Real estate investors who specialize in apartment buildings or other multi-family properties are a unique breed.
Investing in apartments takes a special skill set, and not everyone is cut out for it. But, on the other hand, not everyone is cut out to be a real estate investor – period.
But, investing in multi-family properties can be a hugely profitable and rewarding business model, if you have the passion and know-how for this niche of real estate investing.
The good news is this: anyone who is highly motivated and who doesn’t let fear stand in their way can achieve success as a multi-family real estate investor.
Your first step is simply to find the best property leads (just like any investor!)
Also – side note – even if you’ve never thought about purchasing an apartment building, stay tuned for some helpful information that any real estate investor could apply to their business.
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<h3>FINDING WHOLESALE APARTMENT DEALS</h3>
One of the best ways to score wholesale apartment deals is to <b>build a solid</b> <b>email list of single-family residential brokers, investors, and wholesalers.</b> A lot of times, these people come across residential apartment deals that they just “throw away” because it’s not their line of business.
If you make connections with these people through email campaigns, you can be top of mind when they come across these leads. If you pay a great referral fee or commission to these individuals, you’ll find that the deals will start rolling in. It creates a win-win situation for everybody!
Another method to explore is <b>dialing for dollars.</b> Calling owners of For Sale By Owner (FSBO) and For Rent by Owner (FRBO) properties is a great way to find off-market apartment deals.
Of course, <b>driving for dollars</b> is another option. Just like you can find houses with tall grass and boarded up windows, you can also find apartment buildings with tall grass and boarded up windows. Drive for dollars in the areas where you want to buy apartments and look for those distressed properties.
Another good technique is to look up <b>Google Reviews</b> for apartment buildings in your target market. The ones that have 1- and 2-star reviews are distressed properties, which means they probably aren’t retaining their tenants – and they’re probably very motivated to sell.
Other ways to find apartment properties in your area are:
<li>Sending direct mail to leads</li>
<li>Joining a local REIA or landlord association</li>
<li>Searching through delinquent property tax records online</li>
<li>Advertising/networking through social media</li>
<li>Searching eviction court records (landlord/owners are never more motivated to sell than when they have to go through a lengthy, draining eviction process)</li>
<li>Checking for building department violations (landlords who aren’t taking care of their properties)</li>
<li>Building a network of vendors who work with other commercial property owners (property management companies, appliance repair servicepeople, exterminators, and landscapers are a few)</li>
Depending on your specific market, some of these strategies may be more effective than others. It’s a continuous learning process – you’ll soon discover which ones to spend the most time on, so you can find the properties that best fit your investing strategy and goals.
<h3>ESTABLISHING YOUR BUYING CRITERIA</h3>
So, once you’ve found some good leads, it’s time to assess whether or not you want to pursue them.
If apartments are your main focus, stick with those. I know of some apartment investors who have strayed into buying land, vacation rentals, or other single-family properties… and it hasn’t turned out well. That’s not to say that you absolutely <i>can’t</i>. But it’s usually in your best interests to stick with what you’re good at. If investing in apartments is what you’re good at, look for apartments only.
To give you some ideas, let’s take a look at the strategies of my good friend Tim Bratz (founder and CEO of Legacy Wealth Holdings, a REI company that acquires and transforms distressed apartment buildings into high-yield assets for their own portfolio).
Tim currently owns more than 2,000 rental units and has created a residual income that allows him to live the lifestyle of his choice. He also enjoys education and empowering others to achieve financial freedom through commercial real estate investments.
In general, here is the buying criteria that Tim follows:
<li>Apartment buildings ONLY</li>
<li>Value-add needed (distressed physically or distressed management)</li>
<li>A and B Class areas nationwide</li>
<li>Prefer landlord-friendly states</li>
<li>$2 million+ properties (allows for non-recourse financing)</li>
<li>Typically 50+ units</li>
<li>Minimum 10% cap rate at stabilization</li>
Now, obviously, your strategy might vary from his. But this should give you a good idea of the things you need to consider before moving forward with a purchase contract.
If you’re serious about investing solely in apartment/multi-family properties, exploring your options for joint ventures will probably be essential to your success. Whether you’re working with active or passive investors, knowing your strategy is key. So let’s take a quick look at this in depth…
<h3>BUILDING WEALTH THROUGH JOINT VENTURES</h3>
“You can have everything in the world that you want, if you help enough other people get what they want.”
The more ways that you can think of to help others in their journeys toward success, the more easily you will be able to achieve your ultimate goals.
Going back to Tim Bratz, for instance – he does a lot of joint venture deals. And he works with both active investors and passive investors.
Active investors are <b>operators</b> who find and bring the deals to Tim. He then secures the capital/loans to finance the deals.
Passive investors (private lenders) don’t like to be involved in the work as much, but they have the money to invest. They’re focused on earning a fixed return, getting money back, PLUS keeping equity in perpetuity.
You can choose to work with either/or, or both passive and active investors. The point is this: don’t let fear of forming these crucial connections stop you from pursuing your dream of being a real estate investor.
There are plenty of opportunities out there that are win-win situations for everyone involved. You just have to be willing to reach out to other investors you know or private lenders and make those solid connections.
If you’re interested in potentially partnering with me or Tim, be sure to reach out. Even if you just need advice on where to start, we’re here to help:
<li>Tim Bratz – <a href=”https://www.legacywealthholdings.com/” target=”_blank” rel=”noopener noreferrer”>Legacy Wealth Holdings</a> (CLE Turnkey Real Estate)</li>
<li>Josh Cantwell – <a href=”https://freelandlending.com/” target=”_blank” rel=”noopener noreferrer”>Freeland Lending</a></li>
And remember – you won’t get anywhere if you don’t take massive action. So start digging for leads, building your business, and pursuing the financial freedom you’ve always wanted.