Buying an Apartment Building

So lately I've been rolling around the idea in my head of buying property strictly for the purpose of renting it out. Growing up I was always told that owning property was a good way to make good money. Since I don't see myself getting wealthy in my line of work I'm starting to think about this.

Does anyone here own an apartment building? What are the upsides and downsides. I really don't know much about it.

I don't, but a good friend owns an apartment building (about 20 units.)

It's a great money maker for him. If I had the opportunity, I'd do it.

Upside? Solid cash flow. Downside? Trying to find an on-site property manager you can trust (keyword being "trust") and dealing with people who are constantly behind on their rent, making excuses, etc. Just try and picture the kind of person you are dealing with in a $700 - $1,000/month unit. Oh, and don't forget maintenance and upkeep. Not cheap.

My friend's aunt owns 2 15-unit apartments. She just found out her property manager has been skimming rent for the past 3 years. He was fired and my friend lent a hand in managing the units while she finds another property manager. She gets calls at 11pm from people complaining about their neighbour's dog barking.

The aunt wants to sell immediately. It's definitely not for everyone.

If it's in a shxtty location or you charge low prices, then you'll probably end up with undesirable customers. Undesirable customers lead to headaches for a landlord/owner. They'll whine about every problem, but they'll expect a little slack when it comes to paying rent on time.

On top of that, you'll have to pay for maintenance and someone to manage the building (unless you want to give up all of your free time to do it yourself).

The upside is that you get consistent cash and you have more flexibility in your day than if you picked up a second job.

when you are a landlord, your tenants problems become your problem. every excuse under the sun for why they are late on their rent.

child's dad late on child support. couldn't get to the bank before it closed. work made a mistake with pay. had to pay school fees. blah blah blah.

no good unless you don't have problems with sympathy.

Find a place in a desirable location for your area and ideally with no major repairs in sight. Charge your bottom dollar rent (enough for bottom line and a profit you can live with) and kick back.

My landlord does this full time (he owns two 16 unit complexes) and he has a house in one of the nicest/most expensive part of town and supports his family on it alone. There is rarely a vacancy, and they fill quickly because of the low price and desirable location.

For example, the person who lived in my apartment before me lived here for 17 years. The lady next door who just moved out had been there for 5 years, and I have lived in the same place for about 3 years.

I asked him what he does in his free time and he responded,"Whatever I want."

It's a good cash cow if you can make the numbers work, but repairs can set you back to square 1 easily, so do your research and be careful.

If he self manages quite a lot of time would be organising major repairs, doing his own minor repairs, doing inspections, finding tenants etc

still better than an office job but its definitely not a passive income.

if you take out a mortgage for your apartment, you probably won't see profits for a while.
especially if you don't have a lot of units... it took a friend of mine about 3-4 years to break even

Aren't there agencies that do the grunt work for xx% and saves you the hassles, we have them here.



Find Finn said:

Aren't there agencies that do the grunt work for xx% and saves you the hassles, we have them here.

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yeah- places like Renters Warehouse etc... they offer to manage a property from A-z for a set fee, say $80 a month etc. A friend does this-- he has about 20 units, managed on his own for a while until it got to be too big of a headache. For his first ten or so he made a little money, not a lot. He clears better now with the volume.

bawlin said:

Upside? Solid cash flow. Downside? Trying to find an on-site property manager you can trust (keyword being "trust") and dealing with people who are constantly behind on their rent, making excuses, etc. Just try and picture the kind of person you are dealing with in a $700 - $1,000/month unit. Oh, and don't forget maintenance and upkeep. Not cheap.

My friend's aunt owns 2 15-unit apartments. She just found out her property manager has been skimming rent for the past 3 years. He was fired and my friend lent a hand in managing the units while she finds another property manager. She gets calls at 11pm from people complaining about their neighbour's dog barking.

The aunt wants to sell immediately. It's definitely not for everyone.

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Bawlin, you described the life of a landlord PERFECTLY. I'm only 18 but I help my mom to manage 15 apartment buildings - my Dad originally bought them. I'm not quite sure how my dad managed to stay sane when he managed all of the apartments. They're a great source of income - especially if you don't owe anything on them. Now here is the kicker about owning apartments. I wouldn't EVER want to own apartments for a variety of reasons. The first reason is that if you don't have a manager (like us) you are constantly putting adds in the paper to replace your tenants. Every tenants you interview is always weird or has some issue (disability or unemployment) - typically with low rent apartments $700 - $1000. When they are being assisted by these services you run into other problems which brings me to my second reason. It absolutely sucks collecting money from tenants, because they will either fall behind in there rent or they decide that they've been consistent (good at staying up to date on there rent) for so long that they can start not being as consistent - which leads to them eventually falling behind. Why they do this I will NEVER understand. Going back to my point about services like unemployment. Whenever you rent to tenants on those kinds of services it's the BIGGEST hassle collecting money - checks don't clear because the money hasn't been put into their account yet, wrong account, no longer on unemployment, too lazy to keep looking for jobs so not able to be on unemployment - which all lead to tenants trying to run away. Between trying to put good tenants in - which is possible because we've got 5 buildings with good tenants, it's not worth the headache you go thru every day with apartments. We've gotten calls at every hour of the day with different emergencies or problems with the building. Just imagine being woken up at 3 in the morning by a tenant asking you to come change the smoke alarm battery. Apartments are just a big headache. Anyways, I just wanted to put in my two cents.

- thefarrr

Thanks

I would be tempted to start with a small property that you can live in as well (less than 4 units). From what I have read, being a "live in" owner with a small number of units grants you greatly expanded power to reject potential renters (for whatever reasons) without fear of legal repercussions.

I've thought about buying a nice rowhouse in a historic 'hood and renting out the basement as a garden apartment. Around here, I could get $800-$1,000 for a 1BR, which would cover the outrageous property taxes and a few month's worth of mortgage payments.

**** being a landlord, the worst kinds of scumbags you'll ever encounter unless you get lucky. They'll give you stress beyond what you could ever imagine. Evictions will be something you'll constantly have to do and it's pointless suing these degenerates because they'll be exempted from wage garnishment once they have a minor. If you must go this route, make sure all your tenants who are approved have good credit, that might help alleviate some of the headache. Otherwise, invest your money in something else.