Finding Profits in Wholesaling Apartment Buildings
Can you find a sweet spot in wholesaling apartment buildings for boosting your investment income?
Many real estate investors, especially wholesalers, stick to the typical ‘bread and butter’ single family home for flipping. However, multifamily properties can be very profitable as well. So, why might it be just what you need to give your business a boost and how can you find golden deals others are missing out on?
Multifamily properties are one of the most in demand property types today due to the income they can provide, as well as the ease of management and increased ROI per unit. Plus, of course, commercial properties like this can bring in far more money per deal than single family homes as they are often more expensive.
There is a huge race going on to find rental properties which throws off income today, enabling properties like these to be sold for a premium, making them even more profitable for those who can locate and serve them up for those who want them.
Of course, some may believe this demand could also make wholesaling apartment buildings more challenging as well, due to the increased competition for them, but that isn’t necessarily always the case. Plus, this doesn’t have to be your full time focus but more of a side businesses to bring in additional revenue, and the fact others are having a tough time locating them makes the deals you find even more valuable.
It is true that the REO pool of apartment buildings may be dwindling, but that doesn’t mean there aren’t plenty of deals to be found. There are still billions in defaulting multifamily loans, which are in the foreclosure process, and there are many other reasons that sellers may be motivated.
In particular, this is an ideal time for many aging multifamily property owners to sell, as property values have been rising again and rates are low, creating more appealing cap rates for new buyers. That could go away when rates rise, leaving these owners with an asset they can no longer handle. Help them to exit now.
Savvy real estate investors can also find profit in deals which others have missed. For example, many of these buildings may have commercial loans on them with huge pre-payment penalties in the tens or hundreds of thousands of dollars range or even code violations which are incurring massive daily penalties. These can eat up equity and income, making them appear unappealing. However, these liens can also be negotiated, often down to pennies on the dollar, creating large spreads and plenty of room for profit.
On the flip side, those wholesaling apartment buildings can also use their innovative thinking to highlight opportunities for new owners to easily add new equity and increase income from these properties, whether it is raising rents or making improvements. This can dramatically increase the appeal and value of these properties without having to do the work yourself. So get good at researching local rents, improvement costs and creating projections.
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