How to Approach Commercial Brokers to Purchase Large Multifamily

24 Replies

Hi all,

My family owns 2 properties (1 triplex and 1 mixed-use commercial property) in the Bay Area that we're wanting to sell in order to invest in multifamily commercial property (mostly thinking a large apartment complex, or several smaller ones) elsewhere. We're currently thinking Dallas, Austin, Atlanta, and/or Phoenix.

I'm not familiar with these markets, but I know that we want to get out of California as the laws are becoming so strict on landlords and I don't see it getting any better. In addition, we're wanting to focus on more cash flow markets and based on my research and what I've been hearing over the past few years, these cities seem to be solid bets. I'm wanting to follow David Green's suggestion of approaching brokers, interviewing them, narrowing it down to one broker per city, and then have them introduce me to their markets. Of course, I'm going to continue doing my own research and much more in depth, but I want to visit these cities and get on the ground information as well.

I'm trying to figure out what the best way to go about this would be. I understand that commercial brokers are tougher to approach and they don't take you seriously unless you have proof of funds. I obviously would prefer to do the research, meet the brokers, and see what kinds of properties they can provide me before we go ahead and sell. Ultimately, we're looking to make big purchases. The properties we own are fully paid off and are currently worth $5.5-$6 million. We're looking to use those funds as a 50% down payment(s). My intention isn't to brag, but these figures should mean something to a potential broker, enough to warrant them to work with us even though we haven't sold yet.

My questions are: 1. How do I best approach the best and most connected commercial brokers? 2. Should we sell before seriously beginning the buying search? Capital gains tax is not a real issue as these properties belonged to my father who passed away a year and a half ago, so we got a step up in basis.

Any thoughts would be helpful.

A lot of buyers of small multifamily properties are out of the market at the moment, because financing requirements have changed dramatically. If you're in a position to put 50% down, that should get a lot of brokers' attention. I don't think it will be as difficult as you think. I know if San Antonio was on your list, I'd be happy to help. You are probably better off buying several smaller apartment properties than a single larger one. I've seen a lot of the smaller properties reprice in the last few months.

Only targeting one broker would be a mistake as larger multi family deals are typically traded off market. As a broker we appreciate loyalty but understand this. Its our job to provide value and bring you deals. So I would network with multiple brokers that specialize in multi family deals. We can tell if your serious or not, I rarely come right out and ask for a proof of funds 

Hey you probably want to reach out to a lot of the big commercial firm. cBRE, JLL, NKF, Colliers etc... they have multifamily division and they might be able to do both your sell and buy, off market etc.

@Frank Procopio That's very good to know. I know residential and commercial are two very different ballgames, but I know that residential agents won't work with you if you don't sign an exclusive agency agreement. I would imagine that we have a lot more bargaining power in this situation, but would you say that that's something that commercial agents ask for? 

We went through something similar a few years back... we called various commercial brokerages and asked everyone we knew for referrals. In hot markets you may run into not being able to find a buyers agent as crazy as that sounds.

As for loans... I am in the middle of a transaction now of similar size and the loan requirements keep changing. I just got the commitment for one loan and they want 6 months of PITI and replacement reserves at closing and they will hold it for one year.

If you are buying new builds expect to have to have it 90% occupied for 90 days before they will fund the loan. 

I personally like one asset for economies of scale, altho my current purchases is two smaller assets....

good luck...

Also, I highly recommend Colliers. They helped us thru the years and every interaction has been great. And fwiw, I dont find commercial agents hard to approach :) 

Originally posted by @Kal Seirafi :

@Joseph Cacciapaglia Thanks for the pointers. What are typical financing requirements like these days? And what's the advantage of purchasing several smaller apartment properties vs one large one?

Many lenders have started to require significantly more cash reserves than they did 4-5 months ago. This causes problems for a lot of investors that are trying to lever their deals as far as possible and aren't in the strongest cash position. If you're already planning to use lower leverage, this should have less of an impact on your numbers than it would most investors.

There are a few reasons that I would suggest multiple smaller deals: 

1. If you buy several smaller properties, it gives you a little diversification. If you just buy a single bigger deal, you better pick the right property in the right neighborhood, and have spot on underwriting. One mistake can tank your whole portfolio. If you buy several smaller, the effect of any single mistake is much less. 

