“I’d say that, to be a good deal maker, you have to have three basic characteristics – timing, timing, and timing.” – Richard Armitage
When it comes to investing in multi-family apartments, a lot of people wonder:
How do you find your deals?
What makes a great deal and how do you actually identify this?
Today, we’re going to talk about exactly that!
And we’re going to do it all in three easy steps.
1. Broker Relationships
The most common way we find great deals is through broker relationships.
In every market, you have certain brokers that handle apartments.
They have relationships with buyers and sellers.
This is especially true if a group has owned a property in a certain area for a while.
A lot of these brokers are very established in particular markets.
What’s interesting about working with brokers is that it’s not really a fair game.
Working with brokers is an insider’s game.
When you have a single family house, it’s not uncommon that the highest offer is the one that’s taken.
With multifamily, it typically doesn’t work that way.
Usually, the broker will call a few people that are on their short list.
The people that are calling have maybe bought other properties in that particular area already.
The reason they want to work with people they know is because a property can take months to go through the buying process
They want to make sure the people buying these properties are serious.
When you have a single family house as a seller, the broker is legally obligated to bring any offers to you.
With multifamily or commercial, that’s not necessarily the case.
They can actually withhold that information.
Why would a broker not want to share information with a seller?
They want to make sure that the property is going to sell.
Even if there’s a higher offer, they want to ensure the property isn’t going to be tied up for months.
Brokers want to go with the group they feel is able to sell.
We acquire properties by getting to know brokers in that particular market.
We build that relationship with them.
We leverage our experience either in the local market or other relevant markets.
2. Off-Market Deals
The second way we find a lot of deals is through off-market deals.
An off-market deal is something that’s not being listed.
To find these deals, we work with people who know someone with an available property or are in specific situations where they need to offload real estate.
This method also requires working with a real estate broker before the property has gone on the market.
There are some groups that will send mail out to different owners.
Some will do a lot of networking trying to figure out where sellers are.
Sometimes through relationships or just even talking with other owners, different opportunities will come.
Owners might not want the staff or tenants to know about a prospective deal.
They don’t want anyone to freak out or resign.
It’s these kinds of scenarios where sellers will want to keep things secretive.
Another possible reason for secrecy is the seller wanting a loan assumed at a certain level.
For these reasons and more, you can find some really great off-market deals.
An advantage to going off-market is avoiding a competitive situation.
We’re seeing some of these properties getting 20 to 30 offers (or more!) when they go to market.
So why would a seller want to do something off-market?
It could be the one of the situations I already mentioned or maybe they have a number in mind.
A broker could get them $120,000 a door and that’s enough for them
Instead of being one of 30 offers on the table, you can be one of two offers.
The benefits speak for themselves!
3. We Look at a Lot of Deals!
A lot of people think you just make an offer to get a property.
Unfortunately, that’s not the way it works.
If you try to buy a house or you sold a house recently, you’ve seen that it’s very competitive.
We’ll look at dozens of properties — sometimes over 100!
We’ll make offers on 10-30 properties and maybe get invited to the best and final.
When we’re there, they look at our track record and ability to close.
From that, they make a judgement on if we’re going to be a great operator for the property.
There’s a lot of work that goes in on the front end.
There’s also a lot of properties that you don’t end up getting.
Today, a lot of people are really overpaying for these particular properties.
You might be asking:
Why would somebody overpay?
Maybe they have the money to do so.
Maybe they have billions of dollars that they need to deploy.
You see this sometimes with REITs, which are real estate investment trusts.
Sometimes larger groups have a 1031 exchange, where one property is being exchanged tax-free to go into another deal.
We look at a lot of properties and figure out how they are valued in that particular market.
If you are looking to purchase a property in Atlanta, you need to look at other properties in the area.
From this, you’re going to figure out how much a property is worth.
Now I’d love to hear from you!
Have you found a great deal in multifamily?
Are there things you are interested in hearing us talk about when it comes to multifamily investing?
Put any suggestions into the comments!
Before you leave, make sure to check out our special report about investing. It compares the stock market to real estate, and it also includes how the pandemic affects your investment future.
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