Monday Jan 17, 2022

How to Wholesale an Apartment Building

It sounds totally impossible, taking a large apartment building and awarding the contract in the tens of thousands. Can you really do that, and if you can, how is it done?

Well the answer is yes, you can flip an apartment building. People no smarter than you are doing it across the country every month, maybe every day. The way you do it is not that different from the way you change a house, but with a few adjustments. In fact, it’s probably a bit easier than changing a house.

You may be familiar with this series of events. 1) find a profitable deal, 2) get the deal under contract, 3) find a buyer with cash, 3) assign the contract to your buyer for an assignment fee, 4) deposit the check into your bank account.

Variations are in 1) and 3).

First of all, when trying to find a property at a wholesale price that the end investor will still be interested in, you need to know what creating value in apartment buildings entails.

There’s more than just looking for dilapidated properties with deferred maintenance. You are looking for otherwise quality properties whose owners have abandoned for whatever reason and are in a bind for it. One must have one factor is the location. The poor location is hard to beat.

The deal must have advantages; There must be things currently wrong with the property that will represent increases in value once they are reversed. So, if the property is vacant between 20% and 30%, rents for occupied units have not risen in 5 years and there are repairs that have not been made, generating a potential hike. A buyer you resell to could walk in, change all of these factors and cause a large increase in the property’s value.

Large apartment complexes rarely attract novice investors. The people you resell to will be professional investors who know what good business looks like. If your offer doesn’t have these positives and you don’t have a location that works, they’ll see you right away and say goodbye to you.

Also, when you have all three of these elements present on the property, the owner is very likely to be financially damaged and motivated to sell cheap just to get out of the property. Deferred maintenance drives away good tenants, rents must be lowered to fill units, lower rents attract lower-quality tenants, lower-quality tenants are tougher on the property and don’t pay, and the spiral continues downward. .

It is these same elements that you put to work in your negotiations to obtain the economic price in the contract you need. Without a big advantage, no end investor will be interested, so you need to know these elements.

The other thing that is different with investment departments is the type of buyer you will be selling to. Home renovation has become so popular that you often find yourself selling them to relatively newbies, which comes with its own problems. When changing apartments, most of the time you are dealing with rotund professionals.

These are people with multi-million dollar lines of credit, bank accounts with a few million in cash there, or both, who have absolutely no problem with you making a profit of $ 50,000 by assigning them your contract. They know very well that they will get a couple million out of the property in two years or so, so fifty thousand dollars is a small price to pay.

The truth is, by saving the end investor the time and hassle of having to search for the property, you have created a great deal of value for them. He / she will gladly pay their fee, making sure you get the money because they want you to go out and do it again for them.

This is the world of changing apartment buildings. It may be a little different than what you are used to.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to Top