Jan

Apartment Investor Interview

By Emily

I just had a great phone interview with a gal named Julie Abraham, who just bought her first apartment complex this year. (84 units for $2.35 Million in Oklahoma!)

The interview will become property of TheRealWealthGroup.com – my real estate education company – but I just wanted to pass on a few great points from the interview.

The 84-unit Apartment Building Acquisition

The story is that Julie bought the apartment building at 84% occupancy from a bank (it was an REO) and used a combination of bank financing, private funding and her own money to acquire it. At purchase it has about $420,000 in equity and break-even cashflow after expenses and debt service (including paying her private investors a 10% annualized return).

Over the next year, as she makes improvements to the property, Julie expects to increase the value and the cashflow, hopefully boosting it to pay $45,000/year to her and her partner. If she refinances the property after 18 months, they may be getting $120,000 in annual cashflow.

They found the property in May and closed on it in December. They were able to get bank financing for 85% of the purchase price and raised $750,000 from accredited investors for the balance.

It was definitely a stretch, and there were roadblocks and challenges in getting the property going, but in the end, she came out in great position!

Some Lessons from Julie’s First Apartment Investment

Work with a partner. A partner can provide confidence, accountability, resources unavailable to you, and make it easier to get the deal done!
Use your advisors! Julie relied on property managers, coaches and mentors, her partner, attorneys, contractors and realtors to find the deal, complete her due diligence, and get the job done!
Don’t get discouraged. Everyone she talks to agrees that Julie encountered some challenges and roadblocks in the deal the likes of which they had never seen before! (The seller – a bank – tried to back out of the contract, and two storms in Maui and then Oklahoma delayed her closing!) Julie didn’t let these stop her. She kept going in the face of adversity. She knew the numbers worked and SHE wasn’t going to be the one to quit on the deal.
Be serious. Although there are lots of cool stories that make great "exceptions to the rule," for the most part, it’s hard to buy multi-million dollar apartment buildings if you have no money and no credit. Julie and her partner were able to make the deal work in part because they had the money and credit to convince the bank they were serious, even though it was their first large-scale acquisition.
Just take the first step. Julie didn’t wait til she "knew everything" about apartments before she was willing to get going. She had only been interested in buying commercial property for about 6 months before she went under contract with this building. She relied on coaches and advisors to fill in the gaps in her knowledge AS SHE WENT ALONG. She took powerful action and got powerful results.

After completing their first deal, Julie and her partner agree that they’d like to work together on another one. Only next time, they want to buy an even bigger apartment building as an investment!

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