How I Bought My First Apartment Building


What comes to mind when you read the words “rental property?” For me, it’s pure excitement. In those two simple words, I see opportunities just brimming with potential. It’s no secret that I believe that owning property is one of the best ways to develop long-term and generational wealth. It can be a great source of passive income and, ultimately, it can help you achieve true financial freedom.

If you’ve been sitting on the fence, not sure if owning and renting out property is right for you, this is for you. In this post, I’d like to share how I bought my first apartment building and show you that I’m nothing special. In fact, I've made a good number of mistakes, some of them are highlighted here, but in the end, it’s turned out well.

Okay, yes, it’s my first and only building–but I’m optimistically planning for future posts (second, third, fifth, etc.). I do own fractional shares of some other properties through investments in a few syndications and crowdfunding, but I consider that to be slightly different than actually owning it and being able to make your own decisions on how to handle the investment.

Even though I chose to do this DIY, there are other great options out there like real estate crowdfunding for those of you who might not want to take on what I did initially.

I’m going to break this post up into several different, easy-to-digest parts, so that maybe, just maybe, you can apply them to your own endeavors.

So, without further ado, let’s begin.


I had been reading about investing in apartment buildings since 2011. I told myself that when I had enough capital, I would take the plunge. Cut to several years later, and I had saved up the capital . . . but I was still hesitant. What if I messed up and bought the wrong building? Would I lose all my money? The risk seemed too great.

Then, in 2015, a friend of mine (who happened to also be a physician) came to me and asked me if I would consider buying an apartment building with him. We would be equal partners, split the cost, and since we both had no experience, we would learn together.

Understandably, I was a little wary of investing with a friend. But we both seemed to have the right attitude: a willingness to learn. We also decided to put everything in writing so there would be very little miscommunication. We decided to pool our resources and go for it.


We had taken the biggest step by simply deciding to buy a rental property in the first place. But that didn’t mean that we knew where to go from there. Luckily, a mutual friend of ours (also a doctor) had recently purchased a building of his own, so we took him out for coffee to pick his brain a little.

We asked him to tell us all about his experience, hoping to gain some insight on what we should do next. He immediately suggested that we use his broker and they would teach us the ropes. He also offered to help us with any questions we might have.

Going right along with his suggestion, we reached out to his real estate broker and expressed our interest in purchasing a rental property. The broker asked how much we were willing to put in. We each came to the consensus that, given the “right property,” we’d each be willing to put in $100,000-$200,000. Luckily I had been saving for this moment. With that kind of down payment on a commercial loan (which would likely require 30-35%), we could look for a property of up to one million dollars in value.

With all of that figured out, the broker began looking around town. His suggested criteria were simple: it must be within our price point, and it must have at least five units. Why the minimum of five units? Because at five units and above, you’d be able to get a commercial loan with easier lending standards. This is because your “lendability” –that is, the likelihood of getting the loan–is determined more by the building itself rather than your personal qualifications. That usually means a lot less paperwork and a much smoother transaction.

The only self-reported personal info we needed to provide.

The broker then asked us in which areas we’d like to start looking. Obviously, the price point helped determine much of that (in our area, our highest price point would barely get you a single-family home). We had to look in areas that were considered less desirable in terms of location and possibly not the greatest condition (commonly referred to as B or C Class areas). But we also didn’t want to drive multiple hours every time we visited the building.

And so began the hunt. Our broker would line up properties for us and on an off day for both of us, we’d all hop in the car and drive around. We looked at building after building trying to get a sense for how far our money would go, and what to look for in terms of the property (condition, surrounding area, etc.).

After a couple of weeks, we both seemed to settle on a certain area of town. There was a good deal of new development happening in the area and new public transportation in the form of a metro line was being built. Both of us were able to look beyond the current state of the development to see its true potential. So, we decided to focus here.

There were only a couple of buildings on the market in that area, and in just two weeks, we had narrowed it down to one. Our agent let us know that the asking price of $800,000 was fair, and with a little haggling, the sale ended at $795,000. The cap rate* was around 5% and with market rents we could end up at a cap rate closer to 7-8%. So there was upside that could dramatically increase the value of the building. (*Cap rate is essentially the rate of return on the property based on current income it brings in.)

May not be much to look at but it's ours.


Once our offer was accepted, we hired an inspector and walked the units ourselves. Based on the inspector’s report and our own observations, it was obvious that the building hadn’t been maintained all that well. The property was older, but thankfully it had good bones and was deemed structurally sound. The same could not be said of the roof and plumbing, however, and was a possible (large) future expense. Based on these things, the broker had us go back to the seller, and while we didn’t get the full credit we wanted, we did get some money back to put towards those capital expenditures.


