This Pennsylvania trio bought a $100K abandoned school and turned it into a 31-unit apartment building — here's how to invest in residential real estate without all the heavy lifting

A hefty $3.3 million later, the site is a 31-unit apartment complex.

One-bed and two-bed units start at $1,400 and $1,600, respectively, and the property is already at 100% occupancy.

The project was so successful, the trio have already reinvested some of the profits into another abandoned school nearby, intending to convert it into another apartment complex with 33 units.

The Bowtie High experiment highlights some key trends of the U.S. housing market that investors need to know before making their next real-estate move.

Housing supply shortage

According to multiple media reports, there are simply not enough homes being built to keep pace with the U.S. population.

Between 2012 and 2022, the number of single-family housing starts trailed the number of household formations by 6.5 million units, according to Realtor.com.

And that shortage also applies to the existing home inventory. Just last week, Realtor.com reported a "bleak lack of inventory" for prospective homebuyers earlier this month with the number of new listings down 7.1% compared to a year ago and overall inventory of both new and old listings down by 5.1%.

This housing shortage is expected to persist in the years ahead. This is why the conversion of commercial properties such as schools and offices into residential units is highly attractive.

Passive income

Given that Bowtie High has 31 units occupied at between $1,400 and $1,600 a month, the property generates more than $500,000 in annual rent. That implies a gross return of around 15% on the trio’s total investment of more than $3 million. That’s an incredible return, but it took months of sweat and tears to get there.