I Bought Another Apartment Complex (Step-By-Step Process)

what's going on guys this is chandler smith and i am so pumped about today's video because i just closed another eight unit apartment complex and in this video i'm gonna walk you through step by step the entire process i'm gonna show you how i found the deal how i worked through the negotiations with my bank and with the seller and how i was finally able to put the deal together and close on it and there were lots of ups and downs lots of tricky parts and i'm going to share it all with you so that you can go out and find a deal just like this for yourself so with all of that being said let's jump into it if you're new to the channel i've been investing in real estate for the last nine years i currently own 162 units of rental real estate and a good chunk of those units is made up of apartment complexes and that's why i'm so excited about today's video because i'm going to show you this last apartment complex that i just purchased and how every step of the process came together to get to closing day and i'm really hoping that this video helps you do the exact same thing all that i ask you to do before we jump into this is remember to smash the like button subscribe to the channel and hit the little bell and now let's get started now a lot of people get super overwhelmed by the process of buying an apartment complex one because it sounds intimidating but two they're just a lot of steps and so in this video i'm going to walk you through each individual step and i really want you to understand it's not as complicated as you think so first step you've got to get pre-approved now with me i've bought multiple properties so i've got multiple relationships with multiple banks and there's one in specific that i love i've used them for almost every single deal that i've ever put together and so with my guy he already knows me he knows my financial situation he knows my debt-to-income ratio he knows everything that he needs to know so that i know how much i'm pre-approved for so that when i find a deal i just call them up and i say hey here's the address to the deal here's how much i'm putting in an offer can you please get me a pre-approval letter with that address and that amount so that i can send it over to them and because of our relationship i usually have that in about 15 minutes and i'm good to roll now you can also get a very generic copy of a pre-approval letter so you can say hey i'm pre-approved for up to two million dollars you've got a purchase price of 800 000. here's my pre-approval letter and you can get that beforehand so that the second the deal is ready you can send that the only reason i don't do that is i like it to be deal specific so they know hey he got this pre-approval letter literally 10 minutes ago he sent it to us it's all ready to go it's for our specific address and it just looks a lot more legit either way you need to make sure that you go and get a good relationship with your bank you get pre-approved and you're ready to rock and roll so that when a deal does become available you can jump all over it because here's the deal a lot of people look and look and look and they make all the right connections and they find the perfect deal but they're not pre-approved and so they have to start that process it's hard to get a pre-approval letter and they're just kind of up the creek without a paddle so don't do that go in and get pre-approved step number two is finding the deal now there are so many different ways to find deals but this specific deal the reason that i found it is because all of my connections i've reached out to multiple realtors multiple wholesalers multiple other investors i've even created a video that says hey this is my exact criteria this is what i'm looking for i'm ready to buy a deal if you can find one with this criteria and so please send me your deals i also consistently follow up with all these people and that's why this specific deal came to me because all these realtors wholesalers every all the investors they all know that i want to find an off-market deal because then i'm just competing with myself and with the seller i'm not competing against a ton of other people to where it gets bid up but i can say hey i am good for it i can close on this quickly this is what it's worth and this is why and here's my offer let's put this deal together and that's exactly what happened on this deal and for this specific deal i actually had a wholesaler that i've never bought a property from but he knew my criteria we'd connected another time and i said hey i'm your guy you find a deal i'll buy it i'll use you i won't get any other realtors involved but you've got to send me a deal where the numbers work and that's exactly what he did and so once he sent me the deal i immediately drove by the property i looked at the data on it what was the square footage how many bedrooms how many bathrooms what was the general area which it was an area that i've already bought multiple apartments close by so i knew exactly what rents could be so after i looked at all of the data i put in an offer with me thinking that this was going to be a best case scenario on everything they told me and so i'm saying hey this is if the units are super clean if the square footage the bedrooms the bathrooms if everything you've given me is perfect and there are no issues with this property this is what i would pay and so a lot of times people are low balling on this i know it's a very competitive market and so i'm going to put in and say this is what i will pay now i looked at the taxes and the insurance i looked at the area the square footage put