Apartment Complex Investing vs. Wholesale Real Estate: Which Is Better For Your Portfolio?

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apartment complex investing vs wholesale real estate

Apartment complex investors invest in real estate by buying apartment buildings. Wholesale real estate investors make money contracting homes with buyers at higher prices than sellers. While they are quite different approaches to real estate investing, both are alternatives to other forms of real estate investment, such as buying single-family homes as rental units. If you’re looking for a new investment approach you may want to consult a financial advisor who can help you find the right one for you.

What Is Apartment Complex Investing?

Apartment complex investing refers to investing in an apartment complex that houses many tenants. From an investment perspective, this is an obvious contrast with single-family homes, which have a single tenant.

Investing in an apartment complex has its advantages and disadvantages when compared to investing in single-family homes. It can make it easier to scale and simpler to manage than a dozen separate homes. However, apartment complex investing can require a lot more capital than you would need for buying one single-family home at a time.

Investing in apartment complexes may not always require a ton of capital, however. There are alternatives to buying properties outright, such as real estate syndications, real estate investment trusts (REITs) and real estate ETFs. While these alternatives have their own sets of pros and cons, they usually require much less capital than you would need to buy an entire apartment complex on your own.

What Is Real Estate Wholesaling?

apartment complex investing vs wholesale real estate

Real estate wholesaling is a strategy in which a wholesaler finds a motivated seller and works with them to put the home under contract. However, wholesalers do not buy the property. Instead, they find investors who want to buy the property for more than the contracted price. The wholesaler then keeps the difference between the contracted price and what the buyer pays as a profit.

This strategy is popular for those looking to break into the real estate industry who may not have much capital to start. Since wholesalers don’t buy the properties they contract, it’s possible to get started with very little cash.

But this is not to say that real estate wholesaling is easy. Being a successful wholesaler requires one to have a lot of patience while working to build up a strong contact list. Wholesalers must also be able to spot homes that are undervalued, as this is what allows them to generate a profit.

Lastly, wholesalers must have excellent communication skills and know how to market their business. Since wholesalers typically don’t have a lot of capital to offer, they must be able to gain an edge with their business savvy.

Comparison of Apartment Complex Investing and Wholesaling

The biggest difference between these two strategies is the capital outlay. Wholesalers don’t buy properties, so they don’t need much to get their business going. There might be some expenses involved, such as money spent on marketing and tools to help manage your business, such as accounting software.

Apartment complex investors usually need much more capital to get started. If you want to buy an apartment complex, it is possible to finance the purchase, just like a single-family home. But that also means you’ll need a down payment, and apartment complexes can have price tags in the millions.

Alternatives such as REITs and syndications can reduce the capital requirement significantly, but you also give up most, if not all the control you would have if you owned the property yourself.

While these two strategies are generally very different, there are some ways they are similar. For example, both require you to know the market. When buying an apartment complex, you must be able to identify properties that have the potential to turn a profit. When wholesaling, you must be able to find properties that are undervalued and have the potential to sell for more than what the seller is asking.

The Bottom Line

apartment complex investing vs wholesale real estate

Apartment complex investing means investing in an apartment complex, which can either mean buying a property outright or investing through alternative means, such as syndication or REIT. Real estate wholesaling does not involve buying properties and instead means contracting a home with a seller and finding a buyer willing to pay more than the contracted price. Apartment complex investing has its advantages, such as easier scaling and management. However, those who have minimal capital may opt for wholesaling, at least as they build up some capital.

Tips for Investing in Real Estate

  • It can be difficult to understand commercial real estate loans. If you want some help, perhaps speaking with a financial advisor could be beneficial. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

  • If you decide to buy an apartment complex as an investment property, there will be a lot to think about. In addition to various laws and regulations, there’s a good chance you will have to finance the property. While apartment complexes involve commercial loans rather than a mortgage, you can still use SmartAsset’s mortgage calculator to estimate your monthly costs.

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