How much do you expect per unit in positive cash flow with larger multi unit complexes? i know most say the target in residential units is around 100 dollars a unit of cash flow. If you own say a 250 unit building do you shoot for 100 dollars or a little less a month per unit in cash flow?
I would shoot for $100 per unit per month no matter how many units, but you can certainly pick any number you like. Hopefully, you aren’t thinking about starting with a large apartment complex. I think you’d be better off to start slow and learn the business.
Good Luck,
Mike
No I am not, I was just inquiring to what large complex owners expect back and if that number was different than smaller unit buildings around. Trust me I have learned alot from this site and the number one thing I have learned is to not rush into something like this. Im not trying to lose the game before I really even got started if you know what I mean. Im just trying to get information on all kinds of REI so that I can develop a personal goal and business plan of what I am aiming to accomplish and how I plan to do that. I really would like to put together a deal on a 20-30 unit place honestly to start off. Only If I could find the right deal and the right management was in place. Like I said before even though I am a rookie I have access to investors in my area that will partner with me on the right deal (if the numbers make sense). I do not plan on doing any management myself and will pay a management company to run my properties. I just really feel if I do not have to deal with tenants and lost a little profit I will be ok with that. If there was a property out there that had a high debt service and I had a good management team, would you still not recommend buying 20-30 units and starting smaller? Its an honest question. I just figured if I can get the money to get more units and didnt have to run them than my profits will be higher in the end. I am really trying to skip the first few years of putting money together to wait on the bigger paying deals. In saying that I do not want to just buy a property and lose everything because I did not understand the business. So tell me propertymanager… If you were me and in Cleveland and had someone who could easily purchase 5-20 million dollar properties and you can profit from it by putting the deal together… would you not try? im not trying to sound harsh all Im just asking you personally because I respect your professional opinion.
My personal opinion is that having paid management is just asking for disaster. If (and that’s a big if) you could find a really good manager that would treat the property as if it were their own, then paid management would be fine. However, in the real world, most managers don’t care about the property because it’s not theirs. They often charge extra to place tenants and charge extra to arrange maintenance (which is also usually quite expensive). All these extra expenses can rapidly remove any cash flow that you would have had. In my opinion, you should start small and at least initially manage the property yourself - so that you can learn the business. Even with a manager, you certainly will need to manage the manager.
So, to answer your question directly - no, I would not do a 20-30 unit building just because you have someone else putting up the money. If it’s a good idea to start small with your own money, then it’s doubly important to start small when you’re risking someone else’s money.
Good Luck,
Mike
Generally I would agree you need to start small, but you dont need to stay there long. It mainly depends on your capacity to handle something. I know investors that started out at 100+ units and that was too small for them and there are others that cant handle managing a sfr.
The sooner you get out of the smaller units the better in my opinion. Learn the ropes on a duplex or house than skip the 20-30 unit places and jump to 100. It is actually much easier the bigger you get. I wasted about 10 years thinking I had to do everything myself. Yes, you need to manage the management companies, but let them do the grunt work. You will be much happier in the long run.
Matt
thanks guys for the imput. I agree I should start smaller and learn the basics. I do have management skills but never really used them in real estate. I am used to managing people and working with alot of money. My swimming pool company builds $200,000 pools and I manage everything in the company from the expenses to the job sites. So even though its not real estate I do have a knowledge of keeping track and finances and dealing with people. But in all fairness it is 2 different things completely. I deal with millionaire lawyers and doctors on a daily basis but they are different Im sure than dealing with a single mother of 2 who is 2 months behind on her rent in my unit.
Rory,
This is not directly relating to your question, but I thought the posts between you and Manager were interesting.
My wife and I relocated to Louisville this past summer to invest in the local real estate market. We are getting settled and currently in the process of making investments. As is often said – “invest in you own backyard” – so we moved our backyard.
Our previous backyard was in the Bay area of California where we owned and managed several properties of various sizes up to 46 units.
We are dedicated, full-time investors. Over the years, we have continued to educate ourselves, and keep up to date, on all aspects of real estate investment and recently were working with a REI coach. We are members of the Kentucky Real Estate Investors Association. We are always looking for good properties to own and manage. We personally get involved and are knowledgeable in various trades.
We are like you - eventually we like to have a management company in place for any properties we own. Manager has a good point and that’s one reason I write, because we could manage a property and own part of it to attain the best world for investors in that we could do a management job from an owner’s standpoint.
Best of success!
Bert
Rory,
To answser your question, I think most investors that are looking at that size complex are more interested in rate of return expressed as percentage of invested capital instead of a set dollar amount per unit. They will be taking revenues minus all expenses, minus debt service and then looking at whats left against what they have invested in the property.
My two cents,
DB
Why hire a management company? Start your own. I know a number of investors that hire a handyman who is responsible and trustworthy to manage their properties. You might buy the guy a truck and pay him a decent income and make him responsible for repairs, showing the units, and making sure the property stays in good shape. Basically doing the things you don’t want to do. This is a much better route than a management company in my opinion.
I wouldn’t suggest that. Some investors have different stategies.
And if I was one of the few who wanted to start my own property management company, I certainly wouldn’t start it up on a large complex.
A successful property management company that is inline with my ideas and strategy with proven results is a tremendous benefit.
I wouldnt want to manage the properties myself. I know someone who’s family owns a management company in ohio. They also own 51 percent of all the buildings totalling 7000 units and 300 million in real estate that they own and manage. I figured I would have them do the management or even split the down payment costs for different properties and include their percentage for mamagement.
I wasn’t literally telling you to start a management company. I was saying hire a handyman to work soley for you and tell him how you want things done. His full time job is managing your properties. Depending on how much you own it could be cheaper than paying a company 10%. I’ve seen it done before, just an idea…
Yea, it’s an idea for someone who has experience with it. But I wouldn’t suggest it for someone just starting off who has the means to invest in a large complex.
10% is steep, I’m seeing anywhere from 3-5% for professional management companies in my area.