2. You'll learn as you go, and make better deals over time. There is a lot that goes into buying an apartment property. Even with a great team, there is a serious learning curve. If you're buying 1 property, you're making your buying decision without the benefit of that experience. If you buy several, the second, third, etc. deal will benefit from what you've learned.

3. There is a sweet spot in multifamily deal size where you have less competition. I'm a big fan of the 5-50 unit space, because you don't get competition from many of the institutional investors.

4. You're preferred leverage sets you apart with smaller apartment properties. There are a lot of properties that are sub $1.5MM that don't get much attention because you can't use agency debt. Given that you're putting a large amount down, you'll have better financing options than the typical buyer in that size range.

I would suggest that you focus on one market, even if you're buying several properties. That will allow you to benefit from some scale, and it will make it easier to build a strong team. It will also keeps you from having to learn the intricacies of multiple markets.

Dallas, Austin, Atlanta and Phoenix are all excellent, growing markets, so great choice picking those. I would also look into Charlotte, Raleigh/Durham, and possibly Denver as those markets share many characteristics with the ones you have selected

I would start by working with a lender to see the current loans available to you. If they are recourse or non-recourse, how pricing works on these loans, and what is currently available in the market. Like many other things in this economy, the debt markets are changing rapidly with low interest rates but additional reserves required.

I work with brokers on large multifamily transactions (100+ units), so this advice might be skewed compared to 20+ units that you are looking at (est. $10M purchase price in those markets). In the 100+ unit space, buying brokers are rare, there are only selling brokers and then companies that do all of the underwriting themselves (aka me, an acquisition analyst). Working with only one broker would be a mistake, as there are typically 2-3 big brokers in any given city. CBRE, JLL, NGKF, and Colliers in each of these markets would be a great starting point. It is true that commercial brokers are tougher to approach, they will want to see that you are really serious in buying before they spend time on you. It is important that you show them that you are ready and able to close on a transaction when they have one for you. 

If you are working with a selling broker, RUN ALL OF YOUR OWN NUMBERS! Learn how to run the numbers yourself, or hire someone to help you that has experience. Selling brokers will inflate the current NOI and will get to a cap rate that is 50-100 bps higher than the real cap rate. Especially getting into new markets, you need to learn how real estate taxes are calculated on the sale, learn what current market rents are in the area as well as current operating expenses for the comps, learn current cap rates.

1. How do I best approach the best and most connected commercial brokers? 

1) If you're looking out of town, contact a national chain like ARA, JLL, CBRE.  They usually kickback commission to the local guy so you have someone in town working for you.  Plus they have offices all over the place and most can do financing and brokerage.

2) Be honest about where you're at in terms of location, type of property, timeframe and how much you have.

3) Anything you can to impress the local guy you're serious.  If he runs a bunch of stuff past you that you ask for and you do nothing for 2-3 months, you'll lose a lot of their motivation.

2. Should we sell before seriously beginning the buying search?

1) You know the Bay Area better than I do, but I think we're at a peak in value in the area.  I'd start to list stuff to see how much I can really get.

2) If 1031 is NOT a concern, then tell the broker.  Some brokers exploit 1031 buyers by getting them in contract (even on bad deals) and then dragging their feet until past the 45 day line and you're stuck with 3 (some instances more) nominations to close on.

Be careful out there.  Currently, I have over 230 units in 10 different Apartment complexes.  I have studied, researched, and learned from some of the best out there.  You may want to reach out to me soon, before you go down that rabbit hole Kal.  I was on BP Podcast 238 and am on my way to 1000 units in the near future.  There have been lots of changes in the lending requirements too with Covid 19.  You may want to watch Podcast 238 and then reach out to me.


Think about THIS. There are literally TENS of thousands (not kidding) multifamily buyers out there nationally.

A commercial broker doing a 10 or 20 million dollar property deal usually won't waste time with a 1 million or 3 million small property. Mainly only time I have seen is if they represent a large owner that has a few straggler smaller properties they want to sell. The broker then does it as a gift to the seller. They still make commission but the small deals can be a real pain in the butt to do with low money to be made for the broker.

