Sometimes the simplest things give you the best results.
Three years ago when we moved to Syracuse, I noticed an apartment complex at a major intersection on my route home from work. It appeared to be the size I was looking for, and each time I drove past it, I told myself I would try to find the owner and make an offer.
With the new city, new job, new baby, and so on, that desire to track down the owner remained a wish for another two years.
In July 2019, I finally sent postcards to the owner. I wasn’t conducting a particularly robust marketing campaign, but in my “trying out” the DealMachine app, I also set up automatic mailings—and forgot about it!
One quiet evening in November, I got a call from the owner. He had been out of the country and came home to find my postcards. He wasn’t interested in selling the building I had asked about but wondered if I would be interested in another seven-unit he was looking to offload.
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He gave me the numbers—they sounded amazing! I was a bit hesitant when I got the address, but after a little while, I snapped out of it and went to take a look. We closed on this building right when the COVID-19 lockdown started.
Details about the property:
- 7-unit apartment complex
- Fully rented with some tenants on public assistance (ahem, gold in this COVID era)
- Each unit has its own furnace (meaning I won’t pay for tenants’ heat in cold Syracuse!)
We negotiated price and terms. He was planning to list it with a Realtor but instead let us pay what he would have gotten after Realtor fees were removed.
Details about financing:
- Seller financed
- 20% down, amortized for 20 years, but due in 5 (no banks were involved)
- Expected cash-on-cash return: 53%
What Is Driving for Dollars?
If you’re looking for multifamily property, don’t ignore the good old “driving for dollars.” The idea behind driving for dollars is that you spot potential investment opportunities as you drive around neighborhoods of interest.
I think of driving for dollars in two ways:
- Intentionally driving for dollars, and
- Spotting “dollars” when you drive.
Driving for Dollars Step by Step
You may think of driving for dollars when searching for properties to wholesale or rehab; but it works just as well with multifamily properties.
Step 1 – Find the Property
Depending on your goals, you specify your target property type, and take note of properties that meet your criteria as you drive. Look for tell-tale signs of age, vacancy, or distress (i.e., tall grass, undisturbed snow, a full mailbox, etc.).
For the deal I described above, it was simply the location and property type that caught my attention.
Step 2 – Find and Contact the Owner
When you find a property that matches your criteria, contact the owner.
While I found this owner’s mailing info on the app I used, I could quite easily have looked it up on the city’s property assessment website and sent him postcards myself. I could also have used a skip tracing service to find a phone number or email address.
Irrespective of the method, the key thing that made the deal successful was persistence. People may not respond to the first or third mailer they receive. Keep at it!
In this case, I was able to be persistent without even having to remember to be. I’d forgotten what I had set in motion via DealMachine.
But even that makes a point! Set up systems so that your business doesn’t rely on YOUR remembering.
“What do you say to the owner?” you might wonder. Here’s what I write.
I saw your property on 123 Main St. Would you be open to selling?
Nothing complicated. The worst they’ll say is “no.” If they do, you come back in a few months!
And if they say, “Yes”?
Step 3 – Make an Offer
You’re now direct to the seller. You can negotiate both the price and terms.
- Price: Remind the seller they would be saving on Realtor fees, and negotiate a price that reflects that.
- Terms: You can negotiate owner financing (either partial or full financing), negotiate the down payment, as well as the amortization and duration of the loan. Don’t forget creative ideas like lease options.
The key is to understand what the seller really wants and structure the deal in such a way that works for you both.
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Here’s the real gem about this deal: The owner says he’ll be selling the original property I asked him about in a few years. Guess who will be waiting and ready to take it off his hands?
What other simple ways have you found mouth-watering deals?
Share with a comment below.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.