Buy apartment complex for 2 million with a cap rate of 7%

and don't buy in nigger neighborhoods

A manager doesn't prevent drunk shitlords from trashing your place.

Okay, so what are some common methods of maximizing profits in the face of these costs? Assuming you contract out maintenance work. A cap rate of 10% is considered outrageously high, but even on a $2million property, if you have to hire contractors and janitorial staff and managers, that $200k/year net profit looks like it wouldn't even be enough to maintain the property

>not investing in industrial property
Way less work desu

better to be the one selling the apartments boyo(from what i've heard)

on a somewhat related topic why do i meet so many rich people from the UK who claim to make hundreds of thousands in passive income from 'buy to lets'? is it really as passive as they suggest?

There's a whole host of things you're not taking into consideration.

Your pic related looks like 2 family units, for a total of 14. That's 14 furnaces and AC units your responsible for. 14 sets of appliances. 14 independent plumbing and electrical systems. 7 roofs. And god knows how many windows.

These things break, wear out, and need replacement on a regular basis. Renters are far more likely NOT to respect property as they don't own it. They will put holes in walls, destroy fixtures, let their dogs or kids piss all over the carpet and not give a single fuck.

Again: This is not a cakewalk.

Vet your tenants heavily. Set minimum credit scores and require references. Old people are usually the best tenants.

Outfit the apartments with cheap hardware & cabinetry. Install pet/spill/moisture resistant flooring & moldings.

SPEND money on maintenance free exteriors and roofing systems (ie metal roof) - shit that will likely never need replacement during your entire time of ownership.

> buy an apartment complex near a college/university
Much easier

Do research on the required costs, they will vary based on what the property does and doesn't have (i.e. community laundry area vs. hook ups in units). You'll need to pay for groundskeeping, certain utilities, waste disposal, property taxes all on the reg. It'd be good to try and find a local realtor or two to partner up with to act as your leasing agent, they will want a %. Management to handle all the above things on a regular basis, a good relationship with some local handymen unless you can find someone you trust for regular work. Expect that whenever you change tenants you will be paying to replace things like carpet, paint, fixtures etc. Yeah you won't get anywhere near the 200k back each year. You will still have a good source of income and property though. Just a lot of liability you have to understand before getting yourself in deep.

>apartment complex near a college/university

That is the LAST fucking thing I'd buy. Bunch drunk fratboy fucks constantly wrecking everything. No fucking thank you.

Just factor in complete renovation of the unit as part of the rent/security. Although yeah way higher risk, but easier to charge more.

Honestly if you had $2 million to burn you're better off developing than being a landlord. Partner up with a general contractor. Build houses. Sell them. Split the profits. Move on to the next.

At most you're going to have to offer a warranty on the home for a year or 2. Much better than being someone's babysitter for the rest of your investment life.

Becoming the landlord is one of the best investment strategies. Buying land just to sit on it only drains your funds while you hope that property values rise. But you're not going to be sitting around on your ass unless you want to pay for a property manager, and there goes 30k/yr and one of your units.

Maintenance can be contracted out. You don't need to hire someone full time, just a lawn crew that comes by twice a month and get friendly with an electrician that can do HVAC. Thats like a 2k a month max unless you're renting to low income. The more time consuming parts of the job are paperwork (leasing new apartments and keeping up with taxes) and chasing people that are late with rent.

This is my longterm goal so I've been doing some basic research. Gonna buy me a complex on the edge of a decent sized city with good apartments and rent to mid-to-upscale tenants. (no section 8 shitlords) The $1200 2/br range is very lucrative in my area, though rent around here is dirt cheap so it might be more in other states.

Thx user. I definitely would form an LLC before purchasing the property. The trouble is, most complexes already come with 90-100% occupancy. I suppose who is liable for what damage would depend on the structure of the rental agreement? I used to work as a subcontractor and I'm familiar with building maintenance and costs, the uncertainty occurs when figuring out who pays for it.

As to your suggestion of investing in your investment by retard-proofing you units with spillmats under the carpets, cheap appliances, and things like drywall squares as opposed to sheets, I think it would be difficult to do that with a recently purchased property considering most of the units are already occupied. I'm ignorant of the laws regarding renter's rights, but I don't think you can temporarily evict someone to renovate their apartment. If you wait till their lease is up and refuse to renew it so you can do work, you've obviously lost their business because they won't come back after you kicked them out to work on their (former) home, and given your business a bad name in the market. It seems like a monumental task to me.

