Wholesaling small multifamily.

[Account Closed]

Hi everyone,

I just got a list of about 100 small multifamily properties (ranging from 4-12 units) that I will be sending direct mail on. At this point I'm trying to develop a tool box of techniques that I can use if I find a motivated seller. One of these techniques would be to wholesale to a buy and hold investor.

I know people have wholesaled multifamily before and are currently doing it and I know it differs quite a bit from the 70% sf rule flip model. I have a lot of confidence in myself to correctly analyze deals and I know the differences between a good cash flowing property and a bad one. My main question however is, with an exit strategy of wholesaling only to a buy and hold investor, does that drastically reduce your potential end buyers? Is the wholesaling strategy for multifamily completely different than flips and have/would you wholesale these types of properties?

Also, when you go to put a small multifamily under contract, is your time table for flipping the contract traditionally 30 days? I know this is a concern for a lot of new wholesalers but I always worry about not being able to find an end buyer in 30 days and in the process losing earnest money and tarnishing my reputation.

Any insight on wholesaling small multis would be greatly appreciated!

[Brian Burke]

The APOD is THE tool to use to analyze the income. The income itself isn't region specific, but the price you should pay for that income stream is. As an example, let's say that the net operating income calculated on the APOD is $100,000 per year. You would pay more for this property in a good neighborhood in downtown San Francisco than you would if it were in a bad neighborhood on the outskirts of Buffalo (no slam on Buffalo, I own there too!).

To analyze by region you don't use an automated tool, you use market knowledge. Familiarize yourself with the ranges of cap rates that properties in various neighborhood grades are trading at in the area or areas that you are interested in.

As to the original question of whether it is possible to wholesale Multifamily to buy/hold investors, I say yes! I haven't done it, but as a buyer I would welcome calls from wholesalers with great deals to sell. What this means to you is that you need a buyers list and you want to know what the buyers on that list are looking for. If you know that buyer X wants class-B apartments in Houston over 100 units, you would call buyer X when you have that deal, and so on. The problem is that it is all too common for wholesalers to think they have a great deal when it's not good at all, which is another good reason to know ahead of time what your buyers want.