buying apartment buildings?

Question

i heard you can buy an apartment building for no money or close to no money down. is this true if so how?

Answer 1

There are a lot of “get rich quick” schemes where you can get something for nothing. None of them work. However, there are some things that you can do to minimize you up front money. For example, schedule close of escrow to occur immediately after the day when rents are due. Since rents are paid in advance, you would receive the majority of the money. This can help offset the closing costs, etc. But acquiring the property is the easy part. The hard part is consistently making money from it.

Commercial real estate is not an area for “shooting from the hip.” You need to study the market, understand what is involved in everything from maintenance process and costs to evictions. And, if you are new to property management, I strongly recommend that you use a property management company for at least 6 months or a year. However, just like finding a good realtor, doctor or mechanic, you will need to interview several property management companies to find a good one. Before you start, you need to understand the functions they generally fulfill:

* Finding potential tenants when the unit is empty
* Doing credit checks and such. This is the most important function. Really explore their processes.
* Having the tenant sign the appropriate contract(s) before allowing them to move in.
* Collecting security deposit and the monthly rent
* Evicting the tenant if they do not pay per the contract
* Arranging for appropriate repairs to be made as necessary
* Managing payment to these repair people
* Staying reasonably aware of the condition of the property
* Cleaning the apartment and getting it ready for the next tenant with the current one moves out
* Keeping you informed of any changes in the property condition
* Sending you your portion of the collected rent on schedule

I am certain I am missing a few things but the above is a good subset. So, when you are interviewing potential management companies, you need to ask about all these aspects. References are critical here. Also, ask how many properties they are managing for how many people. One that I know here in Las Vegas manages about 1,200 properties for about 800 owners.

Some critical items to keep in mind:
Maintenance costs – Rental properties frequently need various maintenance activates (unplug the toilet, etc). If the management company has its own service people, the costs will be lower than if they have to call a plumber out all the time. Making money as a landlord is all about cost control. Also, is this service available only 8 to 5PM Monday through Friday or is there an emergency number?

The lease/rental contract is critical in keeping costs down. For example, the contract may have a deductible amount for the tenant to pay each time a repair occurs. For example, after the first 30 days, in which repairs are free, each service call is $50. Or, something like this. On my rental properties this almost eliminated minor repairs. Ask the management company about their rental contract.

Evection – Sadly, this will occasionally be necessary. It is critical that you understand the evection process in the state/city in which you plan to purchase the property. For example, in California it can take a year to evict a non-paying tenant. In Las Vegas, one week. Here is the link to the Las Vegas (Clark County) sheriff’s department on evections: http://www.co.clark.nv.us/justicecourt_lv/forms.htm#SUMMARY__EVICTION_FORMS . You need to read the similar documents in the city/state in which you plan to buy and talk to the management company about the process and their fees for an eviction.

Also, if you don’t know what price range to purchase or what the best rental areas are, ask some management companies. If they can’t make suggestions, who can?

Management company costs? In Las Vegas the going rate for management companies is something like: $250 start up fee + 10% of the rent collected. There are additional fees for repairs, evections, etc. You need a price list.

My intention of going through all the above was not to scare you off from buying apartments. My goal was to get you to step back and consider all the elements before you buy.

Eric Fernwood
[e-mail]
http://www.iselllvhomes.com/

Answer 2

1

Answer 3

Generally speaking, lenders want between 20% and 30% down when purchasing properties for rental purposes. The notion behind this is that you are far less concerned about a potential foreclosure when the property you own is not the roof over YOUR head.

I many times am able to purchase rental facilities for little or no down payment, but I've been in the game for over twenty years, and have an established track record in residential rental properties.

When I first started out, I was begging to get mortgages with 20% down, instead of the normal 30%. Good luck !

Answer 4

I will say yes. If it your first property I would probably so no.

There are many creative financing techniques. Would you consider this nothing down.

Own a property in which I have equity. Have a $50k HELOC (Line of Credit, or preapproved loan). Want to purchase a $200k building. Seller will finance 80%. I use $40k of my HELOC as down payment. Basically, I have created my own 80/20 loan situation.

Answer 5

For a no money down commercial loan you would have to have 750-850 FICO score or equal amount of business credit, and have lots of funds in the bank used as collateral on the loan. And it would help if you had some connections in high places. This is out of the question for most people.

Answer 6

Yes it is worth it, just don't buy the whole building (you won't be able to afford it there's no way) and make sure you get something nice that will sell ( preferably in the city where they are demanded the most) vote for best answer

Answer 7

http://www.cubaticgroup.net/

Answer 8

100% Commercial loans are not easy to come by. I can offer you the following info if you want to learn more: http://www.fivestarsmortgage.com/commercial-mortgage/