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  • Writer's pictureJered Sturm

How I Bought a Multi-Million Dollar Apartment Complex at the Age of 26

A few years back, my brother and I walked into a ugly house built in the 1800s that had an obsolete floor plan and over a century of deferred maintenance. That junky old house was the first piece of true investment real estate we ever bought. That property kicked off the journey that four and a half years later led us to the purchase of a multimillion-dollar apartment complex.

In this article, I walk through exactly what it took and the steps along the way.

The Road to This Point Was Far From Easy

By leveraging our skills in particular trades, we were able to rehab, rent, and refinance a bunch of these 1-5 unit buildings over a 3 year period. Pair that with 17 fix and flip properties, and we were fortunate to have the ability to pursue our larger goal of buying apartment complexes while also maintaining our existing portfolio. To get to this point was hard! There are far easier ways to go about growing a successful real estate investment business. At the time, unfortunately for us, we simply were not aware of those other ways, so we just did it whatever way we could figure out.

What we lacked in sophistication, we made up for in work ethic. We were not and never will be the smartest at this stuff. Actually, in the beginning, we didn’t know much at all. The reason I bring this up is I don’t want to make it seem like this is easy, but at the same time, I want people to realize anyone can do it—if you’re willing to sacrifice and work hard to get there.

As we continued to put out heart and soul into the business, it grew to the point where we needed help. At this time, we brought on a over-qualified property manager/bookkeeper with the agreement we would bring him on as a partner later to run the asset management after a proven year of success. I’ll tell you more about him later in the article.

Why We Did Not Use Private Investors’ Money

Before I dive in, I feel it is important to explain how we paid for this apartment complex and why we did so the way we did. Real estate investment education is flooded with no money down and how to use other people’s money to boost returns and enter the game. Because of this, some may wonder why we went such a standard route by using conventional financing to purchase this apartment building. Although we used bank leverage, we still had to come up with almost a half a million dollars to complete the purchase. Being that this was the majority of my brother’s and my own saved money from the previous 4 years of hard work, many asked why we didn’t just bring on outside investors. Actually, by this point in our career, we had quite a few people notice our growth and offer to participate by being investors.

The reason we did it with our own money is because we have always believed before borrowing private money, one should prove the concept and your ability with your own money first. Not to say using private money is wrong; we actually run our whole business model around it now, but for us, it was important to first prove it with our own cash. At the time, we had proven to ourselves in the smaller unit buildings, but never in the large commercial niche. We did not doubt our abilities but were adamant about sticking to this for our own personal standards. Because of this, we rejected offers from outside investors and went in on the deal using only our cash to fund the needed cash outlay.

Determining What Type of Property We Were Looking For

So it was time to buy an apartment! We were pumped because from the beginning of our career, we realized to achieve our long-term goals, ultimately we needed to get into larger apartment complexes. That’s all great—but what did we want to buy? Answering that question was harder and more important than I anticipated.

Fortunately, we had the right partners to answer this question! With my brother’s degree in Economics with a focus in real estate, our third partner’s Masters in Accounting and his CPA, and my degree in Marketing, paired with our strong experience in real estate and construction, we came the conclusion that the following points were the general guidelines of what we were looking for in a multifamily asset.

Financial Metrics

  • Price range: $500k-3 million

  • Asset class: B/C

  • Cap rate: 6% or greater

  • Median household income: >$35,000; preferably $50,000 range

Target Market

  • Cincinnati metropolitan area

Property Type

  • Distressed properties welcomed

  • Value add strongly welcomed

  • Built 1980s or later

  • PVC drain lines

  • Separate gas/electric

  • Pitched roof preferred

  • Brick exterior preferred

Obviously, there were much more detailed analyses when it came to sub markets, but we found this short general list to be so important when it came time to begin building relationships with brokers. The multifamily industry is not easy to break into, especially in a hot market like we are in. A clear one-page document like this at least allowed us to clearly show brokers what we were looking for and separated us from just another phone call tire kicker.

