Landlording & Rental Properties

6 Actionable Steps to Land Your Very First Apartment Building Deal

Expertise: Business Management, Commercial Real Estate, Landlording & Rental Properties, Real Estate Deal Analysis & Advice, Mortgages & Creative Financing, Personal Development, Real Estate Investing Basics
126 Articles Written

You’re interested in real estate investing because you seek passive income and long-term wealth. And perhaps you’ve considered investing in multifamily properties but you haven’t pursued it because you didn’t know how to get started.

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In this article, I want to show you the blueprint to getting to your first apartment building deal. I believe that once you see the roadmap to your first deal, you will begin to believe that you, too, can do it.

Here are the 6 steps to do your first apartment building deal.

6 Actionable Steps to Land Your Very First Apartment Building Deal

Step #1: Don’t sound like a newbie.

You have to use the right language when you speak to other professionals. You only have one chance to make a first impression. So if you call a broker and sound like a newbie, it will be difficult for you to convince him otherwise later.

This means you’ll have to educate yourself. Read everything you can on BiggerPockets. Check out all of the free resources. Read books. Eventually, it might mean that you invest in your education by purchasing a course or attending a seminar.

Either way, do your homework first. Learn the lingo, use the right words, and understand basic financial concepts.

analyze-multifamily

Step #2: Get good at analyzing deals.

Real estate is a numbers game — the more offers you make, the more deals you do. Unfortunately, analyzing apartment building deals is more complex than analyzing a house flip or single family house rental.

I remember clearly when I got into apartment buildings back in 2007 — it took me four hours to analyze a deal. Four hours! It took so long and was so overwhelming that I almost quit.

And then I discovered a better way. I call it “The 10-Minute Offer,” and it will allow you to make an offer on a deal you get from a broker within 10 minutes of getting the marketing package. It’s that powerful, and it will accelerate the progress you’ll make towards your first deal.

Related: Your Complete Guide to Analyzing a Property in Just 10 Minutes

And once you get a counter offer, it’s time to sharpen your pencil. Now you need a financial model that lets you determine exactly how much you can offer, taking into account the income and expenses, your investors, and the terms of your mortgage. It’s got to be easy to use and accommodate investors, but it also needs to be able to model more complex situations, like value-add scenarios or a cash-out refinance.

For some recommendations on a multifamily deal analyzer spreadsheet, see this Bigger Pockets forum post.

Here’s a side effect of getting good at analyzing deals: Once you’ve analyzed about a dozen deals, you will find that your confidence level will sky rocket.

One of my students, Nick, told me that his potential investors always asked him about his experience, and he didn’t have a good answer for them. But after a few weeks of analyzing deals, he went to his local REIA meeting and spoke to three potential investors who never asked him how many units he already had. It never came up! Why? Because he was speaking so confidently that it never occurred to these investors to ask about his experience.

That’s the difference confidence makes, and you build confidence by getting good at analyzing deals.

Step #3: Create deal flow.

Once you can analyze deals quickly and accurately, it’s time to put as many deals through the pipeline as possible. You can do that in a variety of ways, but the #1 way is through brokers.

That’s because their job is it to find, network, and know apartment building owners. They send cards and letters, make phone calls, and try to meet with these owners. When an owner is ready to sell, they will likely call one of these brokers who has built a relationship with them over the years.

There are other techniques, like sending letters and cold-calling, but the #1 way is brokers.

Related: The #1 Way To Find Great Apartment Building Deals

Step #4: Learn the secret to raising money.

The chicken-and-egg problem with apartment building investing goes something like this: “I don’t have a deal under contract, so I can’t go out and talk to investors.” Or, “I have a deal under contract, and now I don’t have enough time to find investors so that I can close.”

This is a real problem that will stop you dead in your tracks. But it doesn’t have to be that way. You can get financial commitments from people LONG BEFORE you ever get a deal under contract. Once you have the majority of the money committed, you can make offers with confidence, and you have a very high chance of being able to close.

I’ve written extensively on BiggerPockets about raising money — if this is of interest to you, see these related articles:

 

apartment-investing-success

Step #5: Avoid costly mistakes.