I still have a lot of connections with contractors and subcontractors and could probably find the best price in town to get the work done, though.

Yeah, no way I'm putting up with drunk jackasses putting holes in the walls. Maybe as a second property that you can rent out for cheap, but not for your initial investment.

This is honestly pretty good too, desu. Only problem is if you build a house then it sits on the market for 6 months and your capital is completely tired up, whereas apartments fill up pretty quick. Apartments are also fairly depression-proof. No one wants to buy a house during a stock market crash, but people still need to live somewhere. Higher risks, higher rewards.

> I suppose who is liable for what damage would depend on the structure of the rental agreement?

You rental agreement is just a piece of paper. If they don't have the money you aren't getting it. You'll just waste time and money dragging them through court. You'll likely win, but the truth of the matter is that if the people you're going after had any assets they wouldn't be renters in the first place.

An excellent point. That would then give me the right to evict, correct? Another way to increase profit would be to raise rent rates. I assume you'd have to wait until the lease is up, but it does sound doable.

I think if you stuck to houses in the $200 - $300k range you'd be ok even if they sat for a while. That was part of the problem when the housing market tipped over in 2008. I had an uncle who kept leveraging one house into the next into the next into the next. When the market went "poof" he had a bunch of really nice houses with no buyers. His mistake, as with many developers, was overextending himself.

Slow and steady wins the race.

Also good luck trying to get late rent from anyone who's not white or east asian. The NAACP in my area will fight tooth and nail trying to prove that you're racist for expecting your tenants to honor contracts and pay rent. You'll have better luck squeezing blood from a stone.

Sure, you can find all kinds of reasons to evict. Damage would certainly be one. But your best bet in that instance is just to get them out and lick your wounds. Dragging them through court will just cost you more money in the long run.

easy - don't rent to blacks. The law says you have to, but you don't have to tell the government why you didn't rent to them

My conclusion too. Evict them, eat the damage costs, find a whiter replacement tenant

Yep. This too. And there's a whole fucking host of bullshit regulations and conditions that will allow for your tenant NOT to pay any rent until you address them. It varies by area, but it could be something as stupid as a loose staircase railing or some other dumb shit.

And believe me, there are people out there who take every advantage of this kind of shit and will bleed you dry as long as they can.

Remember, eviction costs money as well. If they refuse to leave you may need to get a court order. If they still refuse, ya gotta get the sheriff to literally hall their asses out.

yes - they're called niggers - and white trash

avoid them at all costs

I'm hoping bancor reaches at least 100 usd in 2 years... 500 usd would be great but hey I'm a simple man kek

>they get 3 months free vacancy for your choice to evict them

Yup. Wifebeating nigger in the next unit over didn't pay rent for 6 months while the landlord fought to get him evicted.

I finally had to record a few "video diaries" (multiple to prove it wasn't entrapment of some sort) and caught the screaming towards the end of one. Gave them to my landlord and I think it tipped the court in her favor, guy was gone the next week.

Got me cheaper rent. I need to rat on my shit neighbors more often.

You should look into absolute net single tenant properties backed by corporations with 20+ yeast leases. THAT'S how you make money doing literally nothing. I own a Wendy's returning 6% of 2.2m... Roughly $140k a year and they pay for EVERYTHING.

More info?

Interesting, so you are telling me you are renting commercial space to a franchise/corporation for 6% of the property value a year?

MARCUS & millichap

Correct. And I pay none of the costs associated with it. Building maintenance, parking lot, taxes, insurance, nothing. Triple net. That's the key. It's advantageous for corporations because it frees up capital and limits liabilities. They'll happily pay rent

2.2 million for a lot for Wendy's

Do you live in a large city? large town? medium sized city/town?

So, what, just scoop up a property along a busy road and convince a franchise to build there?

Tenants stay much longer so less time looking for new ones. Higher rents (but at the cost of capital gains). Tenants are generally good business owners instead of dumbfuck stupid residential renters, tenants also have to pay rates/insurance/repairs (in New Zealand anyway). They also have much less rights, its a lot easier to evict.

>much less rights
i like the sound of this.

Property Manager from Australia here.

