Multifamily property makes for a very attractive investment today. So, where do you find the deals?
The multifamily sector is hot right now. Savvy real estate investors are hungry for the yields, cash flow, and efficiencies apartment buildings can offer. Big funds are still on the lookout for more real estate to add to their portfolios. More residential single family investors are recognizing the benefits of this asset class and are looking to move up into it, too. Of course, that means it is not as easy to find deals today as it was just five years ago, but it is still possible. You just have to know where to look and who to contact, and you have to be willing to put in the work and go the extra mile.
On-Market Multifamily Properties
On-market multifamily properties are those listed with an agent or broker. This segment of the market is highly competitive right now, and brokers are feeling like the cream of the crop.
There are so many other buyers out there looking for multifamily properties that it can be time-consuming to track them down and do all the sourcing yourself. Both domestic and international buyers keen to acquire more U.S. property continue to push prices up. Often, this can cause investors to hit dead end after dead end in the acquisition process. Brokers can be very valuable here. Let them do all the leg work. Let them find the deals, negotiate the deals, and help carry the process through to closing.
Even though brokers are sometimes hard to work with, occasionally don’t pick up the phone, and can be expensive, you still want to be on their radar. Meet with them, put them on the job of finding you deals, and follow up. The follow-up is key. When they email you deals, respond—even if you don’t want what they dug up. Tell them why it did not work and what you are more interested in. That will engage them, keep the dialogue going, and build the relationship.
As in any business, the 80/20 rule is definitely at play here. Oftentimes, 20 percent of brokers are responsible for doing 80 percent of the deals in any market. However, it is still beneficial to target the other 80 percent brokers doing 20 percent of deals because they can still obtain pocket listings or make valuable connections. If you give them a chance, they’ll come to you first when they have something.
Off-Market Multifamily Properties
Finding off-market properties is a way to take destiny into your own hands. Be proactive and find your own deals instead of waiting on a broker. The key here is to directly get in touch with property owners.
If you spot potential properties that fit your criteria, you can find owner information through public records. If it is owned by an LLC, google that LLC or check Manta.com, BBB.org, and Bizapedia.com to find individual owner names and contact details. Track them down by getting creative. Go through relatives, check Facebook and LinkedIn, or make in-person visits to the property. In-person contact is by far the best, if you can do it.
If they are not interested or motivated to sell yet, then keep their information. Follow up later, because circumstances can and do change. For example, last year a husband and wife inherited a property we were very interested in buying, and after initial contact, they stated they would never be interested in selling. However, it turns out less than a year later, they now face a divorce, and the wife is selling the property. Finding the gems is a numbers game. Maybe you analyze 100 properties, then bid on 10, and close on one, but it’s still worth it.
There is a lot of competition for multifamily real estate today. There are still deals to be found, if you know how to do it. Real estate brokers may be one channel—even the brokers who aren’t at the top of the food chain. Or you can get creative and go out there and dig up your own deals between driving your market and using the internet. Keep going. They are out there.