Being first-time commercial buyers, finding a loan wasn’t all that easy. We had to move quickly and ended up going with one of the bigger banks. They were known for being very lenient with first-time buyers, but their terms weren’t always the best. We locked in a 5/1 ARM and had to make a down payment of 35% (~$278,000 or $139,000 each).

Now, if you’ve recently purchased a home, you know what a nightmare it can be. But this process was a breeze compared to that. We never even had to provide our own personal bank statements. The bank was betting on the property and, knowing that we were both professionals, that was enough.

After a total of 60 days, the building was ours, and we felt that we had received the best education possible—the kind that only comes from experience. Could we have done a better analysis? Definitely. Could we have negotiated more from the seller? Probably. There were plenty of reasons not to invest in that property, but perhaps the biggest was fear of the unknown. Thankfully we were able to push past that fear.

A preview of what's to come.


In my next post about the apartment building, I’ll share what’s happened since. It’s been a wild ride, to be sure, and in terms of experience, it has been immensely valuable. Suffice it to say, it’s now two years later, and a recent appraisal of our building showed that its value has increased a hefty 52%. Of course, not all of that is pure return (some rehab money was required to get to this point), but we have made money. Got an education and made money at the same time? That’s something you’ll never hear me complain about.

Now that we have a deeper understanding of the process so much better, I’m confident that we’ll only do better next time. Apparently, once you’ve started, the hunt never stops.

Has anyone out there purchased a multifamily property? How did your first deal go?


  1. Most people start with one property or an apartment/condo, you begin with en entire building! That takes guts 🙂 Curious about the rest of the post series, should be fun and interesting.
    Well done!

    • Thanks! Well to be honest with you, there were some steps along the way – crowdfunding and we did in fact own a condo we used to live in. When we bought our home, we decided to keep it and rent it out (the accidental landlord route).

      • Are you the landlord for you current place? How is it managing renters with a full time job? Thanks for all of the info!

  2. Hey Passive Income, M.D.,

    Would you please do a follow up to this article with updates photos and current rents?


  3. Interesting post. Definitely something I’d like to do. I like the fact that with owning the whole building you have more control over the project. I mean if you only owned one of the units then you can’t really control what the other tenants/owners do with their units so it’s much harder to add value especially if they don’t take care of their properties.

    • Having multiple units under one roof gives you economies of scale. You can have one manager look over multiple units and you’re right, you can add value to multiple units at one time. There are always pros/cons for anything so I’m invested in both single and multifamily.

  4. Man I wanna be you a few years down the line. We incurred heavy repairs on our rental but it is appreciating well enough that I might not want to smack myself just yet.

    Hey I like the look of the building, lime green is very Cali! ??

    • Give your rental time, especially considering where it is. One of the biggest regrets I hear from real estate investors in CA is that they sold anything. Buy and hold they tell me.

      Would it really disappoint you to let you know that we painted over that amazing lime green?

  5. Great post! The hardest part is getting past analysis paralysis. You took massive action! Good job. Was this purchased under a LLC? Did you and your partner have an operating agreement or just a handshake over a nice cold one? What happens if you stop being friends? Looking forward to the next parts.

    • Thanks! Yes the first step is always the hardest. We did setup an LLC with a pretty standard operating agreement. Heard of too many horror stories over handshake deals and even though we trust each other, decided it’s best. I’d recommend this for anyone, even partnerships amongst family.

  6. I have purchased several properties in the small town I practice in, which not only provides passive income but also benefits the community. One building I purchased is an old 1905 bank with 3 apartments on the second floor. The county hospital now rents the 3 apartments to provide quarters for lab, X-ray, nurses and providers who come to work for the week from out of town. The downstairs bank space is rented to a dance instructor and provides dance lessons to community children who would otherwise have to travel an hour for dance lessons. The bank building was in rough shape when I bought it and hadn’t been used in years, and needed new windows, electrical, lighting, flooring, paint and furnishings for the apartments but it turned a boarded up eyesore into a profitable investment! Plus it gave my children a summer job painting and laying tile, And the family investment is now paying their college tuition!

    • This is so great! I love how you stretched beyond medicine and found an additional income source that has paid off for years and years. Plus it sounds like so many other people have and will benefit from this one purchase. You just gave me the idea to have my children help with the maintenance and rehab someday. Great experience and education for them…

  7. This was a lot of fun to read. I absolutely plan to do the same someday. It’s fun to see someone who doesn’t just talk a good game, but actually practices what he preaches! #LearnByDoing

  8. Definitely staying tuned for this one. I’m especially interested in hearing about any trouble with the partnership and what documents you signed to mitigate any problems before they have the potential to start.

