HOW TO MAKE YOUR JOB OPTIONAL”

Masterclass on January 22!

 What if you could enjoy a doctor’s lifestyle without depending on your clinical paychecks?

HOW TO MAKE YOUR JOB OPTIONAL”

Masterclass on January 22!

 What if you could enjoy a doctor’s lifestyle without depending on your clinical paychecks?

Accelerating Wealth Is Now open!

Don’t miss out! Grab this golden opportunity to enroll in Accelerating Wealth.  Enrollment ends December 8th.

Days
Hours
Minutes
Seconds

Zero to Freedom is Now Open!

Don’t miss out! Grab this golden opportunity to enroll in Zero to Freedom. Enrollment ends January 30th. 

Days
Hours
Minutes
Seconds

Zero to Freedom is Now Open!

Don’t miss out! Grab this golden opportunity to join the Spring 2024 Zero to Freedom course!

Buying a 160-unit Multifamily Property: Part 1 The Deal

160-Unit Multifamily Property

Summary: We bought a large Multifamily property! A 160-unit one, to be exact. This is part 1 of a three-part series on our 160-unit purchase that we completed at the end of 2021. We’ll highlight the key lessons. This deal had a little bit of everything. The property was off-market. It was also a condominium, so each of the units was individually deeded. We ended up combining Tenants In Common (TIC) and syndication on this deal.

 

[Disclaimer: We are not accountants, lawyers, or financial advisors, so please consult your own team of professionals about the topics covered in this article.

 

This is a three-part series sharing our experience acquiring a 160-unit apartment complex in North Las Vegas. 

We closed on the property at the end of 2021. We shared a little bit about this deal in our 2021 year-in-review but we only scratched the surface, so we wanted to do a deeper dive for our readers.

In part one of this three-part series, I will be going to go into detail on the deal. I will cover how it came to us, and why we liked the deal. In part two, we’ll discuss some of the challenges of the deal and the key lessons. In part three, I’ll go into the closing process and how it all came together in the end before the year-end deadline. 

If your dream is to scale up your rental portfolio and go bigger at some point in the future and invest in a multifamily property, there are going to be a lot of pearls in this article so be sure to check out all three parts!

Let’s dive into Part 1!

 

The Property

This property is located in North Las Vegas. North Las Vegas is located just North of the Las Vegas Strip. Unlike the strip, this property is located in a residential area surrounded by many businesses. 

I had invested during the last major downturn (2007-2009) so I knew that Las Vegas had gotten hit pretty hard. As a result, this was one of my main areas of due diligence. I wanted to understand how a property like this would perform during a downturn. Yet I was still wondering, should I be investing in a multifamily property in Las Vegas? 

I found that the City had diversified since the last downturn. Las Vegas had added two professional sports teams and a host of new businesses. I saw the possibility of the local area being insulated during a downturn. There was a large business park nearby, including an Amazon warehouse. There was also a College just down the street and a large military base close by. The city was thriving and it felt like a great time to be investing in Las Vegas. 

How This  Property Came to Us

This multifamily property came to us off-market from a wholesaler.  It’s a C-class property that was fully occupied but with severely under-market rents. One unique aspect of this property is that each unit was individually deeded, and under a homeowner’s association. The owner owned 158 of the 160 units. Our goal from the beginning was to try to acquire the last two units if possible. Otherwise, we would have to run an HOA and this would add a layer of complexity to the management of the property. 

Condition of the Property

In terms of the condition of the property, it needed a considerable amount of upgrades both to the interior and exterior. It had previously been operated without professional management so there was no shortage of opportunities for improvements to be made. This could be intimidating for some, but for us, we saw this as an opportunity to add significant value to this property. That’s assuming we could lock up the property at a good price.

 

The Negotiations

This is a long-drawn-out story with a happy conclusion. Developing this relationship was one of my favorite parts of investing in this multifamily property. I’m going to save the story for another day, but I’ll cover the highlights. The property was owned by a mom-and-pop operator. The owner had slowly accumulated 158 of the 160 units over many years. 

Our team was also able to develop a close relationship with the owner. Although he had multiple higher offers, he chose us because of our relationship. He wanted to work with people who would follow through with their promises. 

The negotiations took months, but in the end, we were able to acquire the property for over $2 million dollars below the appraised value. In addition to the discount, we were also able to get the seller to agree to a number of repairs. 

This is a great reminder of the importance of relationships. I think many people view negotiations as adversarial. For the seller, it wasn’t about getting the highest price. Instead, it was about wanting to deal with good people and having a good experience. This is something that really stood out to me in our journey of investing in this 160-unit multifamily property.

My sense is that we did exactly that for the seller. In fact, our team continued to have a close relationship with the seller even after closing. 

 

Deal Structure

Deals of this magnitude can be structured in many different ways. 

Given the size of this deal and the money required to acquire and renovate this multifamily property, usually, it should be syndicated. Syndications occur when you pool together money from passive investors, called limited partners. The deal is made by a general partner (GP). General partners sometimes put their own money into a deal to have “skin in the game” but not always. Most of the time you want a GP to put their own money at risk.

Another way to structure this deal is to partner together with a group of investors. Each puts in a portion of the money for the down payment. You can structure these as partnerships, but what we chose to do with this deal is to buy it as a tenants-in-common (TIC). 

I discussed TICs before but in brief, it’s an ownership structure that is very favorable from a tax perspective. With a TIC, you can use a 1031 exchange both for the purchase and at the time of sale. You can’t 1031 your share in or out with a regular partnership. 

We ended up combining a TIC and syndication on this deal. The GPs put their money in as TIC and we raised the rest from passive investors. This (TIC) structure ended up being one of the big challenges for us to overcome.

 

Key Takeaways

So there you have it. In part 1 of this series, we introduced you to the property. We also shared the key lessons we learned. Which will hopefully benefit you on your journey, when you decide to buy a large multifamily property! In part 2 of this series, we will discuss the structure and other challenges we had to overcome while investing in this 160-unit multifamily property in Las Vegas. 

Do you want to learn how to creatively fund your real estate portfolio and achieve financial freedom? Join the conversation! Follow our Semi-Retired MD  Facebook page and join our Doctors or Professionals  group!

Semi-Retired M.D. and its owners, presenters, and employees are not in the business of providing personal, financial, tax, legal or investment advice and specifically disclaims any liability, loss or risk, which is incurred as a consequence, either directly or indirectly, by the use of any of the information contained in this blog. Semi-Retired M.D., its website, this blog and any online tools, if any, do NOT provide ANY legal, accounting, securities, investment, tax or other professional services advice and are not intended to be a substitute for meeting with professional advisors. If legal advice or other expert assistance is required, the services of competent, licensed and certified professionals should be sought. In addition, Semi-Retired M.D. does not endorse ANY specific investments, investment strategies, advisors, or financial service firms.

Share

Hi, we’re Kenji and Leti

we provide coaching and mentorship for doctors and high-income earners

Several years ago, we were newlyweds working as full-time hospitalists. On paper, it looked like we had everything: the prestigious careers, the happy marriage, the luxurious rental home, the cars, etc.

But in reality? Despite having worked for several years, we had very little savings. Despite our high income, we had very little freedom in terms of time or money.

One thing was clear: we had to do something.

ready to see if
real estate is right
for you? Take The
free Quiz!

If you’re just getting started in your investing career, we have a free resource ready for you. Answer a few quick questions, and you’ll receive a FREE download to help get you results.

Search the Blog

view more posts

Explore

GET STARTED

search