I want to get into the the multifamily- where are the deals?

Question

I have a few SFR rentals and recently sold a few of my SFR making me cash rich but I am having a hard time finding good buy and hold deals on the MLS or loopnet for bothe SFR or multifamily. The multifamily sector seems to be very hot and competitive. In fact, I don't understand why anyone would buy a property capping 6% and borrow at 5%.

Any advice on what to do with my cash until the right deal comes. I was thinking of doing some flips again but worried that the deal will come once I am vested in a flip. Any advice?

Any advice on what to do with my cash until the right deal comes.  I was thinking of doing some flips again but worried that the deal will come once I am vested in a flip.  Any advice?

Ryan Dossey · Answer

@Sam Smith

90% of what you're going to get on the MLS especially in multifamily is utter garbage. The good deals are bought as pocket listings, sold to investors off market, or not on the market yet. I would highly recommend sending a company letterhead mailing piece to owners of properties with 5+ units. (Traditional financing is off the table so its harder for them to sell)

You may even find someone who is open to seller financing that way.

Ryan Dossey · Answer

@Sam Smith unless you have just a ton of free time.... I would highly recommend buying a mailing list from Listsource or a competitor. Realistically you're going to want to send out a few hundred letters. From all of my marketing experience I can tell you though that these have a much higher response rate vs typical home owners.

You're going to use company letterhead and come across professionally. Multifamily owners often get these letters so you need to set yourself apart. Having a legitimate marketing piece and knowing some basics will go a long way.

Also a lot of thrifty multifamily owners know how to hide themselves so your tax assessor's website won't always do the trick. I've seen guys set up their LLC to mail to their attorney's office. (Just one example)

Jeff B. · Answer

IMO, I don't comp the Cap Rate to the cost of money; I comp the Cash/Cash.

This is my ROI even though OPM is still involved.  It's all how you look at it.

Steve Haight · Answer

what areas would you invest in as I have some multi family units that may be of interest to you depending on what areas you are interested in what kind of return you looking for on your money

Sean OToole · Answer

Depends on what you expect to happen to yields over time. Those paying 6 caps probably expect an extended period of low rates, and want the added benefit of some inflation protection (rents tend to rise with inflation). On the other side, there is enough concern about rates going up that there aren't people willing to lend into this space at less than 5% on long term money, especially since debt gets deflated with inflation. Thus this squeeze makes a lot of sense for where we sit right now.

You should definitely leverage public records to identify every multi-family opportunity in your market and try reaching out directly vs. just waiting for listings. Expect a LOT of competition of that front in your market though. As for the data, there are better alternatives to expensive one-time lists though. If you just want a list then try your title company, they can often provide one for free. If you want a database that is constantly updated, and that gives you a lot more data like length of ownership, debt, finance history, etc. there are better alternatives. ;-)

Ivo Draginov · Answer

I've also been looking to purchase 15+ multifamily and haven't found anything in Phoenix on the mls although I just recently started looking

Ivo Draginov · Answer

I've also been looking to purchase 15+ multifamily and haven't found anything in Phoenix on the mls although I just recently started looking

Casey Miles · Answer

I bought my last MF about 5 months ago. The MF has really dried up even since then. I've only found my properties on the MLS though, no pocket listings. I too need to start networking and do the Listsource thing. For now I'm in a capital recovery phase so I have some time.

Sam Smith · Answer

Thanks a great idea.  Any chance you know how to locate multifamily owners and their contact info?  I guess I could use the tax records once I drive by a property to get an address.  Any other ideas?

Sam Smith · Answer

The realtors sends me listing every day and most are junk.  I am working on the networking side but few people are interested in joining forces and buying a bigger multifamily.  I will keep working on it.  I just don't understand why invest for a 6% return when you are borrowing at minimum for 5%.  What am I missing?  Is phoenix becoming a speculators market again?

I want to get into the the multifamily- where are the deals?

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