Do it, but don't buy some shit hole that will end up being a money pit.

What you want is a place that you can afford comfortably, in a GOOD (I cannot repeat this enough when I advise family about purchasing real estate) area, ideally, low crime, close to public transport, amenities, etc.

Lastly, if you intend to do the "sitting on your ass landlord" thing (this is fine), and insist on getting a manager, actually get one that actually gives a fuck. There's a lot of dickhead out there that just want to collect their piece of the pie after the month is done, I know these people, I work with these people, these people get fired from their agencies constantly, while I have agencies calling me and offering higher base pay and more commissions.

I have a portfolio of about 200 properties, 80 of those being rentals for family and close friends.

Everyone who uses my services KNOWS why I charge 1% more than anyone else. I get a kick out of when a landlord approaches me and I tell them my commission, they're like "fuck off, John down the road does it for 6%". Trust me, John down the road doesn't give a fuck about your place.

In closing,
Be careful, don't be an idiot.

Also AMA if anyone's thinking about getting into rental property.

>i can sit on my ass all day and my apartment complex will manage itself

You're an idiot.

Nice work user.

just put it into vanguards and wala

How much of an impact does maintenance have on your net? How jewish are your "tenants rights" laws in boomerangistan? Can you elaborate on the nature of your 200 properties? How valuable is your porfolio? Do you manage or own?

Do you take kick backs from Remedial Construction Companies or suppliers to suggest materials?

Ausfag here who has access to both.

Flooring for example

Not sure what questions I could ask. My dream is still a good decade away while I pull in the crypto gains. I've been keeping a close eye on what my 3 landlords have been up to for the past 5 years. But I'm still unsure of the unique challenges I would face if I were to own multiple properties since I wouldn't be able to keep managing them myself.

I know I want to buy some properties in the suburbs of a decent sized city, something with growth potential. Ideally something higher class to keep the gibmeedats and repair costs to a minimum. Finding good people to work for you is a given for anything. I've always believed that you get what you pay for.

I dunno, it's a hazy dream at this point. Still gotta get through university and make bank on crypto first.

>80 of those being rentals for family and close friends.

80 properties for family and close friends? that seems like a huge amount

Become a slumlord

his family and friends might be renting them out to third parties

I'll answer all your questions in three paragraphs.

Tenant rights here aren't that bad. Only shitty thing here is that if you want to evict, you need to give a minimum of 60 days notice, unless you are aware criminal activities have been committed in the property.

I own three properties plus my personal residence (Mortgage on 2, No mortgage on the other 2 properties), that I manage myself. Believe me, if I owned 200 rental properties, I wouldn't be on here right now.

The properties I manage are mainly in the inner-middle suburbs of an Australian city. I have a few in the other suburbs that belong to family members, I wouldn't manage properties for randoms in outer suburbs, because this is where the niggers live, but since they're family property, what the hell.

In my early career, I tried to be moral (Lol, being moral in real estate) and would usually be against taking kickbacks, etc. But if you can get a good tradie to do a cashie for you and make the cost less, do it. If you have access to cheap materials, why not? Saves you money at the end of the day.

Where abouts in Aus are you man?

No offence man, but you sound pretty deluded reading from your post. I am guessing you're young due to you talking about finishing University and "making bank on crypto" Just save up for a deposit for something decent, in a decent city.

out of those 80, realistically 15 of those are for family.

I use the term "friend" quiet loosely here. The other 65 would be clients that have been with me for 10+ years and genuine close friends.

You from Sydney? Do you see happening in the that market in the future or in other areas?

>Wannabe Property Developer

Not sure what's deluded about it. Crypto for me isn't a swing-for-the-fences-all-or-nothing dream. I've got other objectives that I work towards. But if it pays off half as well as I suspect, it will leapfrog me years towards my goal.

Melbourne mate. You couldn't pay me to live in Sydney.

As for Sydney, I knew it was going to fucking grow, but I didn't expect THAT. In my opinion, there isn't a bubble in Sydney or Melbourne. The growth will slowly stagnate.

As for you aspirations to become a property developer, Don't drink $4 coffee and eat $22 smashed avocado. Seriously. I know you think i'm joking, but I am not.

Don't set your goals based off of crypto working out for you. I know many people that thought like this. Investing your $5 a week allowance given to you by your mum will not make you a successful landlord that can live off the rent.