in an offer i was comfortable with but i didn't super low ball them like i put an offer that was below what they were asking by quite a bit but it was an offer i knew hey i can make this work because with me just dealing with them i was planning on holding hard to this offer now they countered back i countered back i held to my numbers and they accepted the numbers and we got the property under contract now this is the fun part and this is where a lot of times people do things differently than me because they'll want to go and walk through the property they'll want to go and maybe even do an inspection before they put an offer in not me i want to get it under contract so i have eliminated all competition because the way that it works is if you get it under contract you give yourself a 15 day due diligence period and so that you can bail at any time during your due diligence if it isn't up to the quality that you thought it was based on getting it under contract after looking at what you looked at you now have an opportunity to one bail if you want to but two you've got a chance to renegotiate and really pick things over now one thing that i failed to mention with this property is before we got to this point i put in my best case scenario offer and they didn't accept it and i was unwilling to bend or budge because i was like hey even if this property is in great shape i can't make these numbers work now they said hey we're not going to take your offer and i said all right like i'm sorry i can't make the numbers work even if this is an incredible shape it's not going to happen and so i thought i was going to lose the deal and you've got to be willing to walk away from the deal but i waited for five six days the wholesaler was keeping it off market they hadn't found any other deals they were in a unique situation and i reached back out and i said hey what's the situation are they not is it not going through i'm telling you the price you've got i don't think you're going to find someone that's going to jump on it and this is different than if you're dealing with a realtor because you know maybe it would have gotten a little bit more competitive and someone else would have got it under contract but odds are you know it could have fallen through or there could have been a myriad of other situations i just knew i gave my best offer and i couldn't go higher than that because there's no way even if it was in prime condition that i was gonna be able to make it work and so by consistently following up they eventually said you know what all right we'll take his offer so now i got them to come down to my offer and i got it under contract now this is a unique situation because a lot of times i'll offer high and outbid people and get it if it was on the mls if the numbers worked this situation i'd already given my best offer and i was willing to walk and we were able to put it together so was there a little bit of luck involved yes but also i think i really knew where the numbers were now once we got inside the property we found lots of other issues we found that they also didn't know but they had put on their sheet that it had one more bathroom than it actually did so now we could pick them apart in the due diligence and that's exactly what you want to do because once you get under contract you've got your due diligence period where you can go and you do an inspection you look at what their rents have been you look at their taxes you look at their profit and loss what have they done the last couple years where are their rents where do you think their rents can be you're going to go through all of this in the due diligence period and then you're going to start picking it apart so for us we'd already gotten them to come down but now i went back and said look this had one less bathroom than you said in every one of these units it also had all this damage it had these issues with the concrete it had these issues in this unit where flooring is going to need to be replaced and i put together this long list and picked them apart and picked them apart and picked them apart so we originally had it under contract for 900 once everything was said and done we got this property down to where we had it under contract for 850 dollars and there was a lot of back and forth there was time where i thought the deal was going to fall through but here's the deal from when you get under contract to then when you're going to close you have to make sure that your numbers are perfect and if it doesn't meet your criteria you need to be willing to walk and that's another thing that i probably should have covered earlier but it is so crucial that you know exactly what your criteria is and that you are unwilling to bend on that criteria because if you don't know what your criteria is one you're not going to know what you're looking for but two once you find it and you're so close and the numbers just don't work with your criteria if you don't know what your criteria is you're probably going to buy a crappy deal or if you're willing to bend on your criteria you're probably still going to buy a crappy deal so know your criteria and hold strong to it now for me my criteria is knowing that it's in a good area preferably a b property or above sometimes i'll go into c-plus knowing the area knowing i'm going to get good appreciation and knowing that at a minimum i'm going to have a cash flow of 12 or more if i can't get that cash flow i'm not going to buy the property and so that's where we really had to battle on this property is because once i got in i knew i wasn't going to get the return that i wanted unless i got them down to an 850 000 purchase