How to Buy Your First Apartment Building

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Investing in your first apartment building can be a nerve-racking experience Many people who set out to invest in an apartment building end up never making the purchase. It could be because of fear of the unknown, or it could be from not taking action. Either way, many people drop out in the process between having the idea of buying an apartment building and actually making the purchase.

Pros of Apartment Buildings Multifamily investments can provide passive income to their investors. Cons of Apartment Buildings Compared to investing in a single-family home, apartment buildings have a much higher cost of entry. This can be a barrier for many investors who are just starting.

Pre Qualifying

This is a bit of a faux step in the process’97kind of chicken or the egg sort of thing. So naturally, lenders will want to know about the specifics of the project before offering you terms. First, however, you need to know some loan terms and the various loan options available to you before you can really hone in on what you can buy.

Shopping the Properties

You might start simply by looking on Loopnet or the MLS and running your own pro forma numbers when shopping properties. Then once you get confident in running the numbers and get an idea for at least what works on paper, it is time to start reaching out to commercial real estate agents.

Make an Offer

When you find a property that looks like it meets your requirements for investment, now is the time to make an offer. Depending on what size of the apartment building you are looking at, this could be in the form of a Letter of Intent (LOI), or it could be a board realtor contract.

Get it Under Contract

Once you agree with the seller on terms, it is time to sign the contract. You will want to have an attorney review the contract to make sure the terms are set up how you believe them to be and to understand all the clauses and how they all work together.