How Do I Get Started Wholesaling My First Apartment Building?

Get Started Wholesaling My First Apartment BuildingIf you’re excited by the potential, but the big question weighing on you is, “how do I get started wholesaling my first apartment building”, don’t worry, this is well trodden territory. You have been snared by an insidious trap, but there is an answer, and a way out.

When it comes to wholesaling apartment buildings, there is more fear involved than wholesaling a house because … well, the numbers are bigger. The asking and selling prices are usually in excess of $500.,000. That’s out of the comfort zone of most beginning wholesalers.

The result is fear. Blind fear. The numbers way exceed your financial experience to this point, and your brain scrambles. It’s easier to look away and go back to where you feel in control.

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And that’s perfectly fine. In fact, it’s more than fine. It’s smart. Start where you are, build experience, and build your confidence. Keep it simple. Flipping houses is a simple process, that you at whatever level you comfort zone currently is.

Start where you are, but get started.

As Dwan Bent-Twyford notes, $10 is all you need to secure a house to flip for $10,000 or more:

Wholesaling Real Estate Step by Step

To make the contract binding, you have to leave a deposit with the homeowner at the time of signing. We typically leave a $10 deposit. This way, if we are unable to wholesale the property, we are not out a lot of money.

$10! Who would take that? Everyone! When we first started asking homeowners to take a $10 deposit, we thought we’d get kicked out of the house. To our surprise, no one gave us any grief.Get Started Wholesaling My First Apartment Building

If you say it like this: “We typically give a $10 deposit and close in 45 days. That won’t be a problem, will it?” They always say, “Okay.” The only reason a homeowner won’t take $10 is because of the way you present it. Speak with confidence.

 

Image Credit: Wikimedia

As Dwan points out, wholesaling houses is very simple.

  1. Find a bargain property and put it under contract
  2. Build your buyers list
  3. Negotiate a higher price with a bargain-hunter buyer
  4. Hand both contracts to the closing attorney … close.

There are a few differences with apartment buildings due to their being income property, and larger in size, but in every way that matters, you are still following the above four steps.

The key is though … getting started.

In the past, what was actually not that long ago but today seems like a bygone era, the problem was a lack of information. In pre-internet times, learning there was such a thing as  a real estate ‘club’ was a revelation. ‘How do I get started wholesaling my first apartment building’ probably wouldn’t even be a question you’d ask.

Today, things have reversed themselves. Now there’s info overload, on every conceivable subject.

As Brandon Turner writes in Bigger Pockets, learning is great, but easing yourself into the real world of real estate is actually more important.

How to Start Wholesaling: Getting Past The Education and Into the Field

There are a million guru guides and programs that will give you the exact, step-by-step, process for talking with sellers, what to write on your bandit signs, etc. Yes – this stuff will probably work, but these are just the building materials delivered to your job site. The gurus claim “all you need to do is this simple 10 step process” but in reality – no two deals are the same. If all you do is follow the steps outlined by a guru – you’ll be lost in no time. You have to grow your knowledge, skill, and business techniques organically.

Important point***: You may not want to move on from single family to multifamily. You may find your niche as a rehabber, or just flipping a few houses each month (both provide 6 figure incomes). You’ll know when you get there.

If you wish to start wholesaling multi-family though, the key is to start small, keep it simple, and work your way upwards.

With a few house flips under your belt, negotiating a Master Lease-Option, or Owner Financing on an 8 unit would not present that much of a challenge. It is a slight step up in price range, though not a lot. You are also being introduced to the additional due diligence of multi-family, but with only 8 units you are not being overwhelmed by it.

Wholesaling Single Family Vs Multifamily

Importantly though, you can see how similar flipping an apartment building (albeit a small one) is to flipping a house. The main difference being the due diligence issues around tenancy and vacancies.

Especially in the case of a Master Lease Option, the financing is the MLO Agreement. All the new buyer needs to come to the table with is the Option Consideration and your assignment fee. They have 3-5 years to turn the property around and get financing.

Get Started Wholesaling My First Apartment Building

Image Credit: Wikimedia

This is a best-case scenario for the investor. MLOs are very easy to find buyers for.

You may stick with small multi-family for a while. When you feel ready for the challenge, start looking for bigger properties. Start controlling the property with a Purchase Agreement in order to capture larger assignment fees.

With your market activity in small multifamily and growing experience and skills, when it comes time to raise private money for earnest money on a bigger deal, you will have a network of people to talk to about it.

Expand Your Comfort Zone

Just as you moved from single family to an 8 unit, your familiarity with 8-10 unit buildings makes looking at a 20 unit building seem like not that big a deal, and definitely doable. And from there, a 40 unit building seems like it’s now basically in the same ballpark as the 20 unit.

And so you progress upwards.

Make no mistake, you are pushing outside the bounds of your comfort zone every time you stretch for a larger goal, but in a way you can see as a challenge. The butterflies may be fluttering, but your brain doesn’t scramble.

How long will it take before you are flipping a 200 unit apartment building (with a six figure assignment fee)?

I don’t how long it will take. But I do know you will get there.

 

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