price now another thing that was really cool about this deal is their rents were extremely low so this is another place we could really pick them apart in due diligence and say look with your current rents at the purchase price you want we won't even break even now you know and i know that we can increase rents but i'm sorry you've got to budge on the purchase price so this makes sense and here are all of the reasons why and so these things and this is where it gets tricky you can bring these up before you get it under contract and you can bring it up again after you get it under contract and you've got to get them down as low as you can before and after because if you go and throw out a super high ball offer and then you're asking for another hundred thousand dollars off odds are you're not going to get that now for us we got another 50 off which was awesome and that got us where we needed to be but that even that really stretched them and was a painful process so it's kind of you know pick your own strategy so it can be kind of complicated because you've got to get it under contract at a reasonable price but then you've got to make sure before you get through your due diligence period your numbers have to work you have to know what they are so they can work and you've got to hold to that criteria another little hack that i use is a lot of times i don't like walking the property before i get it under contract because that gives me more leverage one to get it under contract at a higher price and two to go and say hey we did our walk through we did our inspection we found all these issues but also this wasn't what i thought i mean when you listed it i thought this property was going to be well maintained i saw that it was 900 square feet it was two bedrooms two bathrooms but now that i get in it not only do you not have one of the bathrooms you had on your sheet but a lot of these units are kind of torn up this one needs carpet that's replaced this one needs flooring this one needs a paint job this one the tenants destroyed everything so we're gonna have to put this much into renovations these are all things that we could pick apart however with this property as i'm gonna show you in these pictures when we walk through it's in pretty clean shape the thing is is you've got to know hey do i want to leave this how it is or what changes do i need to make to get the rents to where they need to be to make this deal work because if you go in and it's like hey yeah they're in decent shape but i need these in brand new shape to get the 1100 in rents not the shape they're in that's probably only going to bring 850 900 and so this again is why it's advantageous to not walk the property until you've already got it under contract because then you have more leverage to pick them apart in the due diligence now here are a couple pictures of multiple of the units however we're going to do a walkthrough on this specific unit now if you look this unit is pretty bare with furniture you can tell the tenant has taken extremely good care of it you've got some of this closet space up in the front which is nice and all of the carpet in this unit i'm going to leave with this specific tenant their rents are extremely low and so when i go in i can say hey for this area i'm not going to go in and put granite countertops and all this other stuff this particular unit probably doesn't need a whole lot of fixes now if the tenant moves out will i need to maybe clean the walls or potentially repaint maybe but overall it's great shape i'm not going to change the flooring i'm not going to change the cabinets i'm not going to make any major changes i'm going to look and i'm gonna say all right this specific unit has a washer and dryer it has a nice kitchen a nice living room if this tenant stays i can charge them this much if they leave this is how much it's worth and this unit i don't need to do any upgrades on because for that area it's in great shape now what investors will do a lot of times where they'll mess up is they'll go in and say wow i need new carpet i need new countertops i need to change all of the cabinets i need to update everything so it's brand new when they're in an area where people that are looking for brand new aren't going to want to live in this area so now you've poured 15 20 25 000 into a unit and it's not going to add anything to your rents it's going to make somebody super pumped because they're going to be like holy crap i uh you know i had a budget of 850 and i can rent this for 8.50 it probably would have rented somewhere else for 12 or 1300 but no one's going to pay 12 or 1300 here so they just get hooked up with all of these new finishes that you don't need to maximize rents now for some of the other units i walked in and i'm like ah this carpet's trash it's going to need to be replaced these walls they're going to need to be repainted or these countertops they have to be fixed because they're completely trashed but again i'm not going to go over the top and do granite countertops in a property like this because again you're in a b minus c plus area in a b minus c plus property with b minus c plus i'm parking these are all things that tenants take into consideration and so you can over renovate so you need to know your area you need to know what you can do to maximize rents for the lowest expense possible because you don't want to overspend on renovating so this gives you an idea for this one i can walk into this property and say all right it's been rented for 650 historically i know right now this unit can be rented for 900. now does that stink for the person in it 100 percent but they get to finish their