By: KeyCrew Media

Investors spend months on due diligence before closing. Then ownership transfers, and a different, often more costly, challenge begins.

Taking over a building with existing tenants, an existing manager, and processes you know nothing about is where a lot of new multifamily owners make expensive, avoidable mistakes. The instinct is to assert control quickly: raise rents, swap the management, fix what the previous owner got wrong. Larry Gotcher, owner and broker of Resource Realty Group in Ann Arbor, Michigan, says that instinct is the problem.

Gotcher is currently working through nine apartment complex acquisitions in the Detroit metro area, ranging from 100 to 500 units per property, and expects most to close within the next 90 days. He has been buying, managing, and selling commercial real estate in Southeast Michigan since 1991. His approach to the early months of ownership runs counter to what most investors assume is the right move.

The First Instinct to Resist

“You want to minimize any kind of change,” Gotcher 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 rental market like Detroit, where vacancy is low and waiting lists for government-assisted housing are real, keeping existing tenants stable is worth more than immediately optimizing for peak rents. Turnover costs money. Vacancies cost money. The fastest way to erode the value of an acquisition is to trigger a wave of move-outs in the first quarter of ownership.

Rent increases, when they come, should track lease renewals and be introduced gradually, not used as an opening statement to the building.

Keep the Property Manager On, at Least for a While

One of the more specific practices Gotcher applies consistently is requiring the existing property manager to stay on for 30 to 60 days after closing.

“If you don’t, you don’t know what they were doing before,” he says. “It’s important to understand how they’re running things, what they were successful with, and what they weren’t.”

Due diligence periods are short. There is a hard limit to what can be learned from documents and walkthroughs before a deal closes. The actual operating knowledge (tenant relationships, vendor contacts, building quirks, maintenance patterns) sits with the people who were running the property day to day. Letting that walk out the door on closing day means starting from scratch in ways that cost time and money.

This is not about keeping an underperforming manager long-term. It is about capturing the institutional knowledge of a property before making changes to how it runs.

Buy Based on What You Can Do, Not What the Seller Did

Gotcher diverges sharply from conventional acquisition wisdom when it comes to how much weight he places on a seller’s financial history. “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 only works with genuine market depth. Gotcher has been operating in Southeast Michigan for more than 30 years, with a full-time analyst on staff to run the numbers on every potential acquisition. He knows what rents should be, what vacancy rates are realistic, and what management and maintenance costs look like in a given submarket. That baseline makes it possible to underwrite a deal on his own operating assumptions rather than relying on whatever the seller’s books show.

For investors without that level of market familiarity, the lesson is not to skip due diligence. It is to build enough local knowledge to form an independent view of what a property can produce under your ownership, rather than reverse-engineering a price from someone else’s numbers.

The Floor That Cannot Move

When Gotcher evaluates whether a multifamily acquisition makes sense, his threshold is clear. Properties need to cash flow at or above zero after debt service. Monthly negative cash flow is the one condition he will not accept, because it requires every other operating assumption (vacancy, management fees, maintenance) to be exactly right with no room for error.

“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 is acceptable because depreciation provides a real tax benefit, and because Southeast Michigan properties have historically appreciated consistently over time. A deal that looks flat on paper is producing returns through those two channels, but only if the operating assumptions are accurate going in.

For investors building toward scale, that discipline is what separates acquisitions that perform from ones that quietly erode the portfolio.

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 across Michigan. 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.