Does anyone here wholesale multi-family or commercial properties ? I would be interested in knowing how that is done and if it is different from wholesaling SFH. Also, can a newbie start with commercial or multi-family as their first deal or should they begin with SFH ?
Commercial properties are sold based on cap rate and yes commercial property can be found with 70% occupancy which equates to a good potential upside, but unlike residential property where a margin is created because seller needs fast sale or the property is distressed, your commercial property is worth say for example $1m the day you buy it and still worth just $1m the following day or week as nothing has changed to stabilize new tenants.
Generally banks and lenders want stabilized rents for 6 months to increase value based on occupancy, as a wholesaler you just could not change the financial fundamentals in a day or week that effects value. Now occasionally a bank or lender may liquidate a commercial property for a little less than cap rate indicates value, but it’s not generally enough margin to cover closing to purchase and closing to resell and still make a profit.
I am going to buy 40-60 properties this year, probably 60, and many I will wholesale. I have never wholesaled commercial properties, but I have talked with a RE attorney about it before and it can be done. I almost did this with a 4-unit apartment building, but someone else bought it before I did - lol. As long as you have a willing seller and a CASH buyer - cash is the key word- you can typically assign any residential or commercial property with ease. The reason its so important to have a cash buyer…is that I was told most banks that do conventional financing will not allow the property to be assigned, but that does not apply to all banks. I have one guy who has bought lots of wholesale SFH deals from me, and he uses a investor-type of line of credit from a bank to get the houses.