Buying an Apartment Building

To help you get an idea on the amount of money needed to buy small apartments take a look the break down below.  



When you want to buy get from a real estate agent/Broker


  1. If working with a Broker, get the Operating Memorandum (aka. OM) This tells you quite a bit about the property, it is a brochure on the property.   But be aware this is a marketing brochure that’s designed to promote the property and to support the asking price. It’s equally important to look for what the brochure doesn’t cover. What’s missing? For example, if the marketing copy covers the wonderful location and neighborhood but doesn’t mention anything about property improvements, then chances are the property needs work.  If you are working directly with the seller of the property, without a broker to act as an intermediary, be aware that diplomacy will be the key to your success. It’s important to approach negotiations with a win-win attitude.

The OM will include:

  • Property Address (Use to Research Crime, Flood Zones…)
  • Asking Price (not always listed)
  • Utilities – (who pays what?)
  • Year Built, Year Renovated
  • Type of Construction & Roofs
  • Number of units

If working with or without a Broker, also get:

2. Rent Roll.  Sometimes, they’re in PDF form. You’ll want to convert into Excel.

  • Actual average rents / unit type
  • Loss to Lease
  • How long have tenants been at property
  • What are the “proven” rents that are on record?
  • And more

3. Annual Property Operating Data – (aka. T12, Trailing 12 months’ Income & Expenses)

Trailing  t-12 – tells a lot in a story of the property

Pay attention:

  • Trends – are there unexpected expenses out of norm?
  • Missing expenses
  • Anything in particular looking high / out of place

As you analyze the data look at…


  • What are you near
  • What’s happening around the area (new employers, new metro rails, etc)
  • What are the demographics in the immediate vicinity
  • What is the current tenant profile of this property


  • Google Maps & Street View, Google Earth
  • Crime Mapping – check several sources
  • Better Business Bureau
  • Zillow, RedFin, Trulia
  • Local Tax Assessor’s Office
  • Broker – Brokerage reports
  • Property Management Companies
  • News – use alerts, local papers, follow major employers’ news
  • CoStar, AxioMetrics
  • Local REIA clubs

Putting it together: Income

Putting it together: Expenses


  1. Not Doing Sufficient Due Diligence

  • Accepting Offering Memorandum Financials as FACT
  • Property Tax – not properly accounting for change on Sale
  • Inadequate Rent Comp Analysis

      2.  Relying on Appreciation of Market

  • “Value Add” is the name of our game. There must be “forced appreciation” to move the needle.

      3.  Taking on too much risk with your debt structure