The #1 Way To Find Great Apartment Building Deals
If you’re a newbie investor interested in investing in apartment buildings, you might be wondering how to go about finding deals.
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Some gurus who will teach you to market to probates, send direct mail to apartment owners, or network with attorneys. All of these tactics can work. However, I’ve found that there is one specific tactic that is most helpful for me when looking for deals. So, without further ado…
The # 1 Way to Find Apartment Building Deals
The best and most efficient way to find great apartment building deals is through a good network of commercial real estate (CRE) brokers.
CRE brokers make it their business to find deals. The good ones send postcards and letters to apartment building owners and build the relationship years before an owner wants to sell. They network extensively and beat the pavement to get listings and buyers.
For example, a Marcus & Millichap broker is offering to do an informal “appraisal” of my buildings to assess what they’re worth. All he’s asking for is the financials to do so, no strings attached.
Smart. We get to know each other and maybe start to trust each other. He may gain a listing down the road, or I may be one of his buyers.
Unfortunately, most brokers are not that good. But the few that are that good are worth their weight in gold.
I remember when I was marketing for deals in Texas after taking my first apartment building boot camp. While I did send out letters (a lot of work, and I didn’t get a single deal out of several months of marketing!), I focused heavily on cold-calling CRE brokers. Over several weeks of this, I noticed that a few brokers actually took me seriously and had deals on a more regular basis and communicated frequently, while most did none of these things. I found one broker in particular who fed me deals almost on a weekly basis.
Focus your efforts on finding just two to three brokers who are prolific deal-makers and who take you seriously, and you are set for the rest of your real estate investing career.
How Do You Find Good CRE Brokers?
One of the best ways to find potential brokers to work with is on LoopNet. OK, I hear you saying, “LoopNet is worthless for finding deals,” and that is mostly true, but it’s a gold mine for finding good CRE brokers.
I go on www.LoopNet.com (it’s free to create an account), and then I search for the kind of buildings I want to buy. I create a spreadsheet and capture the contact info of each of the CRE brokers who have listings. After doing several, I see some brokers over and over again, and I track how many listings a broker has. The more listings, the better.
I then cold-call the brokers. I normally say something like, “I saw your listing on LoopNet, and that deal doesn’t really work for me, but here’s what I’m looking for. What else do you have?” I may tell him what I’m looking for and learn a little about him, too. Then I see how he interacts with me and what his deal flow is.
I find an in-person meeting is a good next step if you think the broker is one of the better ones.
I track all of this activity. Over time, you see a few brokers bubble to the top.
The Key to Maintaining Good Deal Flow
In addition to finding the few brokers that will feed you deals, it is important to be responsive when they do send you a deal. Nothing cools a relationship faster than a lack of response.
What I mean by “response” is that you respond to the broker with feedback about EVERY deal they send you. This means you have to get fast at analyzing a deal. But it’s not enough to just answer the question, “Is it a deal or not?” (Because 99% of deals are not based on the asking price!) The real question to answer is, “What is the MOST I would pay for this, and why?” That is what is most helpful to the broker. Using my deal analyzer spreadsheet, I’ve gotten my first analysis down from 4 hours to about 15 minutes — very useful.
Over time, the broker will get to know your criteria better. He may try to find deals that fit your criteria. At a minimum, though, he’ll start sending you only those deals that he thinks will be a fit.
Focus on building relationships with 2-3 good commercial real estate brokers, respond to them quickly when they do send you a deal, and you will have more deals that you can handle.
[Editor’s Note: We are republishing this article to help those who have found BiggerPockets more recently hunt out apartment deals. Let us know what you think with a comment!]
What’s YOUR best way to find apartment building deals?
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