In this episode, I interview a really good friend of mine named Doug Benson. Doug and I met about five years ago, and he was definitely one of the people who impressed me early on because he is a super fun and super smart guy. Doug and his wife Debbie, are real estate investors here in Michigan. Although they do flip houses, their favorite method of investing is definitely apartment buildings. Doug and Debbie own 44 apartment units.
Doug got his start in the early nineties when they bought their first investment property. After that initial investment property, Doug and Debbie took several years off investing to focus on their kids and family. Although Doug wishes they had never stopped investing after that first one, in retrospect he’s happy that he spent this time focusing on his children. Doug and Debbie are currently working on a deal that will help them more than double their current 44 unit portfolio. They are gathering funds and talking to private investors in order to make that deal happen. Doug sees him and his wife continue to work with apartment buildings in the future to try to build their portfolio, and create even more financial stability for themselves.
One of the biggest mistakes that Doug sees new investors make is that they are constantly getting what he describes as “financially surprised“. What he means by that is that they often miscalculate after-repair values, rehab costs, etc. They just aren’t using accurate numbers and that is why they end up surprised at the end of the deal that it didn’t make the money that it should have. Doug’s four main areas of concern when he is screening a potential tenant for one of his units are the following:
- Gross income is equal to at least three times the rent.
- Does not have a criminal record.
- Is a non-smoker.
- Has a great rental history.
The rental history stipulation seems to be the one that trips up most applicants according to Doug. That one is probably the most important to Doug when screening a tenant because it is the most indicative of what kind of a renter they will be for him. I shared with Doug that my biggest reservation about investing in apartments is the fact that the buy-in is so much higher than with houses. Doug brought up a great point, and one that I think all investors should understand: it is possible to buy apartments on land contract with nothing down. Doug did just that with one of his apartment buildings.
One of the things that Doug would change if he could do it all over again is that he would not try to do everything himself. When he started investing in real estate, he and his wife felt like they had to swing every hammer swing and screw in every screw. He did not realize that he could leverage peoples’ knowledge and skills.
www.eskerproperties.com – Doug’s website. Go there and see everything Doug has going on.
www.rentlinx.com – resource for advertising your rental properties.
Trulia.com – and online MLS for non-realtors. Doug uses Trulia for listing his apartment rentals.
Craigslist.org – Doug uses craigslist for listing available rentals also.