Buy your own building, or invest in someone else's

Most people who ask me about apartment investing are really deciding one thing. Do I go buy a building myself, or do I put money in with somebody who already does it?

Almost nobody gives you a straight comparison, because almost everybody answering has a side. The gurus selling courses need you to buy your own. The sponsors need you to invest in theirs. I’m a sponsor, so read the rest of this knowing that.

Here’s the part that makes it worth reading anyway. I did the hard one first.

I own a $25 million portfolio of buildings outright. All mine, bought with my own money, and that’s where I learned every bit of this. On the apartment deals we hire a property manager and I’m the asset manager. I write the business plan and my job is making sure the manager executes it. Investors are in alongside me.

I still love doing deals. What I like more now is helping other people get into one, do well in it, and actually understand what they own by the end. That’s the whole reason I write any of this down.

Neither path is better. They cost different things, and mostly not the things people expect.

What buying your own actually gets you

All of it. No fees to anybody, no promote, no split. The building’s cash flow is your cash flow. If it does better than you thought, you keep the difference.

Control. You decide when to renovate, who manages it, whether to refinance, when to sell. In a syndication all of those are somebody else’s call, and you agreed to that going in.

You can start smaller. A fourplex is a real thing you can buy. Most apartment syndications have a minimum around $50,000 and some are higher, so there’s a floor under the door.

You learn faster than any other way. There is no substitute for being the person who has to solve it. A year of owning a small building teaches you more than five years of reading about it.

If you want to be in this business, buy the building. That’s not a close call.

What buying your own actually costs

The debt is harder than people expect. On our last purchase the bank moved the goalposts on terms six weeks into escrow. I fired them and rebuilt the financing from scratch, and locked the replacement the day before the closing wire was due. That was a full-time job on top of the deal.

And somebody has to sign. I sign on our loans. That last one was non-recourse, and I was paid $31,725 for qualifying it and standing as key principal, because a lender that size needs a person with a balance sheet and a record behind the borrower.

Here’s the part worth sitting with. Non-recourse is a privilege of scale. The loan on a fourplex or a small apartment building almost certainly is not, which means you sign personally, your house is in the sentence, and nobody pays you anything for it. You take more personal risk on the smaller deal, not less.

Deal flow is most of the work and all of it is unpaid. You have to look at a lot of buildings to buy one. I pass on nearly everything I look at, and passing takes real hours. That work has no return attached until the year it does.

Your time is the input. A 45-unit building at any given moment has leases expiring, residents on notice, units mid-turn, and a few on month-to-month. That’s a normal Tuesday. Somebody handles it. On a small building bought yourself, that somebody is you, and a property manager is not free either.

One building is one roof. Concentration is the real risk nobody prices. One bad market, one bad tenant year, one uninsured event, and there’s nothing else carrying you.

And all of it rests on you. This is the question people skip, and it’s the one that matters most. How confident are you in your own judgment on the things you haven’t done yet? Not your work ethic, your judgment. There’s no partner to catch a bad call, and the first few are the expensive ones.

So here’s a fair test. On the building you’re looking at, can you answer these without guessing?

• What return are you projecting, and what does it assume about rent growth, expense growth, and what you sell it for?
• What do expenses actually run per unit on a building this size, in this market, this year? Not the seller’s number. Theirs is a ten-year owner’s tax bill and a pre-renewal insurance policy, and both reset when you buy.
• Have you gotten a real operating budget from a property manager who would actually take the job, or are you using a percentage you read somewhere?
• Where does your market rent come from? Signed leases in comparable buildings, or a survey that reports asking rents nobody paid?
• Is your insurance the right coverage at the right price, and do you know what the right coverage is on this building? Replacement cost or actual cash value, what the deductible does in a hail market, whether you’re carrying enough loss of rents.

If some of those made you pause, that isn’t a reason not to buy. It’s the work you haven’t done yet, and it’s cheaper to do it now than to learn it from a building. But if you can’t get to answers you’d defend, you’re not underwriting. You’re hoping, with a mortgage.

