Wholesaling Apartment Buildings: Step By Step Guide (2023)

Wholesaling houses has developed a reputation as an entry-level investment strategy, and for good reason: It boasts a relatively low barrier to entry, requires minimal capital expenditure, and can help build wealth for subsequent real estate endeavors.

It is worth noting, however, that when most people refer to wholesaling, they almost exclusively reference single-family homes. While single-family properties are the most commonly wholesaled real estate assets, they aren’t the only ones. Apartment buildings, in particular, can be wholesaled with a high degree of success.

Due to the economic indicators shaping today’s housing market, there may be no better time to learn how to wholesale apartment buildings. If for nothing else, rental demand is higher than ever, creating a window of opportunity for well-informed wholesale real estate investors.

Also, the distinct lack of available inventory on the housing market will continue to relegate a large portion of the population to the renter pool for the foreseeable future—and most likely beyond.

In other words, there will always be a demand for apartment buildings, and the latest pullback is more of an investment opportunity than a secular trend. Investors who learn how to wholesale apartment buildings today can get ahead of the competition and cater to a much-needed niche. As a result, we’ve developed this guide to teach investors everything they need to know, including:

• What Is Wholesaling Apartment Buildings?
• How To Wholesale Apartment Buildings in 7 Steps
• How To Wholesale Apartment Buildings With No Money
• Is Wholesaling Apartment Buildings Legal?
• Do You Need A Real Estate License To Wholesale Apartment Buildings?
• Final Thoughts On Wholesaling Apartment Buildings

What Is Wholesaling Apartment Buildings?

Wholesaling apartment buildings is a commercial real estate exit strategy that borrows from the wholesaling single-family homes concept and applies the same principles to larger multifamily apartments. Not unlike traditional single-family home wholesale deals, wholesaling commercial properties will witness the investor act as an intermediary between sellers and buyers. When the wholesaler connects a buyer to a seller, the buyer will pay them a fee for their services.

That, of course, is a simplified explanation of how to wholesale apartment buildings. However, it should give aspiring wholesalers a better idea of this exit strategy. For a more in-depth look at wholesaling apartment buildings, reference our more detailed outline below.

Read Also: Wholesaling Commercial Real Estate: The (ULTIMATE) Guide

How To Wholesale Apartment Buildings In 7 Steps

Wholesaling apartment buildings can be a lucrative venture for real estate investors looking to make substantial profits. However, it requires careful planning, market knowledge, and the ability to navigate complex legalities and contracts. In this comprehensive guide, we will walk you through the seven essential steps to successfully wholesale apartment buildings.

By following these steps, you can position yourself for success in the competitive world of real estate wholesaling:

1. Educate Yourself On Laws & Contracts
2. Understand The Real Estate Market
3. Define Your Benchmarks
4. Locate Distressed Properties
5. Put Property Under Contract
6. Assign Contract To Buyer
7. Exit The Deal & Collect Assignment Fee

If you're serious about honing your skills and maximizing your success in this niche, we invite you to join our FREE training program. Real Estate Skills provides invaluable insights, strategies, and tools specifically tailored to wholesaling apartment buildings. Don't miss out on this opportunity to take your real estate wholesaling career to new heights.

1. Educate Yourself On Laws & Contracts

To excel in wholesaling, wholesalers must familiarize themselves with the local laws and contractual regulations. For up-to-date and reliable information on the governing rules and regulations surrounding apartment buildings, here is a list of reputable resources to mind for due diligence:

• U.S. Department Of Housing & Urban Development (HUD): Aspiring wholesalers should consult with the HUD for information on the most relevant housing laws and regulations, including those related to wholesaling apartment buildings.
• National Association Of Realtors (NAR): The National Association of Realtors’ website has a dedicated legal page with laws governing Realtors and real estate transactions.
• State Real Estate Commission Websites: Every state has a dedicated Real Estate Commission or board whose sole purpose is to regulate real estate activity within its borders. Wholesalers looking to learn the laws in their specific state will want to visit their respective Real Estate omission for the latest wholesaling laws.
• Legal Websites & Online Platforms: There are many trustworthy websites and online platforms wholesalers can reference. LegalZoom, FindLaw, and Nolo are just a few that provide information on real estate laws, including the laws and regulations governing wholesaling apartment buildings.
• Real Estate Forums & Communities: Participating in real estate forums and communities is an excellent way for investors to gain first-hand knowledge from like-minded investors.

