3 Steps for Contracting and Securing a Commercial Apartment Deal



Posted: Monday, June 29, 2009

by Lance Edwards
First Cornerstone Group, LLC

So you have found a multifamily apartment and you would like to secure the deal. How do you close it if you want to hold it? Do you know the process that is involved? There is a simple 3 step process to follow to wrap up your apartment deal. It involves qualifying the deal, due diligence and closing.

Qualify the Deal: This is the first step in closing your deal. It actually has a two part phase: verifying the income and expenses and driving by the multifamily property. Up until this point, you have just been talking on the phone with the seller and you have not even seen the property. Now you need to validate income and expenses.

You need to look at whatever financials they send you in the context of how you can enhance the situation. For instance, if the occupancy grew from 72% to 85% how would you maximize your cap rate? If it went to 95% how would that expand your cap rate? You need to wear your "money glasses" because you are looking at the property with regard to making a profit on this deal.

Once you have seen the numbers and it looks like a potential deal, you need to visit the property. Again, you want to make an evaluation as to how you can make money on this deal. What could you do to make it more attractive for leasing? Does it look like a lot of deferred maintenance? Look at the multifamily property as the asset manager to determine what needs to be done to create more NOI.

Due Diligence: Now that you have looked at the property and confirmed that it is indeed a good deal, you want to issue a letter of intent to get the property tied up. The letter of intent is basically a statement that the seller is looking to sell the commercial apartment and that you are searching to buy the apartment and that you agree on the stated terms within the letter. The letter allows for an inspection period which is due diligence. It also allows for a financing interval.

Closing: Once you have your letter of intent signed by yourself and the seller, you move right into the contract. You can use any formal contract that you and the seller can agree upon. You will be signing the contract as well as additional legal documents. Money will change hands and you will take the title and you are now the proud owner of a multifamily property!

Once you are aware of the process that needs to be followed when putting together a multifamily deal, it becomes much less intimidating. Again, educate yourself on the process and not only will you be more confident when dealing with the seller but the seller will be assured of your knowledge and ability.

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You don't have to "graduate" from single family to multifamily. You can start with multifamily - just like Lance Edwards did. And besides owning apartments, you can flip them for big cash. Utilizing the multifamily apartment strategies he now teaches and writes about, Lance retired from his job in July, 2005. For more information on how you can achieve financial freedom using other people's money, visit http://www.ApartmentWealthMachine.com .

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