So you want to join the elite of the real estate investment world – to own a highly profitable and tax-advantaged apartment complex.
Would you be surprised to learn that it’s easier than you might think?
Let’s take a quick look at the 5 steps needed to acquire our good friend – a 200 unit apartment complex at $5.5 million, with an annual NOI of $550K and a mortgage payment of $250k.
5 Simple Steps to Owning Your Own Apartment Complex
Step 1 – We locate the property
This can be a long process which requires in-depth market knowledge. Of course, at this point, we’ve already done this work, and let’s assume that we’ve located our target property.
Each market cycle has a specific set of key indicators that will shed light on when you should be buying and when the optimal time to sell your property.
Step 2 – Do our homework
We need to look deeper into before making an offer on this complex, such as:
- Are the expenses legit and what the seller says, or do we need to be a little more realistic?
- What’s the actual NOI based on current occupancy?
- How much will a 75% loan to value mortgage cost each year?
We want to see at least two years of the properties financials and rent rolls, also we need a listing of major repairs done in the past two years.
Of course, at Adams Investor Group, we don’t even show you an opportunity without already having done most of the due diligence.
We look at each potential deal frontwards, backwards, sideways and all around to determine if the deal fits our very conservative investment model.
So, assuming everything is ship shape…
Step 3 – We put the capital together
Now we assemble the investment group of which you are a part of.
We gather everyone usually into a limited liability company (LLC) which will control our new property.
I am not an attorney, but an LLC structure provides the most flexibility when owning real estate and has some legal advantages over other types of entities.
From a risk perspective and to protect the investors if the deal ever went “south” (such as if the bank foreclosed on the property), there is no personal risk to the investor level and each investor is only liable for his or her investment contribution.
Here’s how it would break down:
As an equity partner you get a percentage of the deal based on your investment contribution.
Adams Investor Group also receives a percentage of ownership in exchange for putting the deal together, overseeing the purchase and for managing the property after it’s purchased.
Yes – the complex has a property manager.
However, our job is to make sure they’re doing their job and to make sure you get paid!!
Step 4 – Inspect the Property and Get the Loan
We begin what’s called the due-diligence phase of the acquisition and we also put our loan package together.
This is where Adams Investor Group:
- Gets a property survey done
- Has the buildings inspected
- Inspects all financial and legal documents
- Performs any environmental studies required
- Inspects each unit
- And so many more things that happens in due diligence
I bring a unique skill set to deals and is a great benefit to our investors. Being a CPA for almost 20 years and having forensic accounting experience, I am pretty darn good at looking at financial documents and determining when the numbers just don’t make sense…
I will never forget this email I received from a seller who has been in the multifamily business for a very long time.
Basically, Adams Investor Group makes sure all of the I’s are dotted and the T’s are crossed.
If anything differs significantly from what we were told before, we will adjust the offer accordingly.
If the seller is unwillingly to re-negotiate and this creates an additional risk to the investors, Adams Investor has a fiduciary responsibility to act in good faith on behalf of its investors.
If the deal doesn’t now make sense, we always walk from the deal.
Protecting the investor’s capital far outweighs just doing a deal to get it closed.
Step 5 – We begin raking in the profits
In our sample 200 unit deal above, we’ve established that this property has an NOI of $550K each year.
We also know that our loan is going to cost us $250K each year leaving us with $300K in annual cash flow before we even start talking about tax breaks or rent raises!
So what’s your share?
Generally, and this depends on how each individual deal is structured, the investors share is an allocation of cash flow based on ownership in the deal.
Although the day to day process of purchasing and managing a successful apartment complex is… well, complex… we make it so easy for you!
It’s time for you to jump into the game and begin experiencing the unmatched security and profitability of what is arguably the most in-demand real estate in the world – multi-family residential rentals!
We’re looking for a few select investors to join us and we know you’d be a valuable addition and we’d like to help you get into the game.
Get in touch now and take advantage of a great new property that’s just waiting for us to claim it!