Work towards it, get a job, save up a hefty deposit so when you walk in the bank the manager doesn't piss themselves laughing at you.

How much deposit would you say is enough (also when just buying a single house for yourself)? I'm thinking 10 - 15%?

Thanks user, I knew what Tim Gurner originally meant by that. But everyone else completely disgards it.

20%. 15% as a downpayment. 5% as an emergency fund.

>Tim Gurner

Ahah. I met this guy YEARS ago (Think 2005). He's a really, down to earth, humble guy. The media portrays him as an asshole that he really isn't.

There was something on reddit someone posted that he allegedly inherited $30,000 when he was 17 from his grandfather. As someone on the other side of the fence, he was upfront about it when he told me, but the guy had a pretty normal upbringing. He didn't attend any fancy private school, he didn't go to uni, pretty normal guy to tell you the truth.

yeah you can easily see through the media bullshit, heard on radio 2GB 837AM, that it was $34,000 and that he had to pay it back with interest. And talked about his early days. Would love to meet him one day.

He is probably one of the most interesting men I have met, even when he was younger. Really driven guy.

I hate to sound weird, but I am guessing you're younger than me.

If you want to repeat what Tim did, work hard. Don't spend, save every cent, work double time. Good luck man, you seem to be on the right track.

Also, i'd add.

I hate to kill your dreams about meeting Tim Gurner, but since he's married now, he doesn't really make a ton of public appearances. He does some TV and radio here and there, but I think he wants to live out his life privately.

Yeah 100% turned 18 just a month ago. To have a guess of you, I would say early 40s?

And thanks for the support, going to do everything I can to get there.

ah oh well, sometimes he still does talks at events. So who knows what will happen.

I turned 40 two months ago. Good Guess.

If you have any other questions about Australian Real Estate, fell free to AMA.

>Former military
>Working and furthering my education while I amass capital.
>"Get a job and save your money."

Yes, dad.

Might as well ask some more, did you take any education in relation to real estate? Any tips about the industry in general or in your area of management? What got you into this?

Based off of your questions, I am guessing you're looking to get a career in real estate. I'll answer them the way if an 18 year old version of myself asked me the same questions. I'll answer your question in a very long statement individually. So go get a drink if you need it.

>Did you take any education in relation to real estate?

I did my real estate licence and a Diploma in Property Services at TAFE in 1998. If you're looking to get into real estate, you DON'T need the diploma, especially considering what TAFE costs now. It cost me about $100 back then.

>Any tips about the industry in general or in your area of management?

Real Estate (Sales or Management) can be a very brutal industry when you start out. A lot of wannabe agents burn out after a year, you have to work hard in that initial stage, just keep going, build your client base.

>What got you into this?
In 1995, when I finished my HSC, I barely passed. I thought to myself I wasn't going to make it in life. If you asked 18 year old me what i'd look like in my 40's, I would've answered homeless. A few weeks after I finished year 12 I got a job in a call centre for a big 4 bank, based here in Melbourne. Back then I was making $15,000 a year.

I remember coming home from work in 1998, I had an argument with a coworker at work. I knew that was when I needed to do something different and that the job I had wasn't sustainable at all. I looked online, saw real estate as an option, considering I had good customer skills and sales skills.

The rest is history.

>Where abouts in Aus are you man?

Sydney.

Will have a warehouse in the western suburbs very soon. My family owns factories in China which manufacture flooring, wall paper and formwork.

So only the flooring might be useful for you. Happy to do kick backs. I am already doing this for a few ex-coworkers.

Landlord here.

I've thought about starting a property management company. What kind of money do you bring in, bruder? How did you go about advertising initially? Office space?

Washington DC area.
No. There are hundreds of these properties all over the country. Search Marcus & Millichap. They're a firm that specializes in these sales.

Wendy's buys shitty piece of land for 100k. Builds a Wendy's for 500k. Puts property up for sale at 2.2m as an investment, Says theyre willing to sign a 20 year lease at 6% with increases every 5 years. Property value is a function of the rent, so they set that number... In my case, it's close 12k a month. They free up their capital, make 1.6m, alleviate a liability on their balance sheet. And they get to operate their business using max leverage... agreeing to pay rent is like using future money. If you know anything about the time value of money, you know a dollar in your pocket is king...