    Tom @ HIP

  9. Not everyone can put down $139,000 x 2 to buy a large apt. building. I have 5 rental single family houses, each bought one at a time, and the rents have been going up nicely. Continue on.

  10. Love your approach. I’ve done a single family rental and have set my sights on something similar to what you’ve done. Definitely awaiting updates. Curious to hear your experience finding and managing contractors during the rehab.

    • I hired a general contractor who I had worked with before on my house and he hired and supervised the subs. This was actually the first rehab that I did. It was part of my “bucket list.” Usually, I buy properties that need little work and can be rented out immediately. However, you always need to make room for surprises. If you agree on 3 months, figure it could go to four. If you agree on $20,000, figure that it can go to $25,000. Also, do not forget that you need insurance for an empty house with people working in it. Yes, your GC will insure your subs, but it is your house and you will be liable too.

        • Now I am semiretired. But if you hire a good GC you should be able to work and still keep an eye on your property’s rehab. Remember
          a good GC is not necessarily a cheap GC!

  11. Great article!

    The one suggestion I would make is build a relationship with your banker and be loyal to them. It’s a piece of advice I was given early on in my investing career and it’s paid dividends many times in recent years. I can call my banker up and she knows me and how we’ve performed on all the loans (never a missed / late payment). Every property has cleared underwriting, etc.

    Now, when I bring her something, she takes a quick glance and it and says, “We’ll lend on this, no problem.” We get better service and they’ll go out of their way to help us. That doesn’t happen without the relationship.

    As you said, home loans are a nightmare compared to commercial loans. They get even better after you’ve built the relationship.

    Excited to read the rest of the series!

    • That’s a great idea. I’ve never focused on that relationship and just considered each transaction separately. I can see how it would make a huge difference in the commercial loan space.

  12. Can’t wait to hear the rest of the series! Signed up to your newsletter and via feedly. Keep ’em coming!! I plan to build my passive income through real estate, at $70k cash right now, need to build up more for a good down payment. My problem is that I’m impatient and tempted to just put it in a couple of crowdfunding real estate deals or syndicate deals… but I must wait! We bring in $6k savings/month (after tax sheltered accounts) so it takes a while to build it.

    • Thanks! You’re doing an amazing job saving, that’s impressive. Yes, it’s easy to get distracted, I do the same. I guess you just have to assign priorities and after you fill up one bucket, move on to the next one. Keep me updated or else I’ll look for it on your blog!

  13. I enjoyed your article!

    I’ve had a dream to be a Real Estate Investor for the past 5 years, and have recently just made the jump into residential Real Estate full time in the Denver, CO market. Right now I have $100k equity in my house and $30k in savings in the bank. My brother is working in Hawaii for the next 3 years and is renting out his house currently sitting on approx $150k equity. Being non marred, and no kids, I was thinking of making a strategic sacrifice my brother and I are tossing around the idea of selling our homes, and putting the equity towards a down payment on a commercial multi family building similar to your example. Any thoughts or suggestions? Thanks!

  14. Nice article. With the amount of money that physicians make, they are far underestimating the amount of risk that they can take vs. the potential gains of cash flow, capital appreciation, and depreciation which offsets their large incomes. Purchasing one apartment building is a seemingly brave first step but in comparison with the risk that a high earning physician can take with their income, it is really a much smaller step than it seems.
    While maintaining a busy surgical practice, I began purchasing apartments, then advanced to office buildings including the ones I practiced in, then a group of hotels and a shopping center, most of which I still own today by myself. This allowed me to retire early even though I continued practicing many years past the point where my passive income exceeded my medical income. The two pieces of advice that I give to any physician who asks me how or why I did it: because of the historic inflation rate of 3% per annum, with a down payment of 10 to 30% (ie leverage), your rate of return exceeds almost any other investment. In addition, because of inflation, over a period of years the odds of a bad investment in real estate is dwarfed by the chances of success. This especially applies to physicians with their typically high salaries.

    • I completely agree with you. I consider the bigger risk doing nothing and expecting our day jobs to continue to provide income and stability in the future. That’s why I’ve done what’s considered to some “risky” or “aggressive” in my circles, but I just see it as a necessity. Thanks for the advice, looks like I need to ask you to write a guest post on this site and teach me & others.

