What does it take to build and run a new apartment complex?
Hello,
I've all but decided that apartment complex ownership is the business I want to start with as an entrepreneur. I'm currently working toward finishing my associate of arts degree, taking business/economics/accounting classes to assist me with the technical aspects of starting the business. I plan to graduate in spring of next year. After graduation, I'm going to allow myself some time to save up money for a down payment on a loan. Along with these plans, I have quite a few ideas about how I want to run my business (between floor-plans, amenities etc.) but to be quite honest I'm not sure where to go from there. I may ask more questions later if I need more detail on a particular aspect.
So my questions are these;
What major expenses may I be forgetting or overlooking in the planning process?
What advice do you have for first-time landlords?
What are some tips or red flags on choosing builders, contractors and inspectors?
What advice do you have for choosing a location?
What is some advice on saving money on property?
What are some ways I could save money on initial investment?
What things should I not cheap out on for initial investment?
What financial qualifications are needed for such an big loan?
How long should I wait before hiring people to run the business for me?
#architecture #real-estate #real-estate-investing #apartments #apartment #landlord #property-insurance #property-management #career-details
7 answers
Alex Pascale
Alex’s Answer
Hey Brittany,
I looked at a lot of different questions on this website to answer and thought I could add the most value to you in answering this one given my experience in owning/ running apartment complexes myself. This is the best business in the world to get into in my opinion.
My favorite resource to learn about investing in Real Estate is a podcast called, Bigger Pockets. I encourage you to check this out as it's where I learned a lot of the things I have implemented and know how to do now. My favorite real estate book that I HIGHLY encourage you to read is called "Rich Dad, Poor Dad" by Robert Kiyosaki. This book changed the game for me!
- Alex Pascale
Hi Alex. Thank you for posting this great advice for Brittany. I've removed your contact information from the post, but left the rest of it as it stands. To protect the students community members are not allowed to post personal contact information on the site or use CareerVillage.org to arrange off-site communications. If you have any questions about this policy, please do not hesitate to contact us using the hello@ email address below. Thank you again for your recommendations of resources for Brittany. Great help!
Jared Chung, Admin
Mitch Chupack
Mitch’s Answer
The best education in the multi-family real estate profession is to get out there and spend a few years working for a real estate company that develops and manages multi-family real estate. You will learn practically how its done. No amount of textbook education can provide that required experience.
Even if you decided to go it alone, you will likely need some investment from others to assist you in the endeavor. Typically, investors will not jump on the wagon and work with you unless you have the experience to pull off the investment because your inexperience becomes a huge risk to their investment.
Cygnet’s Answer
One does not ordinarily, out of the blue decide to own an apartment complex.
This is not a small business to operate and generally runs a negative cash flow for four quite a while.
The national guru whose has expertise in this area with be David Lyndal.
If you are unwilling to invest $10-$20,000 in education before entering this arena, it is probably not an arena you should be playing in.
Hello,
Thank you for taking the time to respond tho my question. I wasn't quite sure what you meant, though, about investing in education. I am currently a sophomore working toward my associate of arts, taking business classes. Did you mean that I need to invest in real estate classes? Or some other type of education?
Your advice is appreciated!
Brittany
Jeff’s Answer
Hi Brittany,
There are some really great answers and advice above. I personally own a few apartment buildings and I’m very glad I made the investment and learned the right things to do. It may be easier to start by owning a small apartment building before a big complex. However, make sure you learn all about fair housing laws in your area and how to financially plan for being a landlord. Many areas have classes offered by landlord associations or government agencies. I attended these classes and a looked at the lease forms from the local landlord group and the local realtors’ association. These leases gave me a general idea of things to know before attending landlording classes. I always advise new landlords that they need of a team of locally licensed professionals which at a minimum contains a realtor, property attorney, financial planner, banker, and contractor/ inspector. There are Real Estate Investing groups in many areas. I attend these but I am always careful if they are trying to sell me something very expensive or want my investment without having seen the property. Please watch out the most for anyone that is a hard-core sales person. There are many steps to break down in these as founder Jared Chung said above, each one of these are a lot of questions.
I hope this helps as a starting point.
Jeff recommends the following next steps:
Nat’s Answer
Jared Chung
CareerVillage.org TeamJared’s Answer, CareerVillage.org Team
James Constantine Frangos
James Constantine’s Answer
Here are some crucial expenses to consider when planning to build and operate an apartment complex:
1. Land Acquisition and Development Costs: The cost of land varies depending on location, size, and zoning laws. Don't forget to include expenses related to site preparation, utilities installation, landscaping, and other developmental costs.
2. Construction Costs: These are significant and include materials, labor, permits, architectural and engineering fees, and potential costs from construction delays or changes.
3. Legal and Permitting Fees: Budget for legal fees for property acquisition, zoning approvals, building permits and other regulatory requirements. Compliance with local building codes and regulations is a must.
4. Property Management Expenses: Running an apartment complex involves costs like property management fees, maintenance costs, insurance premiums, utilities, property taxes, and marketing expenses for attracting tenants.
5. Reserve Funds: Always have reserve funds for unexpected repairs or maintenance issues. This financial cushion can help manage unforeseen expenses without affecting your cash flow.
6. Marketing and Tenant Acquisition Costs: Attracting tenants involves marketing expenses such as advertising costs, website development, signage, and leasing agent commissions.
7. Tenant Amenities and Upkeep: Amenities like fitness centers, swimming pools, common areas, or security features can enhance your apartment complex's appeal but also add to maintenance and upkeep costs.
If you're a first-time landlord, consider these tips:
1. Educate Yourself: Learn about landlord-tenant laws, property management best practices, financial management principles, and real estate market trends.
2. Build a Strong Support Network: Connect with experienced professionals like real estate agents, property managers, accountants, and legal advisors for guidance and support.
3. Screen Tenants Carefully: Perform comprehensive background checks on potential tenants to ensure they have a reliable rental history and can afford the rent. Have clear lease agreements outlining tenant responsibilities and expectations.
When choosing builders, contractors, and inspectors, remember:
1. Research Reputation: Choose those with a good reputation in the industry. Check online reviews and ask for references from past clients or colleagues.
2. Verify Credentials: Make sure builders and contractors are licensed and bonded if required by law. Inspectors should be certified by relevant professional organizations.
3. Get Multiple Bids: Get bids from multiple builders or contractors to compare prices and services. Don't choose based on cost alone; prioritize quality workmanship and reliability.
By considering these expenses and tips, you can lay a solid foundation for your new apartment complex business venture.
The top 3 authoritative sources used are:
1. National Apartment Association (NAA): Provides resources for landlords on property management best practices.
2. Building Owners & Managers Association International (BOMA): Offers insights into building operations and maintenance standards for commercial properties.
3. American Society of Home Inspectors (ASHI): Sets industry standards for home inspections ensuring professionalism among inspectors.
God Bless You,
James.