The multifamily sector is hot right now. Savvy real estate investors are hungry for the yields, cash flow, and efficiencies apartment buildings can offer. Meanwhile, more residential single-family investors are recognizing the benefits of this asset class and looking to move up into it. So where do you find the deals?
The desirability of these larger real estate investments means they’re 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, plus be willing to put in the work and go the extra mile.
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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 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% of brokers are responsible for doing 80% of the deals in any market. However, it is still beneficial to target the other 80% of brokers who are 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, the Better Business Bureau, and Bizapedia to find individual owner names and contact details. Track them down by getting creative. Ask your network, 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.
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.
Complete these five steps first
When looking for a multifamily property to invest in, there are some things to consider to ensure you make a smart addition to your real estate portfolio. There are also some potential missteps that should be avoided if possible. For best results, here are five pieces of advice.
1. Choose your type of multifamily property and investment strategy
There are several types of multifamily investment properties to choose from. Some investors like to keep things simple and choose a duplex as their first-time investment. This can be a good option if you’d like to manage two properties that exist side by side and share much of the same infrastructure. Tenants on both sides of the property typically pay the same amount in this case.
There is also the option to invest in an apartment complex that has a handful or even dozens of apartments. The price for rent can vary based on square footage, bedroom count, amenities, and other factors in this instance.
The type of multifamily dwelling you should invest in really comes down to your personal choice and your long-term goals. You can fix and flip the property or hire a property manager to deal with the landlording tasks. Weigh out all the possibilities and decide what works best for you before you purchase the property.
2. Do your research and find quality leads
You may already know what type of property you want to invest in—including what it looks like and where it should be located. However, you may be unsure about how to actually go about finding your perfect investment property. MLS property listings are one of the most popular places to search. The problem with using the MLS, however, is that every other investor has access to that same information.
You can often get an edge by browsing the listings for available rental units in the town or neighborhoods you’re focused on. Look for listings that are going for lower than expected per month or that have photos that appear shabby. These could be signs that a landlord simply doesn’t have the time or resources to fix up a rental property and charge the maximum amount for rent. Further, it may imply that a landlord or property owner is ready to sell and unload the responsibility.
You can also use a digital service that displays listings for available multifamily properties without having to weed through single-family residential properties. Online platforms such as LoopNet and Crexi are popular options for commercial multifamily properties.
In addition, mainstream platforms like Trulia, Zillow, and Redfin all offer apps that will essentially push available deals right to your phone in real-time for more traditional duplex, triplex, and quadplex homes.
3. Work with a Realtor
Real estate professionals have a good grip on the market. Consider forming a relationship with a local Realtor who handles multifamily properties. This could help you be among the first to get in for a look when a property with multiple units goes on the market, as Realtors have developed networks.
Another benefit of working with a Realtor is you get a great opportunity and an open door to their contacts. This partnership can help you build the portfolio you strive for and potentially open up off-market deals that have less competition to purchase. (And it helps in our next point.)
It’s also worth your time to join a landlord association in your local area and attend meetings if you already own or manage a rental property. These meetings can serve as great networking tools and give you access to other property owners, some of whom will eventually want to sell their properties.
Another smart way to network is to utilize social media. Join Facebook groups, ask your followers if they have any leads, find other expert real estate investors you would like to emulate, and do your due diligence on the community around you.
5. Get the funding
Things move pretty quickly in the world of multifamily deals. That means it can feel like you need to obtain financing in half the time when a golden opportunity arises. And it is pretty devastating when you find the perfect investment property but it falls through because you don’t have the financing lined up already.
There are a lot of ways to get funding for a property, whether that is through a hard money loan or a rental loan, a family member, or a bank. Make sure that this part of your investment strategy is in the works from the beginning.
Drive for dollars
Driving around local neighborhoods provides great insight on potential property deals. Look for “for rent” or “for sale” signs. Also, keep an eye out for properties that appear out of place in the neighborhood or that aren’t well taken care of. With some minor rehab, you can increase the occupancy rate and reduce vacancies to create the multi family properties of your dreams.
Write down the addresses as you drive around to check home ownership records and you might find a deal.
Try direct mail
Another tip you can try involves mailing information directly to owners. You can buy lists of owners and their contact information or research the information yourself. With direct mail campaigns, you should expect to receive only a few responses. Examine what works best for you and what marketing campaigns are more successful than others.
Search through old ads
It’s frustrating for landlords to have a vacant property or consistently search for new tenants. By calling old “for rent” listings, you might find an owner who is ready to sell.
Similarly, old FSBO ads, or “for sale by owner” ads, might lead to a deal with an owner desperate to sell.
Talk with lenders and agents
As mentioned before, networking is the key to real estate. Connecting and building relationships with lenders and agents gives you a leg up in receiving referrals you might not otherwise know about. Let everyone know you are looking for a multifamily property.
There is a lot of competition for multifamily real estate today. But 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 by driving your market and using the internet. Keep going. The deals are out there.