Strategies for Finding and Acquiring REO Multifamily Properties (5+ Units)

Buying & Selling Real Estate
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Strategies for Finding and Acquiring REO Multifamily Properties (5+ Units)

Orhi Tahi
Member since 2023 · 90 posts · 26 votes

Hey BP community,

I'm looking to expand my real estate portfolio and I'm particularly interested in REO-owned multifamily properties with 5 or more units. I'd love to hear from experienced investors about:

  1. Best resources for finding these listings (beyond the obvious MLS)?
  2. What are the core websites ?

Thanks in advance for sharing your wisdom!

Orhi

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    2y

    I bought some REO single family back in the day. The fact of the matter is that banks do not want to be in the property management business. They are not good at it. So, I have not heard of REO department in this space, like we did post GFC. What I have heard is the following:

    1) Banks willing to extend loans with the existing owner, hoping they can hold on until NOI goes up or interest rates come down

    2) Banks knowing a property is coming back so reaching out to a local broker to find a buyer with a pocket listing.  In these cases, the broker is just looking for someone to buy for the amount of the mortgage.  They transact quietly.

    3) Similar to above, I know of a few people that have been asked directly by their lender if they have interest in taking over a nearby property for just the loan amount. Again, they transact quietly.

    The few exceptions are a handful of very large foreclosures (e.g. 3200 units in Houston) with terrible operators. The banks could not execute 1, 2, or 3 so had to foreclose. I don't think this is a large opportunity for REO, unless you are already in the game. On the other hand, I'm talking larger apartments 100+ unit. I suspect there will be some regional banks holding properties of 50 or fewer units.

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  • Orhi Tahi
    OP
    Member since 2023 · 90 posts · 26 votes
    2y
    Quote from @Greg Scott:

    I bought some REO single family back in the day. The fact of the matter is that banks do not want to be in the property management business. They are not good at it. So, I have not heard of REO department in this space, like we did post GFC. What I have heard is the following:

    1) Banks willing to extend loans with the existing owner, hoping they can hold on until NOI goes up or interest rates come down

    2) Banks knowing a property is coming back so reaching out to a local broker to find a buyer with a pocket listing.  In these cases, the broker is just looking for someone to buy for the amount of the mortgage.  They transact quietly.

    3) Similar to above, I know of a few people that have been asked directly by their lender if they have interest in taking over a nearby property for just the loan amount. Again, they transact quietly.

    The few exceptions are a handful of very large foreclosures (e.g. 3200 units in Houston) with terrible operators. The banks could not execute 1, 2, or 3 so had to foreclose. I don't think this is a large opportunity for REO, unless you are already in the game. On the other hand, I'm talking larger apartments 100+ unit. I suspect there will be some regional banks holding properties of 50 or fewer units.


     Thanks Greg! I was reffering anything between 5 units to 30 units. From what i understood is I need to build relationships with bunch of multifamily lenders to see if they offer pocket listing. 

    Do you have any recommendations for major CRE lenders to contact?

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    2y

    @Orhi Tahi I used to work in a bank's REO / Special Assets Dept.

    We were inundated with communications from people just like you and ignored EVERY one of them. 

    We had a list of preferred real estate agents we listed our stuff with to get fair market (maximum) sales price.

    If we wanted to dump a property below market value, we knew who the players were and would contact them discreetly - we didn't want any negative publicity.

    Unless you find a desperate, failing lender, don't see you having much success.

    [email protected]248-209-6824
    Logical Property Management4.9469 Reviews
    WebsiteView Page
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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    2y
    Quote from @Orhi Tahi:

    Do you have any recommendations for major CRE lenders to contact?


    For properties that size, you are not looking at the major CRE lenders. You would be talking to regional banks and credit unions. These would be the same banks that support family businesses in your local community.

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  • Joseph Chiofalo
    Banker · Henderson, NV · Member since 2023 · 317 posts · 74 votes
    2y

    Hi Orhi, 

    There are lenders that will go 29 units. 

    Many times experience of the buyer, credit history and reserves in addition to what income the property can produce will factor in how the lender will structure the loan. 

    Have you narrowed in on any properties yet? 

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