lease i can't raise rents on anyone until their lease is up so if they still have six months left i'm going to keep their rents where they're at until six months then i'm going to give them 30 days notice before they vacate the property or before their lease is over and say hey just so you know current rents for these units is 900 now if you choose to stay you've been an awesome tenant you've already been here a year this tenant especially is taking great shape of the property and so if you stay i'll give it to you for 800. i'm okay taking a hundred dollar loss and not getting my desired returns this next year to keep a good tenant in there to not have any turnover so i'll give you a hundred dollar discount from what i'm going to charge but yes your rent is going to go up a couple hundred dollars compared to what it's been the reason i wanted to walk you guys through this is this is how my brain's working when i go into these units now in even this unit during our inspection and everyone should always get an inspection we still found knits and picks of probably a couple thousand dollars even in this unit of things where it's like hey the faucet didn't work oh in one of the rooms the flooring was a little trash so at some point we're going to have to replace that oh you know what this hookup for the sink was leaking or whatever it would be we're going to find all that we can so that we can go back and say these are the issues so that we can hopefully make the numbers work now will i need to replace this flooring super soon maybe not but that's something in due diligence i can work on because i know i'm needing to change it in the somewhat near future and these are all things that you can use and bring back with pictures to say hey i was expecting perfect units these aren't perfect i need you to bend on price so that's one advantage but the other advantage is i want you to look at these properties and say what do i need to actually spend money on to get my rents where i need them to be and what do i not need to spend money on the one other point i want to make extremely clear are these finishes brand new no but this is a very nice very livable apartment complex if you are leaving things like water damage leaks um smells stuff like that for new tenants you're shifting into a slum lord so you've got to figure out what your criteria is because yes you don't want to overspend but you also don't want to underspend because that's going to give you a certain type of tenant so know your area know how to maximize rents for your area and for that property know what you shouldn't overspend on and know the things that you shouldn't underspend on and for me that's what i'm looking at in these units and taking all that into consideration so i know how much i need back in due diligence to make this deal either a buy or a pass now if this is getting overwhelming for you don't get overwhelmed this is why i created a real estate investing course that's like 15 hours long because i can't cover all of this in one video but i'm trying to give you as much as i can in a 20 minute video if you want to pick up that course you can get a discount link is down in description now once you've gone through all of this you've done a full inspection you've done your due diligence on the rents taxes insurance on their profit and loss you've found a way to say all right this is what the property is worth so that my numbers can work that's when you're going to put it all together and you've got one shot and usually i try to find way more than what i actually need because if you need another 50 000 off the property odds are you're probably gonna have to show them that you need another eighty thousand because they're not going to give you everything it's just how humans are they're gonna say oh he wants 80. i'll give him like 45.50 and that's exactly what i did on this property and i could find the things but a lot of those things are deferred a couple big hitters you can use with older properties you can always find that the seals on windows are broken this doesn't affect the heat but it is going to make the window not great to look through that's something you can change over time but you're going to get a bid for every one of the windows same with your pavement same with your roof same with all these things where you can get a bid and say hey i think this needs to be replaced even though you know you can replace it over time and stay within your allotted expenses so you can get your desired return and this is a life hack i love using to go in and say hey i need 90 000 back to make this deal happen they're going to come back and say hey here's 50 000 that's the best i can do or i'm gonna have to walk from the deal and you say great i only need 45 000 to make this deal work we both ended where we needed to even though both of us kind of flexed our own directions and that's why in due diligence you want to make sure you come back with more than you need but it has to be realistic it has to be things that you can tie each of those expenses to a specific thing and then you hope that they come back if they don't come back with what you need you've got to walk and hopefully you did your contract properly so you gave yourself that 15 days due diligence and you got everything in so you can walk if you need to on this particular deal after a lot of back and forth we were able to put the deal together we were able to get 50 000 back even though we'd asked for more and now we're under contract we're through due diligence now there are only a couple more people i need to negotiate with at this point i go back with the final contract to my loan officer