Wholesaling apartment buildings is a very legal and viable exit strategy, but only when investors operate within the confines of their local laws. Therefore, wholesalers must ensure they abide by the rules and regulations in their area, all the while exercising transparency and the highest ethical standards.

Read Also: Due Diligence For Wholesaling: The (ULTIMATE) Guide

2. Understand The Real Estate Market

Once investors know the laws regulating their impending wholesale, the next step is understanding the real estate market in which they intend to work. Digging into the market’s most fundamental indicators, investors need to familiarize themselves with everything. Conduct extensive research to gain insight into current conditions, trends, demand for apartment buildings, and other relevant information.

An excellent place to start is local demographics. Identify critical factors like population growth, employment rates, and economic indicators. With a better idea of how healthy the economy is, investors can gauge what demand might look like for an apartment building—now and in the future.

Additionally, investors will want to evaluate their local market's supply and demand dynamics. Supply and demand of multifamily and single-family homes will provide a clear picture of the market demand and the potential profitability of wholesaling apartment buildings.

Research can include visiting trustworthy online portals, but it’s usually better to network with local professionals. Realtors, agents, property managers, and other investors can tell wholesaling beginners everything they need to know about wholesaling apartment buildings.

With a better understanding of the local real estate market, wholesalers can simultaneously locate deals and find the perfect cash buyers to connect with sellers. Additionally, the more a wholesaler knows about a market, the more they may be able to charge the buyer for their services.

3. Define Your Benchmarks

Before wholesalers even think about talking to sellers, they must define their benchmark indicators and clearly understand what a successful real estate deal will look like. Setting accurate and achievable benchmarks allows investors to set goals, track progress, and make more informed decisions.

The first benchmarks to set have to do with financial objectives. In particular, determine an appropriate wholesaler fee to make the deal successful. Understanding how much their time is worth will impact future deals; it could help investors evaluate potential opportunities. Lastly, benchmarking financial goals will help investors set annual goals and turn a single wholesale into an entire career path.

Investors can’t finish setting benchmarks without addressing how much time they want to spend wholesaling apartment buildings. At the very least, wholesaling apartment buildings requires significant knowledge and effort, so investors need to know how much time it will consume.

With financial objectives and time allocation out of the way, investors should move to establish several key performance indicators (KPIs): the number of leads generated, conversion rates, profit margins, the average time it takes to close a first deal, and more. Tracking important KPIs will help investors gauge their success or failure.

Alone, each benchmark gives investors an individual target to aim for; together, they can create a roadmap for an entire wholesaling business and set the foundation for effective decision-making.

4. Locate Distressed Properties

The strategies for locating distressed apartment buildings aren’t all that different from finding single-family homeowners. In fact, investors looking to wholesale apartment buildings should look at these sources before going anywhere else:

• Their Network: Investors shouldn’t underestimate their network. Real estate is a people business; sometimes, finding a deal is as simple as talking to someone in the industry. Therefore, investors will want to connect with real estate agents, property managers, lenders, and other professionals with access to distressed properties. Some of the best contacts can be found by attending local real estate networking events, joining online forums, and engaging with industry-specific social media groups.
• Property Auctions: Apartment buildings can be included in property auctions, like foreclosure and tax lien sales. The institutional entity conducting the auction will usually be ok with selling the property at a discount, as they would rather get the asset out of their inventory than hold it without the revenue potential.
• Direct Marketing: Direct marketing is a large umbrella that includes mailers, postcards, or letters to distressed property owners. Each medium should allow the investor to express interest in purchasing distressed apartment buildings and how working with a wholesaler may be the owner’s best move.
• Online Platforms: Utilize online platforms and apps to broadcast real estate wholesaling services. Wholesalers should establish a website that can capture the leads of motivated sellers. In doing so, provide helpful information to attract viewers and give them a reason to submit their contact information.
• Local Government Resources: Inquire with local government agencies, such as the housing department or economic development offices. Specifically, ask about distressed or underperforming apartment buildings nearby. There’s always the possibility they will want to sell immediately, or they have information on rental properties with tax liens, code violations, or other issues that may warrant a wholesale.

Read Also: How To Find Distressed Properties To Buy

5. Put Property Under Contract

When investors identify a distressed apartment building that meets their criteria, the next move is to draft a wholesale contract. The foundation of every wholesale, contracts give the investor the sole right to buy the property at a predetermined price. Consequently, the owner of the apartment building is then contractually obligated to sell to the investor until otherwise noted.