  15. Yes, it definitely becomes a necessity. Unfortunately we are significantly influenced by the habits and investing patterns of our fellow physicians, especially in the doctor’s dining room before rounds, between surgical cases, or at the typical freebee lunches at the hospital. When faced with the decision to invest or not to invest, it is easier to say, “I am too busy”, or at the end of the day, “I am too tired” to do research or reading to educate oneself on a subject that is infinitely simpler than learning how to become a doctor. Spending an extra few hours per week on this can improve one’s financial status by multitudes and as measured per hour, can be the most productive time that one can possibly spend.

    They say the two certainties in life are death and taxes. With taxes, the rates climb steeply in the salary range of the typical doctor especially with the advent of the Obama 3.8% tax addition. This is heartbreaking with all the hours (and expense!) it took to become a physician. As a result, increased capital appreciation becomes much valuable than boosting ordinary income in building your estate. With the addition of depreciation, real estate can become the investment of choice for high wage earners. Ironically, doctors practice medicine by continuously assessing risk and odds of success but completely ignore the probabilities of success with investing in real estate such as your apartment building.

  16. Congratulations. This is amazing. Thank you for this post. Do you think you would have purchased your first building if you did not have a partner? My husband and I would like to purchase a small apartment building in few years.

    • I always had it as a goal, but it did make it easier and harder. Easier financially but more difficult when it came to making decisions. Fortunately we have a great partnership but I know they don’t always turn out that way. I think it’s a great goal to have and I know it’ll continue to pay increasing rewards as time goes on.

  17. excellent post. I really like blogs that reflect on real life experiences. I graduated residency 2 years ago, parents helped pay off all my debt. moonlighted like crazy during residency, finished residency, bought 2 condos , then 3rd and and now almost finished with a 4th deal. I think real estate is probably one of the simplest passive investment any physician can do. Doesn’t require any significant experience. Continue the good work!

  18. For a physician, this is a good way to go. Do your homework and start small. Talk to contract property managers. They know the score. Ask about pitfalls. In my area, it’s foundation problems & slab leaks in pre-1980 homes. That bit of knowledge would have saved me some 50K had I asked that one question. Also consider commercial real estate if you have good advisers.

  19. You should really check into Lifestyles Unlimited based out of Texas. They are experts in multi-family and single family investing, and can get you the proper education and training to get the right deal every time. Additionally, their network of sophisticated real estate investors willingly share information and assist you along the way. Check them out ASAP!

  20. Hello How much money Should I have before asking for a commercial loan?. I would love to own couple of buildings in the future.

    • Depends on the property you’re looking at. To be safe I’d say expect to put a down payment of 30-35% plus some closing costs. So if you wanna be totally say and make sure you have enough, have 40% of the price in cash.

  21. Interesting post.
    It would also be great to know how you got to the terms of agreement between you and your friend who invested in the building. What is one of you wanted to get out for any reason? How do you foresee such situations handled?

  22. Great story. My husband and I live in South Florida and stopped looking for apartment buildings here due to high prices and fierce competition. Do you own any properties out of state? We are currently looking in Texas.

  23. I find it interesting that you shared how your realtor advised you to look around areas that are less desirable and are not in the greatest condition in order to buy a condo between $100,000 to $200,000. Reading about this tip convinced me that I should hire one for my uncle. That way, he can downgrade from living in a rental home and earn by renting the other units too. Any tips on which realtor should I recommend to him? Thanks!

  24. Great post! I love that you included some of the things you could have done better. Great comments too! (build a relationship with your banker, the surgeon who worked his way up to shopping centers). My story is a weird one because I’m probably more a real estate investor that practices medicine than a physician who invests in real estate. I took a nocturnist job at a rather sleepy hospital for the 7PM-7AM, 7 on/7 off schedule so that I can real estate like a mad man during business hours (attend auctions, eviction court, and project manage my rehabs). I’ve flipped, and BRRRR’d and 1031’d my way to 45 units in the last two years and I couldn’t be happier with it! I understand I am far too active at present, but that is by choice and constructing the systems to get progressively more passive has been a blast. Good luck on that first one with your partner and I can’t wait to see the follow up! I’d be happy to help package the numbers for the post for you if you wanted a hand. With 52% appreciation (even with some of it forced) I’m sure you have a monster IRR. Congratualtions!

  25. Very informative! Thank you so very much for sharing!!! I want to own an apartment building as well. I don’t have the capital just yet but I will get there. I can’t wait to see the finish product of the building! May GOD bless you and your partner with amazing tenants!

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