Finding the Deal

We knew the multifamily industry was hot and competition was high. What we found is in the price range (up to $3 million), it seemed buyers were willing to pay outrageous prices. We heard from many brokers that buyers under $3 million were high income earners, buying mainly for tax benefits. This allowed them to be comfortable paying far more than we were willing to. Brokers knew this, sellers knew this, and we now knew it. It was disheartening for sure, but when times get tough, I go back to my roots. No mater what the obstacle, we will always have work ethic, so work harder is what we did.

I built a list of all the brokers who had any multifamily listed in our target areas. I made lists from the public record websites of all the owners who had bought or sold property zoned multifamily in the past 15 years in our target areas. And I called them all.

I called a minimum of five brokers and three owners a day, EVERY day. After about three months, I had circled back on my list a couple times and called a big time broker in the area to remind him of the purchasing criteria doc we had sent him and to let me know if he had anything.

That’s when he said, “Yeah, actually I have one that meets what you want perfectly that’s been under contract quite a while, but I just got word it’s about to officially fall out of contract here in the next few days.” I asked him to email me with any information he had on the property. And I would call him back by the end of the day to schedule a walk through if we were interested. The property hit most, if not all, of what we were looking for.

Purchasing the Property

After reviewing financials and walking the property, we were ready to move on it. We knew that like any real estate deal big or small, when everything lines up right, you have to be quick on the trigger or it will be gone to someone else who doesn’t pause.

We were one of three offers; the other two had done deals with the broker in the past and were known in the multifamily market. Despite this, we convinced the seller to accept our offer. We did this by being willing to pay more than the other bidders. I know you’re thinking, “OK, great, this guy’s purchasing strategy is to overpay?” Yes and no. I’ll explain.

What we realized when looking at several other properties and competing against the high income earners that buy mostly for the tax benefits was that they are not creative because they don’t have to be. They simply run the analysis in a spreadsheet, take the NOI, divide it by the cap rate, and say, “This is what it’s worth. I’ll pay 90%-100% of that.” Because of this type of buying, we realized we needed to see something that others were missing. This building had just what we needed.

The property was in great shape—built very well in 1989 by a well-known builder and maintained well. Occupancy was hovering above 95%. BUT we realized three opportunities the others may have missed, which made us comfortable to bid just enough higher to have the seller accept our offer.

In the end, we bought it at 93% of asking price and 89% of the appraised value.

The 3 Opportunities We Noticed

1. We realized we could sub-meter the water utility.

During our walk through, with our background in contracting, we realized the water lines were run individually to each unit for both hot and cold lines with their own hot water heaters in the units. But the property was still master-metered, with the landlord paying a $29,000 water bill each year.

During due diligence, we found that it would cost us only $200-$250 per unit to put wirelessly read sub-meters in each unit for water. This would allow us to have all water billed back to the residents, which is common practice in the area. With rents being slightly below market as they were when water was included, we were confident that adding water bill-back to residents would not drive residents out. And lastly, we found from other large investors in the area that total water consumption decreases 30% when tenants are responsible for the cost of water. This means you decreases your expenses X, but you only increase the residents cost of living 70% of X.

2. We found there was a high interest in self-storage.

There were eight total 10’ x 13’ common area laundry rooms through out the complex, only four of which were being used. The others were empty, locked, and the current owner never had the key.

During due diligence, we surveyed every resident and asked, “What would make your living experience better?” We had a large amount of residents request extra storage space, which was not available. We then followed up by asking them, “If a 30 sq. ft. storage unit was available in the building for $29 a month, would you rent it?” We had lots of residents agree. This meant the unused old laundry rooms could be remodeled into storage units for rent. Four rooms were doing nothing as they currently sat, so all we had to do was spend $500-800 dollars to have some basic storage units built in each of them. The other four would come later.

3. We decided to offer washer and dryer rentals to each unit.

Each unit was equipped with washer and dryer hookups in the units, but coin laundry was the only option available for residents.

