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Daniel, I see several red flags in your question. You have an apparently inexperienced investor asking you, an apparently also inexperienced guy to HEAD up a group of “like minded” (whatever that means) people to pool resources and buy apartment buildings. There’s zero discussion of whether the target apartment buildings are to be “value-add” (aka unstabilized) projects where there may be a LOT of “deferred” maintenance, an enormous amount of rehab needed, and the likelihood of a whopping vacancy problem to be overcome. The alternative would be apartment buildings in the “stabilized” category where there is little to no vacancy problem, there is little to no deferred maintenance or rehab to be paid for, but far less opportunity to add value to the property.There’s also no discussion about how to select your key operators for each project, who have the apartment management experience, and possibly the rehab experience, to keep a tight rein on such projects so your “like minded” investors don’t lose their collective shirts.
BTW, the medical professions are notorious for being totally unaware of how to select such projects, and unaware how to select skilled project operators, and unaware of how to financially differentiate between a bum deal and a sufficiently profitable deal, or how to protect themselves when such a project “goes sour.”
What I’ve described above requires a special set of COMMERCIAL real estate skills, where CashFlowDepot is oriented mostly to residential deals.
If you’re really serious about acquiring those commercial skills, as a newbie it’s going to take you some time to find the competent people who intermittently teach those subjects. They tend not to offer their skills like breakfast food boxes you can find on a grocery store shelf year around. It will take you some internet searching on a continued basis, and the ability to check reviews and do background and reputation checks on such “gurus”. Some of them may be much more pricey than you’re prepared for.
As is, your question suggests a serious case of “the blind looking for more blind people to lead them”. That’s not intended as an insult. Everybody starts from somewhere, and when any subject to be learned is totally new, the learner starts from zero. That’s just life. I’m just trying to give you some hints of the kind of efforts it will take you to acquire the skills-set for the mountain-size projects (with serious risks) you are considering taking on.
Good luck,
–Dee
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Daniel, one more thought. Since you did ask about books, if you run a search on Amazon.com in the books category using the phrase APARTMENT INVESTING, you’ll pull up a very long list of titles, several with good appearing reviews (some of which might even be genuine). A minority of them are new 2017 titles. Here’s a cheap hint: anything older than 6 months past the release date is fair game for a free interlibrary loan. Anything newer than that, you can either recommend your local library acquire a copy (some libraries are more accommodating about that, depending on their budgets), or wait until each newer book has past that 6 months point, or spring for the cash on Amazon. At least that plan will familiarize you with the vocabulary in commercial apartment investing, plus a few different authors’ approaches — while you continue your searching online for such expertise.–Dee
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Daniel, you might also consider that poorly informed investors are a favorite target of those seeking to bail out of commercial projects where the market is about to crash. The very unkind Wall Street phrase for such targets is “The Greater Fool Theory”. If by any chance an understanding of boom and bust business cycles was not part of your public schooling (as it is not for most such grads — by design), the central bankers at the Federal Reserve start that cycle by lowering the interest rate and the lending standards for almost everything. That gives entrepreneurs grossly misleading signals in the marketplace as to the price and long term profitability of “everything.” So they invest in all kinds of projects, including commercial ones, like crazy — for “about” 10 years. During that time, those in the FIRE economy (Finance, Insurance, & Real Estate) make money hand over fist. Then the Fed tightens up, with higher interest rates and tighter lending standards. This makes all kinds of projects that were previously seemingly profitable suddenly turn “underwater”, and everything slows down. At that point, there is a mad search for “Greater Fools” to bail out those very much at risk. Some people get sucked in; some don’t. Newbies are the most vulnerable, for lack of knowledge and experience.See this recent article on the commercial market slowdown that’s already begun:
When that business cycle turns into a crash, commercial banks undergo a weird new pressure from their regulators. The federal regulators insist those banks strengthen their cash reserves, and the easiest way to do that is to foreclose on commercial borrowers (even those who have never missed a payment), auction off the newly foreclosed property, and make up their apparent loss via some backdoor federal insurance you never knew about. This practice is so predictable that Wall Street will fund new investment groups to suck up such foreclosed properties on the cheap. I saw this happen again and again after the 2008 crash. A friend of mine was a longtime commercial property developer who had never missed a payment, and yet had to spend $100,000 in legal fees to successfully defend against FOUR fraudulent foreclosure actions filed against him by the commercial lender in Dallas he had thought was his friend.
The point of this economic, lending, and “legal” history you didn’t ask for is that there is a repeating and very treacherous game being played in the commercial lending world. It is designed to FLATTEN the unwary with little experience and no awareness of the minefields being laid. If you are working strictly with your own money and that of other private investors, that avoids the commercial lenders’ traps, but it doesn’t protect you against a market crash that could many years to recover from.
FYI. Choose your projects and their timing wisely.
–Dee
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