You’re going to make mistakes no matter what you do. You just want to take steps to avoid the kind where you lose your shirt. Here are some of the most common (but avoidable) mistakes newbies make with apartment building investing:

  • Buying in the wrong area
  • Not correctly analyzing a deal and overpaying
  • Choosing a deal that doesn’t have enough cash flow
  • Not having enough cash reserves
  • Not starting the money-raising process soon enough
  • Spending money too soon in the due diligence process
  • Not knowing your lender’s underwriting requirements up front

The best way to avoid these mistakes is to educate yourself and to surround yourself with experienced investors and/or hire a coach.

Step #6: Consider partnering on or wholesaling your first deal.

Don’t think that you have to have all of the money raised to get into apartment building investing. Absolutely not. In fact, many new investors get started by referring or wholesaling a deal, or by partnering with someone.

I had a student who brought me a deal in Columbus. He found it, analyzed it, and was getting close to a verbal agreement around a number that made sense. He then called me up, and we determined that the deal was in fact going to work. We agreed on a $45,000 referral fee payable at closing, and I would take over from there.

This would let him say that he did a deal AND got paid $45K. Experience + getting paid. Very cool.

Listen, if you can find a deal, properly analyze it, and negotiate around a number that makes sense, THAT has value. That’s something you can get paid for.

Conclusion

Many newbie investors don’t pursue apartment building investing as a viable option to achieve financial independence because of these three limiting beliefs:

  • “I don’t have the cash or credit.”
  • “No one’s going to take me seriously without a track record.”
  • “I don’t know how to get started and what to do next.”

I hope that this article dispels some of these limiting beliefs and gives you a map to help you visualize the road to doing your first apartment building deal.

Have you considered getting into multifamily investing? What’s holding you back?

Let’s chat in the comments section below!

Michael Blank is a leading authority on apartment building investing in the United States. He’s passionate about helping others become financially free in 3-5 years by investing in apartment building deals with a special focus on raising money. Through his investment company, he controls over $30MM in performing multifamily assets all over the United States and has raised over $8MM. In addition to his own investing activities, he’s helped students purchase over 2,000 units valued at over $87MM. He’s the author of the best-selling book Financial Freedom With Real Estate Investing and the host of the popular Apartment Building Investing podcast Apartment Building Investing podcast.

    Michael Sadler from Edmonton, AB
    Replied over 3 years ago
    After reading Brandon’s article on retiring in 3 years, apartment buildings sound good.
    Sterling Anderson Developer from Omaha, NE
    Replied over 3 years ago
    Awesome Article. Multi Family Is Definitely The Play!
    Kris Martinez Investor from San Antonio, Texas
    Replied over 3 years ago
    Michael Blank has a solid deal analyzer, too. If you haven’t checked out his website, it is loaded with good content.
    Brendan Novisky Pharmacist from Chillicothe, Ohio
    Replied over 3 years ago
    Tons of good info and links to other articles. Thanks for taking the time to write this, it is exactly what I am looking to do right now.
    Tom Mole Investor from Sunland, California
    Replied over 3 years ago
    Thanks Michael. Great post! You nailed it! You always put out the best blog posts. Last year I had a 55 unit under contract and my money person repeatedly said, “no problem, we can get this funded”, then just as the EMD was gonna go hard he tells me that the deal is all wrong from top to bottom and I’ll need to crawfish the deal. I’ve been working out new ways to fund my deals ever since. (Grrrrr…..) I’m gonna concentrate on steps #4 and #6. I do need to raise funding better in order to have the confidence to talk to broker knowing that I’m not wasting their time or my own. Would it be OK to send you a PM directly when I have a question?
    Michael Blank Rental Property Investor from Northern Virginia, VA
    Replied over 3 years ago
    Thanks Tom for the kind words. If you have questions, best to ask them at http://www.TheMichaelBlank.com/ask. Thanks again!
    AJ P. Residential Real Estate Broker from Napa, California
    Replied over 3 years ago
    Excellent read! Thanks for sharing!
    Casey Murray Real Estate Agent from San Diego, CA
    Replied over 3 years ago
    Great article, Michael. The beauty about REI is the ability to scale your business and trade up from SFR’s and MF’s to apartment buildings.
    Iggy Marques Flipper/Rehabber
    Replied about 1 month ago
    My question is; if you had 150k cash and wanted to put 50k in 3 different apartment complexes(5+ units), would it be easy to get financed, would banks take into consideration cash flow? Any help would be appreciated... thx!