After the year or so it will take to transition all residents onto sub-metered water, we will be left with another opportunity in year two to remove the coin laundry from the common areas, fill those rooms with storage, and begin renting individual washers and dryers to each unit.

This process will take roughly 24 months to complete. All the while, we will never raise rents one penny. With our rents only being 17% of of the median household income, we are comfortable even with these additional optional expenses, our residents will not be over-extending their means. Through this, the value of our property is projected to increase close to $425,000.

This is why I now say spreadsheet analysis is a commodity. It is basic math that everyone can do. There are free spreadsheets online to plug in the correct income and expenses in the correct slots, and out pops a value. The real value comes from creativity between those lines—seeing value that has been left unnoticed for years and exposing it.


Through our sacrifices, we were fortunate to have enough money to put a down payment on this property and secure the rest from a local portfolio lender, as I have mentioned at the beginning of the article.

But how do you get a bank to lend you all that money?

We have used the same 2-3 lenders for the entire time we have been in business, but have stuck to one primary lender. This lender is a small, two-branch portfolio lender that we work very well with.

We knew we wouldn’t be the strongest borrower on paper to be asking for the size of loan needed to buy the type of building we wanted. Because of this, in 2015 we decided to move our business accounts into our primary lender not only so that they could see the transactions in detail, but also so that we would be one of their large account holders. With income like cash-out refis from our other properties, we did not have taxable events, and therefore, they never show up on a tax return. However, if the bank sees money going into their accounts and sitting there, they become more and more comfortable.

Once we had the property under contract, we went to our lender to present the deal. They gave us conditional approval for a 75 LTV loan at 4.75% interest, 5/5 ARM, 20-year term. We were pumped! The bank was going to lend us the money! After the excitement calmed, we wised up and began to shop to deal around to our other lenders. After a few rejections and much back and forth with two banks, we end with our initial primary lender.

The loan structure was:

  • 80% LTV

  • 4.25% interest

  • 5/5 ARM

  • 25-year amortization

  • 20-year term

  • Minimum closing costs

  • No pre-payment penalty after 12 months

We pushed very hard to get one of the lenders to 80% LTV. They were very resistant based on the fact that this was our first larger apartment and that our personal financials didn’t look awesome based on the fact that we are self-employed and much of our income comes from non-taxable events like cash-out refis.

After hearing “no” several times on the request to go from 75% to 80% LTV, I offered to deposit the 5% difference (roughly $100k) into a CD at their bank for 6 months. This would allow the bank to benefit by being able to go lend out the CD money and earning more interest on it. Actually, due to the fractional reserve, the bank was allowed to lend out roughly 10 times my deposit. This was an offer they couldn’t resist. This would also give us our money back in 6 months to use elsewhere. Ultimately, we agreed to a 12-month CD. In the end, we were thrilled with the terms we got. There may be better out there, but for our specific situation, these were great terms.

Taking Ownership

After closing on the property, we held a cookout for our staff to introduce them to each other and to meet the residents and answer any questions about the welcome letter we had sent out explaining our procedures. Shocking even to us, we had every single resident pay that first month with no issues!

The business plan continues to chug along just as we predicted, and within in 24 months of purchase, we should be refinancing and pulling all of our cash back out of the investment.

Each Experience Opens New Doors

I hope this article inspires others to stick to their plans, make sacrifices, and chase big goals. At the age of 26, I was able reach my goals faster than I hoped and be a part of an awesome journey along the way.

Now that we understand the process and our team has executed on this transaction, we are actively pursuing larger opportunities. By reaching the point where we are comfortable bringing in equity investors, we are now actively looking for apartment complexes in both the Cincinnati and Atlanta markets up to a $10 million dollar purchase price. To pursue this goal, I even moved across the country to live in the Atlanta area to learn the market, build relationships, and expand our company. This is just another sacrifice I am willing to make to build a secure foundation on which we can create an empire on for many years to come.

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