Interesting, what happens if they were to break the lease?

I am guessing this is a corporate Wendys not a franchise Wendys.

Also, what happens after the lease is up after XX years?

I'm protected. You evict them essentially, but that rarely rarely happens. I have an iron clad 40 page lease. You hire a law firm to read it and help you negotiate terms. They have lawywrs that specialize in real estate. It's an up front cost, but well worth it. I paid close to $30k initially in lawyers with all the back and forth. I also negotiated into the lease that I can audit their financials ... From time of sale back ten years and again every year to make sure the business is in good shape. In this particular case, it's not corporate... It's a franchiser with 39 locations that's been operating since 1981... So they're strong. The percentage of return is a function of the strength of the tenant. If it was Wendy's corporate or Starbucks or Walmart, for example... It'd be closer to 4.5-5%

Cap rate of 9% is not uncommon in my area. Typically cap rates decrease with the overall value of the property. Cap rate of 7% is actually conservative in some areas.

The cap rate refers to the net operating income after vacancy and operating costs have been accounted for.

There are 4x5 year renewal options. Most likely we'll draw up another lease at 5 years remaining. That location has been there since the 80s, and it makes money. I was able to see financials on that individual store as well as the franchiser as a whole. They're both profitable. Most of the work in this is on the front end... Then you place your educated bet and sit back and collect.

Did you flat out buy the lease of did you finance it?

6% return on 2.2 million, wouldn't it better to just look for the same return on stocks?

Am I correct to assume that the land value goes up over time as well so your rent increase proportionally?

not larping btw

Do it OP. I'm a Canadian property owner and manager (for other owners) and it's the beginning of a new month. The plebs still are flowing into my office a week in to pay rent. I hardly have to do anything. Just today some guy walked in and told me he could only pay half his rent. I said no problem, but I gave that deadbeat an eviction notice right then and there and told him if I don't get the rest in two weeks with an extra $150 as a penalty for late payment I'll be taking further action -- all with a smile of delight on my face. Most of these peons have no clue I'm not allowed to do that.

Another guy walked in to complain about another tenant breaking into his unit because the locks are bad. I told him it's not my problem and to call the police. I deflect a lot of problems like this because I don't really give a shit. Then he told me he wants the locks changed and I told him that those are perfectly good locks and if he wants them replaced I'll have to bill him. When I get to pay myself like this I usually charge 60/hour plus a service fee plus materials.

Then there are all the retards on disability. The beauty about living in a welfare state is that you can jack up the rent on retards and ODSP will just keep giving more and more money. Their cheques come in every month ahead of time and in full... And these people will rent anything. I rented a shed with a space heater a while back for 550 a month to some schizo freak who bathed in the lake. Got away with it for 7 months till his worker went to visit him. Barely got a slap on the wrist.

I'm known around town as a slumlord but I don't really care. I'm about to deposit 20 large into my account and I've hardly collected half of my rents so far. Meanwhile you kids keep staring at dumb charts pretending like you can predict the future

Property is assessed at like $850k...significantly lower. The value in the property is in the tenant and their strength and the lease terms. I'm in the stock market, yes... But there's no guarantees in that. Ever. This is an alternative or a diversification. I put up 1.2 and financed a mil. The note payment is about $4500/mo of the 12k in rent.

Location has been there and profitable and paying rent since 1981... The dotcom bubble, the crash in 08, etc all happened and they are still there serving burgers and paying rent. That money in the market would not have consistently won during all of those years

But you acquired it in 2016 with a 20 year NNN lease?

If lets say 20 years from now when that Wendys moves, is the property and the building effectively yours? Or just the lot?

Rent escalations are built into the lease. 5% (of current rent, 6%) every 5 years

I own everything except for the contents inside of the building. These big corporate chains are all about market share. If they move it becomes an arbys or a McDonalds and they don't want that

Holy fuck you are cunt, I love it.

Thanks for the info, it is good to see some legit advice coming out of Veeky Forums besides altcoin shrieking.

Seeing your numbers I can actually feasibility do this.

Did you also happen to be a plumber prior to getting into real estate?

Seriously check out Marcus and Millichap for sale listings. There's thousands. From 100k to 100m shopping malls.

123throwawayy at gmail if you wanna chat

Yeah sure I'll shoot you an email had some other questions