It is important to note that the wholesale contract doesn’t mean the investor is buying the building. Instead, the wholesaler gains the right to buy the building. This arrangement guarantees that any future dealings related to the property must involve the investor, ensuring their involvement in the transaction.

6. Assign Contract To Buyer

Having obtained exclusive purchasing rights, the investor's next step is to locate a cash buyer to whom they can assign the contract. Specifically, the wholesaler must sell their right to buy the apartment building to another investor before the contract's terms expire. If the wholesaler has a well-curated buyers list, connecting with the appropriate individuals may be straightforward. Other investors, recognizing that the wholesaler knows how to wholesale apartment buildings, will likely seize the opportunity and collaborate.

Once an end buyer is identified, the wholesaler must initiate another contract, an assignment of contract agreement. As the name suggests, this agreement permits wholesalers to transfer their right to purchase the apartment complex to the new investor. Upon completion of the assignment of contract agreement, the wholesaler relinquishes their right to buy the house in exchange for a fee from the new investor.

7. Exit The Deal & Collect Assignment Fee

Once all the required documents are prepared and signed by the relevant parties, the next step is to close the deal and receive the assignment fee. This raises a question: How much should a wholesaler receive for facilitating the connection between a seller and a buyer?

Typically, wholesalers charge a fee of 5% to 10% of the property's asking price. However, it is not uncommon for wholesalers to opt for a flat fee. It is important to note that there is no universally established fee structure. Instead, determining the assignment fee is flexible and based on the market value the wholesaler brings to the end buyer.

How To Wholesale Apartment Buildings With No Money

Traditional real estate investments typically require a large amount of capital. Buying a home, for that matter, is often the most expensive purchase most people will make in their lifetimes. However, wholesaling makes it possible to complete a deal without spending a single dollar.

While there are always exceptions, most wholesale deals don’t require the investor to spend any money; they merely acquire the rights to buy a home and assign their rights to an end buyer. Sometimes, an earnest money deposit may be required to ease the seller’s nerves. The end buyer is the party who will be spending money to purchase the apartment building to capitalize on future cash flow.

You can also check our video on "How To Get Into Real Estate With NO MONEY!", which outlines strategies and insights on navigating the real estate world without hefty bank account withdrawals.

Is Wholesaling Apartment Buildings Legal?

Wholesaling apartment buildings is a legal and profitable venture, provided local laws and regulations are strictly adhered to. Investors must prioritize transparency and uphold high ethical standards to ensure compliance. The more transparent wholesalers are about their intentions, the better it is for everyone involved.

When entering into a bilateral contract with the seller, wholesalers must disclose that their objective is to acquire an equitable interest in the property rather than the property itself. Additionally, investors must provide a proof of funds letter and act as the principal buyer. Again, it is crucial to be fully transparent and disclose all relevant information without omitting any details.

Engaging in on and off-market deals can be a complex process, and it is advisable for investors to seek the guidance of a qualified real estate attorney. Consulting with a professional will help ensure compliance with specific market laws and regulations, allowing investors to navigate the intricacies of wholesaling while staying within legal boundaries.

Read Also: Is Wholesaling Real Estate Legal?

Do You Need A Real Estate License To Wholesale Apartment Buildings?

Investors do not need a real estate license to wholesale apartment buildings. Anyone, for that matter, is permitted to wholesale apartment buildings if their knowledge and expertise allow them to facilitate a deal. That said, while a real estate license is not necessary, it may be helpful. If for nothing else, a real estate license coincides with many benefits, like a nationwide network of like-minded professionals.

As a result, inventors may not need a license, but they may benefit from having one. Anyone with a real estate license needs to be completely transparent and let each party involved in a deal know their status as a licensed agent.

Check out our in-depth video on "How to Gain Access to the MLS Without a License." We cover key insights and practical tips to unlock potential property opportunities you might have been missing out on!

Final Thoughts On Wholesaling Apartment Buildings

Apartment buildings aren’t the first type of multifamily properties wholesalers typically gravitate towards. However, the state of the current housing sector suggests that anyone who knows how to wholesale apartment buildings may have an advantage for the foreseeable future. This guide should provide a good starting point for those who have yet to learn how to wholesale apartment buildings. Following the steps above should get the ball rolling.

At Real Estate Skills, our team of experts is ready to provide the tools you need to wholesale apartment buildings. We're committed to providing the knowledge, resources, and support you need to successfully navigate an apartment building wholesale. So avoid common mistakes and maximize your returns by leveraging our expertise.