with only 21% down. At that point the minimum down requirement would kick in requiring 35% down.
If you e-mail me with the details of a specific property or if you know generally where caps are in you area I will send you an analysis so you can see for yourself what I am talking about. paulsylveste@remax.net or call 626 485-5163
Paul Sylvester, CCIM

May 20, 2009
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Tai L.
Broker/Agent
San Diego, CA

Honestly, ask yourself if you are going to manage it yourself and you should know how to do it or hire a property management company. Know some terms before hand...cap rate, NOI, gross income...check out awesome loans that are out there

May 22, 2009
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