Buying your first apartment building feels overwhelming. I get it. But small multifamily real estate investing is not rocket science — it is a science, and once you learn the sequence, it gets simple. This is the same process my wife and I used to go from single-family homes to owning more than 300 apartment units, no syndications, just the two of us. Do one small multifamily deal right and it changes your family’s life. Here are the seven steps, plainly.
Step 1: Define your buy box
So much of this game is knowing what you want and, more importantly, what you don’t. A question well phrased is half-solved.
Most new investors call a broker and say “send me a deal.” That is the fastest way to get nothing useful. A deal means something different to every person. Get specific:
- Location — the markets you’ll actually buy in. I buy in Metro Detroit, and I also work with brokers in Indiana, Ohio, and California. I’ve bought and sold in Las Vegas. Each relationship works because I’m specific.
- Size and budget — you’re not chasing $10 million deals on a $700,000 budget.
- Deal type — there are three: value-add, stabilized, and heavy reposition. Inside value-add there are flavors too: a distressed property, a full rehab, or the light BRRRR strategy I run.
Write your buy box down before you talk to another broker. Mine reads like a sentence, not a wish: a value-add, light-BRRRR building in a defined list of submarkets, in a unit-count range I can actually finance and manage, at a price my capital supports. The more specific you are, the better the deals your brokers send — and the faster you can tell a real fit from a time-waster.
That specificity is the difference between my broker relationships working and not working. I work with brokers in Metro Detroit, Indiana, Ohio, and California, and they each know exactly what I buy. “Send me a deal” gets ignored. A precise buy box gets you the first call when something matches.
Once you know what you’re hunting for, your next job is learning to read a deal the moment it lands. That’s where I break down how I analyze a deal start to finish.
Step 2: Submit a Letter of Intent (LOI)
Once your buy box is dialed in and you find a fit, you write a Letter of Intent. The LOI is non-binding. It outlines the contingencies you want.
Here’s a real example of what mine looks like on a small deal:
- Purchase price: $660,000 on a 7-unit building
- Earnest money deposit (EMD): 3%, held at the title company
- 30 days for due diligence
- 30 days for financing
- 60 days to close
That’s it. Residential single-family has pre-approvals and purchase agreements up front. Multifamily doesn’t work that way, which trips people up — but it’s not complicated once you’ve done it.
Step 3: Sign the Purchase and Sale Agreement (PSA)
If the LOI is accepted, you move to the Purchase and Sale Agreement. This one is legally binding. You sign it, your EMD gets wired, and you carve out your due diligence terms.
I have an attorney draft mine. On smaller deals a broker-standard PSA is fine — I’ve sold properties where the buyer used one with no issue. On bigger deals, and on any Fannie Mae or Freddie Mac loan, you absolutely use an attorney.
The key on the PSA: be specific about your due diligence rights. Don’t just write “30 days of due diligence.” Spell out what you expect the seller to provide and what you want access to inspect.
Step 4: Run physical and financial due diligence
Due diligence is your chance to inspect what you expect. It splits in two.
Physical due diligence. Walk the units — I walk all of them. Decide which experts you want on site: a roofing expert, a plumbing expert, a foundation expert. Name them in your terms.
Financial due diligence. This is a lease audit and a rent roll audit. You’re confirming the rent roll, the leases, and the bills against what you were shown.
Here’s how inaccuracies surface. The rent roll says Mrs. Jones is in unit 1 paying $1,000 a month. You pull the lease and it says she’s in unit 2 paying $800. Is the seller lying? Usually not — small multifamily is full of longtime, unsophisticated owners with messy records. But find several of those and it materially changes the deal. That’s your moment to renegotiate or walk. I always look to renegotiate first, because I want to make deals.
If you want a structured way to pressure-test the income before you ever write the LOI, run it through my Deal Analyzer.
Step 5: Let the bank underwrite and order third-party reports
While you’re doing your due diligence, your lender is underwriting in parallel. This is the part people get wrong — they treat it as sequential. It isn’t.
The bank orders third-party reports; you pay for them:
- Appraisal
- Environmental survey (a Phase I) — this protects you, confirming the land isn’t contaminated
- Property Condition Assessment (PCA) in some cases
There is no pre-approval in multifamily. In single-family the bank pre-approves you. In multifamily, the lender issues a term sheet — for example, on a $1,000,000 purchase they might offer a $750,000 loan, meaning you bring $250,000 — but everything is contingent on a satisfactory appraisal, environmental, and bank underwriting.
The lender may also flag immediate repairs. On a Fannie Mae deal I did, they required repairs I wasn’t planning on, with escrow held back to cover them. You can try to negotiate those onto the seller or you may have to fund them yourself.
When the reports clear, you get your commitment letter. That is the moment the loan is actually approved — not before.
Step 6: Protect your timeline
Deadlines drive decisions, and delays kill deals.
By the time your commitment letter lands you might be 55 days in and several thousand dollars deep — inspections, appraisal, environmental, legal. You’re invested. That’s the cost of doing business in multifamily; you can’t avoid spending before close.
The biggest mistake I see: investors who are slow getting documents to the bank, or who think due diligence and financing are separate tracks. They blow their deadlines, the seller gets annoyed, and depending on the contract the seller can move to keep your EMD. Sellers also won’t volunteer documents — you have to request the leases, tax returns, and updated rent rolls. Stay organized and on schedule.
Step 7: Close
On closing day you go to the title company. It’s usually not a joint closing. You review the closing statement — you get it 24 to 48 hours ahead, and you read it line by line: purchase price, rent and security-deposit prorations, lender fees (a “point” is 1% of the loan; on a $1,000,000 loan that’s $10,000).
Your EMD counts toward what you owe. If you put down $5,000 and owe $100,000 at the table, you wire the remaining $95,000 — your cash to close. You sign the mortgage and the deed, title transfers, and the deal is yours.
Start with one deal
You don’t need a syndication or a fund. One small multifamily deal, done right, is the lever. Build your buy box, then work the sequence.
Want the full playbook? Grab my book, The Small Multifamily BRRRR Method — it’s $20 on Amazon, or free as a digital download for subscribers. And if you’d rather not navigate your first deal alone, apply for coaching.
Frequently asked questions
How many units counts as “small multifamily”?
In my world, small multifamily means apartment buildings you can buy as an individual or a couple — generally in the lower-unit-count range, roughly 6 to 50 units — rather than large institutional deals. The 7-unit and 56-unit buildings I describe both fit. The point isn’t a hard cutoff; it’s a size you can finance, manage, and actually close on your own.
Do I get pre-approved before buying an apartment building?
No. Unlike single-family, multifamily has no upfront pre-approval. The lender issues a term sheet based on the purchase price and preliminary numbers, then everything stays contingent on a satisfactory appraisal, environmental survey, and underwriting until you receive a commitment letter.
What’s the difference between an LOI and a Purchase and Sale Agreement?
A Letter of Intent is non-binding and outlines your contingencies — price, EMD, due diligence, and financing timelines. The Purchase and Sale Agreement is legally binding; once you sign it, your earnest money is wired and you’re committed to the terms, subject to your carved-out due diligence rights.
How long does it take to close a small multifamily deal?
It varies. My standard target is roughly 60 days, but I’ve closed in 45 days, which was a nightmare, and I’ve had deals stretch across several months. The timeline depends on the seller’s demands and how fast everyone moves through due diligence and financing.
