Most investors prepare obsessively for closing. Fewer prepare for what comes the morning after.
The due diligence process gets most of the attention in a multifamily acquisition. Financials are reviewed, inspections are completed, lease rolls are analyzed. Then the deal closes, ownership transfers, and a different set of problems begins. For many new owners, that transition is where the real money gets lost.
Larry Gotcher, owner and broker of Resource Realty Group in Ann Arbor, Michigan, is currently working through nine apartment complex acquisitions in the Detroit metro area, ranging from 100 to 500 units per property. He has been buying and managing commercial real estate in Southeast Michigan since 1991. His approach to the early ownership period is built around one principle: slow down before you change anything.
The Instinct That Costs New Owners the Most
New ownership carries an obvious temptation to move fast. Rents get adjusted, management gets replaced, systems get overhauled. To investors who spent months analyzing everything wrong with a property, taking control feels like the point. Gotcher says that thinking is exactly what causes problems.
“You want to minimize any kind of change,” he says. “If you’re going to change, you do it over a long period of time. A lot of people fail because they go in and make drastic changes quickly, and it makes everybody upset and they leave.”
In a market like Detroit, where apartment vacancy rates are low and demand for rental housing has exceeded supply for years, tenant turnover is a direct and immediate expense. Every move-out triggered by an abrupt rent increase or a disrupted building environment is a unit that needs to be leased again, often at a cost that easily offsets whatever short-term gain the change was meant to produce. Rent increases belong at lease renewals, introduced gradually, not as an opening statement to the building.
Keep the Manager. At Least for a While.
One of the more specific practices Resource Realty Group applies to every acquisition is requiring the existing property manager to stay on for 30 to 60 days after closing. Gotcher is direct about why: without them, you simply do not know how the building actually runs.
“It’s important to understand how they’re running things, what they were successful with, and what they weren’t,” he says.
Due diligence documents tell you a lot, but they do not capture tenant relationships, vendor arrangements, informal maintenance routines, or the institutional knowledge that exists only in the heads of people who were there. When that walks out the door on closing day, a new owner is starting from zero on an asset they just paid significant capital to acquire. The 30 to 60 day overlap is not a permanent arrangement. It is a knowledge transfer with a defined end date.
Your Underwriting Should Start With Your Own Numbers
Gotcher’s approach to acquisition analysis breaks from conventional wisdom in one notable way. He places very little weight on seller financials and in many cases does not request them at all.
“I purchase properties based on what I know I can do with the property,” he says. “I don’t really care what somebody did in the past. I’ve bought hundreds of properties without asking for a single piece of financial information.”
That approach is only sustainable with genuine market depth. Gotcher has operated in Southeast Michigan for more than three decades, and Resource Realty Group maintains a full-time analyst to evaluate every potential acquisition. The team knows what rents should be, what vacancy looks like across submarkets, and what management and maintenance costs run in a given area. That baseline makes it possible to underwrite from first principles rather than work backward from whatever the current owner’s books happen to show.
For investors who do not yet have that level of local knowledge, the takeaway is not to skip the financials. It is to develop enough market familiarity to form an independent view of what a property can produce, so that the seller’s history informs rather than drives the analysis.
The One Number That Cannot Go Below Zero
Gotcher’s acquisition threshold is straightforward. A property needs to cash flow at or above zero after all debt service is paid. Negative monthly cash flow is the condition he will not accept, because it eliminates any margin for error in operating assumptions.
“If I don’t have monthly cash flow to amount to anything, I have to make sure all my other numbers are correct,” he says.
Breaking even on a monthly basis works because depreciation delivers a real tax return on top of flat cash flow, and because Southeast Michigan properties have appreciated steadily over time. A deal that looks unremarkable in year one produces returns through both of those channels, but only if the vacancy rates, management fees, and maintenance costs going into the model are accurate. That precision matters most when there is no cash flow cushion to absorb a miss.
For investors building a portfolio across multiple assets, that discipline is the difference between acquisitions that quietly compound and ones that quietly drain.
About Resource Realty Group: Resource Realty Group is a full-service commercial and residential brokerage headquartered in Ann Arbor, Michigan. Led by Owner and Broker Larry Gotcher, the team has built a reputation for closing high-volume commercial transactions through deep market knowledge, disciplined process, and creative deal structuring. The group also manages land development projects and operates a REIT designed to provide investors with access to resilient, income-producing real estate across Michigan and international markets. Website: www.resourcerealtygroupmi.com
This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.