How to Buy Your First Multi Family Small Apartment Building

Discover how to buy your first multi family small apartment building. You'll also learn the personal benefits of owning small multi family apartments, the investing advantages of going "small", how to find the best deals, why you should start with 5 plexes and NOT 4 plexes or below, and finally, 5 different ways to finance your first deal, including if you are short on cash or credit. This is an extremely powerful training that may have a lasting impact on your financial future. Here's how to buy your first multi family small apartment building:

 

How to Buy Your First Multi Family Small Apartment Building PodCast

Here is a summary of what you learned in the video above:

How to Buy Your First Multi Family Small Apartment Building

 

Personal Benefits of Small Multi-Family Apartments (1:27)

• It is easier to wrap your mind around an 8 unit apt vs a 100 unit apt
• A smaller apartment requires less equity
• Easier creative financing
• Single investor
• Smaller property equals smaller mistakes

Investment Benefits:

• Less competition
• Less sophisticated
• No large ownership approval
• Higher cash-on-cash, IRR
• Easier to wholesale

How to Create Your Own Deal Flow: (6:10)

Real Estate Agents

• Ask yourself what you are looking for?
• Look for 5-20 unit apartment with some sort of upside

Loopnet.com

• Search for small apartment buildings in your areas

Make the Call

• Call the agent and develop a relationship with them
• You are not after the property you are after the relationship with agent

Thank the agent for their time, exchange information

Ultimate Goal

• When the agent gets a deal they send it to you first
• The best deals come from good relationships

Precision Direct Mail: (11:49)

• Develop a list of property owners and periodically send them letters so that they call you when they have a property for sale
• This is how you get the best deals

3 Unique Advantages:

• No real estate agent involved
• There is a perception that the deal is good because it is coming directly from the owner
• Simpler to wholesale these deals because of perception that it is a better deal

 Keys (14:00)

Target absentee and out of state owners first

• These type of owners tend to have problem with cashflow, repair issues, and property management
• They are often mentally and spiritually detached from the property

Use a fresh list from a reliable source

• It is a campaign
• You must remain in the minds’ of property owners.
• Send out your letter every 4-5 weeks, 3-5 times.

Why Start with 5 Unit Apartments not 4 (16:30)

4 unit apartments

• Considered a residential property
• Its value is constrained by the sales comps in the area

5 unit apartments

• Considered commercial property
• Its value is based off sales comps AND NOI
• NOI is your income minus your expenses
• As NOI goes up your property value goes up
• Value equals NOI increase divided by your Cap rate

Financing Your First Small Multi-Family Apartment Deal (21:33)

Conventional Financing

Take loan package to a local bank or loan broker

• Local bank:
  Salary person
  They submit your loan package to a board for approval or denial

 

• Loan Broker:
  Works off of commission
  Submits your loan package to 20 or more lenders to find financing

 

  Creative Financing

•    Seller financing
  The seller becomes the bank for you and finances the loan

 

• Seller-carry
  The lender might require 25% down that you do not have so the seller carries a second loan to cover what you do not have

 

• Master lease
  You do not need a lot of experience or cash down
  Do not have to go through a bank
  I have a 20 minute video about “Master Leases” here

 

• Wholesale
  A great way to make money if you do not have a lot of funds or experience
  Find a great deal, get it under contract, then assign the contract to an investor buyer for a fee
  You collect the fee at the closing and the investor buyer takes over ownership