How To Buy And Finance Apartment Buildings No Upfront Fees

Winston Rowe & Associates

Apartment Building investing is the preferred investment strategy for those investors who want an additional source of monthly income along with slow but steady appreciation in the value of their portfolio.

Buying an apartment building is a long, sometimes complicated, process. It's important for you to gather as much information as you can before you make the decision to buy.

Applying for a mortgage to finance an apartment building is not at all similar to applying for a home mortgage. Apartment complexes with four or more units are commercial properties, and loans for them have different underwriting rules.

Here's how to make a great investment in an apartment building.

Verify the accuracy of your assumptions; it's critical that you have a realistic idea of what the value is, and what the income and expenses will be, accuracy of the information is everything

Don't trust any numbers you hear from the seller, the real estate agent or anyone else representing the seller, use a third party firm that specializes in conducting a professional due diligence investigation.

Winston Rowe & Associates provides this service with no upfront fees to their clients.

They will make sure you're working with reliable data from the seller and their agents.

A professional due diligence investigation will get to the hard evidence from using business analysis metrics to find out what those numbers have been in the past and what they may be in the future.

The Metrics of Apartment Investing:

Gross Rent Multiplier (GRM):

Gross rent multiplier is a rough measure of the value of an investment property that is obtained by dividing the property's sale price by its gross annual rental income. GRM is used in valuing commercial real estate.

Utilizing the GRM you can accurately determine the value of the commercial real estate prior to ordering an appraisal. Additionally, the GRM can also verify or discredit an existing appraisal.

Net Operating Income (NOI):

Net operating income (NOI) is used in the real estate market to determine the revenue that a property generates less operating expenses. NOI also determines a property's capitalization rate, or rate of return.


The occupancy rate is the number of units filled divided by the total number of units.  For instance, if there are 95 units occupied out of a 100-unit apartment complex the occupancy rate is 95%.


Some investors prefer to use the vacancy rate instead of the occupancy rate.  The vacancy factor is just the reciprocal of the vacancy.  For instance, in the example above if there were 5 empty units out of a 100-unit apartment complex the vacancy factor would be 5%.


The absorption rate is the rate at which available apartment units are rented in a specific real estate market during a given time period. It is calculated by dividing the total number of available apartment units by the average number of sales per month. The figure shows how many months it will take to exhaust the supply of apartment units on the market.

Capital Expenditure (CapEx):

Capital expenditure, or CapEx, are funds used by a company to acquire or upgrade physical assets such as everything from repairing a roof to building, to purchasing a piece of equipment like water heaters, air conditioners, or new plumbing.

Cash Reserves:

This is very important to every potential lender; it's the amount of cash that you set aside when running a business. A business that is not properly capitalized can fail in a very short period of time.

Internal Rate of Return (IRR):

Internal rate of return (IRR) is a metric used in capital budgeting measuring the profitability of potential investments. Internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Loan-to-Value (LTV):

Loan-to-value ratio (LTV ratio) is a lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if the mortgage is approved, the loan generally costs the borrower more to borrow.

Debt Service Coverage (DSC):

The formula for DSC is Net Operating Income divided by the total debt service.

Typically, lenders want to see at least a 1.10 DSC.  This means that for every $1.00 of debt service, the property is producing $1.10 of cash-flow to service that debt.

Capitalization Rates (Cap Rate):

The capitalization rate is the rate of return on a real estate investment property based on the income that the property is expected to generate. The capitalization rate is used to estimate the investor's potential return on his or her investment.

Even though this metric is simple, most real estate brokers manipulate this number (usually by using forecasted income numbers rather than the actual numbers).  Always take a stated cap-rate with a grain of salt and do your own math.

Due Diligence Review & Investigation:

Winston Rowe & Associates commercial real estate due diligence services range from initial deal review for accurate and reliable analysis to help support your important real estate decisions, then presentation and placement to their extensive network of capital sources.

Without the usual upfront or advance fees that are typical in the industry.

Whether you are looking to finance a small apartment building, a complex with hundreds of units, or a co-operative looking for an underlying mortgage, Winston Rowe & Associates can help you find the optimal financing solution to meet your individual needs.

They can be contacted at 248-246-2243 or visit them online at

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      The GRM for value is not working out for me. A sale price of 40,000.00, with a monthly gross income of

750.00 and a gross annual income of 9,000.00 leaves me with a GRM of 4.44444444. How do I determine value

with this number?


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