Apartment Buildings and Motivated Sellers – Your Winning Combination to Riches
That commercial real estate can make you rich is no secret. But most people think that commercial real estate is not for them. They believe that you need a lot of money to get started in the business. This is a common misconception. Of course money is very useful but thanks to motivated sellers, it is possible to get started with very little money. Sometimes even with no money at all.
Getting started in commercial real estate is difficult. You need to know a lot in order to avoid buying a loser. To a lot of people, already the money involved in most residential real estate deals fees uncomfortable. In commercial real estate the numbers are often much bigger. But rather than letting the big numbers scare you, remember that your profits will be big as well.
So why start with apartment buildings? Apartment buildings have a lot of advantages for new commercial real estate investors. The main reason for starting with apartment buildings is that they offer a fairly safe and stable cash flow. Generally, you have a lot of tenants. If one tenant leaves or can not pay the rent, your cash flow is not affected as much as it would be if you have an office building with just one or two tenants. This also means that banks are, generally, prepared to lend you more money, or rather give you a higher loan-to value, than for other commercial properties. This makes it easier for beginners to get started since you need to come up with less cash to close a deal.
But how do you get the remaining money? Banks generally lend you 70-75% of the market value of the apartment building. For most new investors, the remaining money is well beyond their resources. This is why you need a motivated seller. A motivated seller will provide you with the remaining money, or at least part of it. This is called seller financing. Not every deal includes seller financing but a lot of them do. Sometimes the seller financing can even be 100%. This means you do not need to get a bank loan, the seller acts as a bank. Finding deals which includes generous seller financing is not easy but as you probably have realized, it is well worth the effort. Just one successful deal and you are on your way to the big money.