who's already worked on numbers he's already got things in motion but i say hey if i'm going to be able to put this deal together i've got to get interest rates and terms down to this and he goes chandler are we really doing this again and i'm like yes you're the best i love you but i'm gonna have to shop elsewhere if we can't get it to meet this criteria and i'm always pushing my lender even though i've got a great relationship with them and because i'm pushing them they usually work with me couple life hacks i've used to push my lender i go to competition for one i go and say hey i've got these deposits and another bank i'd be willing to move over another couple hundred thousand dollars for you maybe you don't have a couple hundred thousand dollars but this tactic works even with smaller amounts if you're working with a credit union if you try to do this with wells fargo or chase they're gonna give you the middle finger and say dude we just do the rates and terms we do but if you build a relationship with a credit union you've bought multiple properties with them they're going to take that into consideration and there are these little things you can do to kind of push them to push down their rates and for me i found this to be a huge advantage working on rates and terms after i've worked with them and i get that solidified then i'm going to go to the title company if they're the title company i've worked with a lot they already know chandler gets chandler rate and chandler rates usually a couple thousand dollars less especially on these commercial properties than it would be otherwise if the seller has a specific title company they use then i'm gonna go into them and i'm gonna say guys here's the deal we're gonna have to go and use the title company i usually use unless you can match their prices and usually they do it for 500 bucks right now you're bidding me at like 2 000 and so i need you to do that otherwise i'm gonna have to talk to the seller because i don't want to close here however if we can build a relationship you're someone i'll continue to use in the future now i have three or four title companies i've used in my area one in particular i love the most i always try to push my work that direction but i can use all of them to get the deal that i need so anytime i'm closing not only am i getting a deal from my lender not only am i getting a deal from the seller but i'm also going to get a deal from the title company the only other place you can push if numbers get tight is you can talk to the realtor or the wholesaler and say guys i want to put this together you know i'm going to easy close i'm going to push this through i'm going to close on time i'm going to make it happen but i need you to give me a little more wiggle room because my numbers are tight in all of these areas you can push them to whittle down to make sure that your numbers are where you need them to be now you don't want to bank on any one of these you want to just bank on the seller and the rest of these can be gravy for you to make sure that your numbers are extraordinary by the time you get to close now when it's time to close they're going to send you a closing statement before you actually get into the closing table you want to check it over you want to make sure all the rates the terms the setup are perfect and once it is perfect then you want to make sure that all of your prorations are right you should get deposits prorated you should get rents prorated you should get taxes and insurance prorated and once it all looks good then you're going to go in and you're going to close and you're going to move over your down payment and you're going to be pumped because you just closed on another apartment complex like i did now i hope this video really helped you here is a picture of this glorious property that i just closed on it does have more than a 12 cash on cash return this video has gone far too long to run you through the numbers but if you want to know how to run the numbers you can click this link to go watch a video on how i run the numbers and you can download my free app to have it right on your phone so it's extremely easy to plug in the numbers on any deal and see if the numbers work now if you guys enjoyed this video remember to smash like button subscribe to the channel and hit the little bell and i'll tell you i'm just about to release my brand new revamped course and after all the time we've put into this i think we're actually going to bump the price up to a thousand dollars or at least 900 for the course right now you can get it for only 300 bucks and with the discount down below 250 bucks so if i was you i would jump all over it but that's just me hopefully the majority of you that watch this channel already have it because it breaks down everything but i'm telling you right now that course is about to get a hell of a lot better and i don't swear a lot on the channel but that's the truth so again if you guys enjoyed the video smash the like button and we'll look forward to seeing you in the future videos thanks guys [Music]

Channel: Chandler David Smith

Views: 38,624

Keywords: graham stephan, meet kevin, real estate investing, biggerpockets, grant cardone, real estate for beginners, ryan pineda, How Do You Buy Apartment Complex, How Can I Buy Apartment Complex, How To Buy An Apartment Complex In 7 Steps, How To Buy Into Apartment Complex, How Buy Apartment Complex, How To Buy Apartment Complex With No Money, Where To Buy Apartment Complex, Best Place To Buy Apartment Complex, Where To Buy Apartment, Why Buy Apartment Complex

Id: jx2eyaJ2A7Y

Length: 25min 13sec (1513 seconds)

Published: Wed Feb 02 2022