What investing with an operator actually gets you

Somebody else’s deal flow and somebody else’s debt. You get the building that survived the screening without paying for the ones that didn’t, and you’re not on the loan.

Diversification that’s actually available to you. $200,000 can be four positions in four buildings in different markets with different operators. The same money buys you one small building and a mortgage.

The tax treatment, without the operating. This is the one most people underrate. Our North River investors’ 2025 K-1s carried 52 cents of paper loss for every dollar they invested, because a cost segregation study moved about 30% of the building’s basis into short-life assets. One investor put in $300,000 and the K-1 showed a $155,776 loss against it, while the building was distributing cash. You get the depreciation of a building owner without being one. Talk to your own CPA about whether you can use it, because that depends entirely on your situation.

Your Saturday. Nobody calls you about a water heater.

What investing with an operator actually costs

You’re buying a person’s judgment, and you can’t take it back. That’s the real risk, and it isn’t the building. It’s whether the person running it tells you the truth when something goes wrong.

It’s illiquid and the timeline isn’t yours. Five years is five years. If your money has a job before then, keep it liquid and don’t let anyone talk you out of that. Including me.

Fees. There are some, they’re on our deal pages in full, and you should read them on anybody’s deal before you read the returns.

No control. You don’t get a vote on the renovation schedule or the sale.

A third option, if you already know you want your own

This one isn’t for everybody, and I’m not going to pretend it’s the answer. It’s for a specific person: someone who has decided they want a building of their own, and isn’t sure they’re ready to go get it.

For that person the two paths aren’t a choice. They’re an order.

Invest with an operator first. Put money into one or two deals, read every document they send you, and watch a real building operate for a year or two from the inside. Then go buy your own.

Here’s what that buys you. You learn what a property manager actually costs before you hire one. You find out how long a renovation really takes to show up in rent, which is always longer than the spreadsheet says. You see what a bad month looks like and how it gets handled. You learn which questions matter, which is the thing that takes people three buildings to figure out. And the whole time, the money is working instead of sitting in a savings account waiting for you to feel ready.

The alternative is that your first building is your tuition, and that’s an expensive way to take the class.

This is a big part of why we built our investor portal the way we did, with the plan the deal was underwritten on sitting on the same screen as what actually happened, every month. It’s not just reporting. Someone watching that for a year is learning to operate. I wrote about what’s in it and why, here.

I’d rather have an investor who eventually goes and buys their own building than one who never understood what they owned.

How I’d actually decide

I don’t think this is a personality question, and I don’t think wanting to own your own building means you’re not an investor. Two things decide it.

Do you want the job? Not the asset, the job. Sourcing deals and passing on most of them, getting the financing done, signing on the loan, writing the business plan, and then managing the manager against it every month. If reading that list made you interested, go buy a building. If it made you tired, you already have your answer, and there’s nothing wrong with the answer.

How much do you have to place, and how concentrated can it be? If it’s $100,000, a small building gets you one bet and a syndication gets you one or two positions. If it’s $500,000, doing both starts to make sense, and plenty of the people I talk to do exactly that: buy something small they run themselves, and place the rest with operators in markets they’d never get to alone.

Those aren’t opposing teams. Some of our best investors own rentals of their own. They know what a bad property manager costs, and they ask better questions than anybody.

The one thing I’d tell you either way

Whichever side you land on, the skill is the same. You have to be able to read a building’s actual numbers and tell the difference between what it earns and what somebody hopes it will earn.

If you buy your own, that skill saves you from the wrong building. If you invest with an operator, it saves you from the wrong operator. It’s the same twenty minutes of work pointed at a different document.

If you’re interested in learning how to invest in one of our deals, book a call. Or look at the deals themselves, where the terms, the underwriting, and the fees are already posted. If you’re going to go buy your own instead, that’s a good outcome too, and I’d still rather you did it with your eyes open.