Apartment Investing

4 Ways To Wholesale An Apartment Building

wholesale transactionWholesaling an apartment building is usually only thought of in terms of an all cash transaction, where the seller agrees to a low price in order to get a cash sale and the end buyer comes in with cash plus bridge financing to fund the transaction.

This is indeed a tried and true model, but they are only available in any kind of abundance at a certain stage of the real estate market cycle. Once a market heats up, the deep discounts are harder to find.

If you broaden the transaction types you can do, you are able to wholesale more deals in a single market over a longer period of time.

Below are four transaction types that will expand your opportunities as an apartment wholesaler.

1. All Cash For Double Discount Price: This is the classic scenario for wholesaling an apartment building (or any other piece of commercial real estate). The property is usually distressed and attempts to market it have been unsuccessful. To price your offer as a wholesaler you first look at what would make sense for property as a value-add. You then discount price again to take into account what you need to make for an assignment fee. Persistent follow-up and negotiation by the wholesaler gets the deal under contract at a double discounted price, and the end buyer comes to closing with cash paying the single discounted price, cashing out the seller and paying the apartment wholesaler their assignment fee. As long as market conditions allow for extremely low prices, end buyers are able to easily mobilize capital for your asking price and deals go through easily. Read more…

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A Primer On Real Estate Wholesaling

real estate wholesalingReal estate wholesaling is the process of buying a piece of property at a very low price, marking the price up slightly, then turning around reselling it to a retail buyer, who will then rehabilitate and/or stabilize the property and realize the bulk of the upside value.

The beauty of wholesaling real estate, is that your profits are cash, and they come to you quickly; within a week or two. The sellers wholesalers deal with are highly motivated to sell, making buying at very low prices possible, and the investors they sell to come to the closing table with cash, be it their own cash, or from a line of credit or rehab loan.

In the world of real estate wholesaling, “price” is the central issue. If you can buy a property cheap enough, no matter what it’s flaws there will always be a buyer for it. Also, the lower the price, the more demand there is for a deal and the more the wholesaler can demand payment in cash with no contingencies.

Possible Risks And How To Deal With Them

If you are wholesaling properly you are buying at low enough prices that, even with your profit added on, the price you are reselling for still gets investors greed glands pumping and they are falling over each other to take the deal off your hands.

The only risk you face wholesaling is when you are unable to resell the property because you paid too much to the seller and no investors want to buy.

When you put a property under contract you always have an inspection contingency, so if you haven’t found a buyer by the end of the inspection period you can give notice you don’t approve the condition of the property and the contract is null and void. Any earnest money binding the contract is returned to you as long as you have given notice before the expiration of the contingency.

Finding Deals To Wholesale

The key to achieving low price is marketing; 1) targeting sellers who are motivated and most likely to sell cheap in order to get a quick cash sale, 2) making offers to those sellers, and 3) following up with offers until their properties are sold, either to you or  someone else. The secret to wholesaling lies in numbers, and creating high lead flow, and making a lot of offers. Read more…

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Only Cash Flow Matters

by Jeffrey Smith cashflow

2014 Q1 is almost over.

The lamestream media says everything is rosy (yeah, right). The problem with a cliff, even a demographic cliff, is that it is such a sharp drop-off that most folks can’t see the cliff until they are teetering the brink, especially when they are moving fast and thinking about something else.

Two realty brokerage firms in Las Vegas NV (ground zero of 2008 crash) are contradicting each other. One says there is a major downturn coming this year (wait a few months to buy when prices are lower), and the other says buy now before prices skyrocket. Who shall we believe?

The triggers for crashing real estate are: (1) Lack of debt financing and (2) lack of cash flow to service debt. The 2008 crash was caused by #1 when Wall St ran out of Other People’s Money (OPM), and then it was “solved” by the FED buying toxic mortgages with money printed out of thin air. #2 will happen when a sudden shift in demographics causes job losses and a sharp reduction in spendable income. The FED cannot “solve” that problem.

How much debt the FED buys won’t matter when there is insufficient spendable income to service that debt. Any financial calculator will show how Present Value (PV) and periodic payment (PMT) vary proportionately for a certain periodic interest (RATE). The PV and RATE vary inversely for a certain PMT (when RATE goes up the PV goes down). The FED can set rates to zero to try to prop up PV (to hide bank insolvency), but when PMT goes down, the PV must also go down. Read more…

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Teaming Up And Co-Wholesaling Apartment Buildings

co-wholeslaingWholesaling apartment buildings is an amazing opportunity. You leverage multi million dollar transaction values, slice off five and six figure assignment fees, all without taking any risk or using any of your own money.

In the early stages though, there is a lot to get your head around. In the world of project management, it’s well established that if you have to learn more than one new skill during the course of executing a project, your chances of successful completion start to go down.

This is definitely the case with apartment wholesaling, and it illustrates quite neatly why the first deal is the hardest deal to do. You are learning how to find deals, how to negotiate with sellers, you are learning how to raise private money, you are learning how to qualify buyers, and shepherd them through the closing process, all the while dealing with your own fears and maintaining a “can-do” mindset.

When you look at this way, it’s not a surprise that, most people struggle getting their first apartment deal done. There are a lot of firsts you have to achieve, and an unforgiving time frame in which to achieve them.

One way to lower the bar though, and increase your overall chances of succeeding, is to break the doing of the deal down into separate parts, and assign the accountability for producing a result in each part to another person. This can be a partner, someone in your network, it can be another Apartment Entrepreneur.

Read more…

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