The brokers already have proven performer buyers with strong balance sheets. If a broker knows they have a large property and an awesome deal they will take it to those who can buy it quick, are already a preferred buyer with a lender, etc. A broker doesn't typically want to take an amazing deal to a new buyer for multifamily. The new buyer presents so many potential issues they usually just show them retread properties or the overpriced dogs.

I disagree with the statement have a bunch of agents interview with you etc. That stuff might work in the small ball world of residential but when you get to larger properties and commercial those brokers make A LOT OF MONEY. The seasoned ones are multi-millionaires themselves and won't listen to all of that crap. They want you to SHOW THEM THE MONEY that you can perform and if they show you an internal deal that you are committed to them (at least for a specific area) with a written agreement.

If someone calls me on commercial properties and says they are talking to blah,blah,blah many brokers and see who digs up what I disconnect the call right away. The new desperate agents that need money to survive work on crap like that but they have little to no network either. If someone is a seasoned broker and very well connected that can be much more powerful to reach your goals than talking to a bunch of newbie agents with little network to speak of.

Now some brokers will work with buyers who aren't committed to anyone just for a transaction. Then there are other brokers that require an exclusive.  

It's just food for thought that if someone says ( Hey I am a new buyer, have little to no track record, have to pool money to buy property, and want to keep my options open,etc.) that's an immediate 3 strikes and your out buyer to 99% of commercial brokers.  

@Kal Seirafi

If it were me I would find a dominant residential agent and ask for a referral. Rinse and repeat if necessary. A dominant residential agent will refer you to the most dominant commercial guy he or she knows that can get the job done. They will get a referral fee for a completed job. Be upfront with the agent. Mention the fee. If they say they do not take referral fees for the connection then keep looking. Them having skin in the game ensures they will find you the best help. Be upfront with the commercial agent as well. Your 5-6M in property to sell should be enough proof of funds. Trust your first instinct. If you don't vibe well at first glance with the agent then keep looking. I might even call the C.A.R president and ask them for the referral. They are likely to know some powerful forces in the market off the top of their head.

Exactly!! A rabbit hole as I said.  Be careful and make sure you beware of wolves in sheep’s clothing.  Been there and done that and lost $350,000 on my first 2 Multifamily deals and am expanding to 1000 units after this Covid 19 is in our rear view mirror.


@Kal Seirafi as a commercial broker, I have a few thoughts.

1. Don’t ask residential agents for a commercial referral if you choose to go for large multi family deals. This is like asking a personal injury lawyer for an international tax attorney. However, if you are looking at smaller properties, that is not bad.

2. Choose a market and find who dominates that area. For example, Bull Realty is strong in Atlanta. Michael Bull has done over $6 billion and has a designated multi family division. The Kirkland Company is good in Tennessee and other Southeast markets as well.

3. An easy way to find out if a broker has good underwriting skills is to see if they have a designation called CCIM. I am currently earning my designation, and it takes at least two years. You also have to submit a portfolio of closed deals and experience in order to even apply to take the exam once your classes finish.

I am in the Louisville, Kentucky, area and happy to answer any questions if you want to PM me.

Happy hunting!

@Kal Seirafi I have a few other thoughts.

David Greene talks about building a team. Make sure whoever you talk to is able to connect you with attorneys, property management, and bankers. Community and regional banks are more flexible in general with terms, especially preexisting broker relationships.

I also don’t think it’s a mistake to focus with one broker. They will know everyone in a market and network with who is getting deals done. That’s because there’s more than one way to get paid as a broker, and they will get a referral fee from brokers who can close. If you are talking to a lot of people, that’s a turn off.

Some questions I asked before buying my apartments: Is the broker someone with a personalized focus or corporate mindset? Are they professional in their knowledge, not just likable? Do they know the market and have a team of professionals in place?

Originally posted by @Kal Seirafi :

@Mary Mitchell Thanks for the info! I'll definitely look into Colliers. Just out of curiosity, where are your properties located? 

 Hey Kal - I currently am in the Portland OR MSA. I manage my own assets so I buy where I live..... I know it can sound overwhelming especially when you get straight talk responses like above ;), but if you can find the right Broker (and I agree to get one with all the designations) they will know that while your current deal may be “small”, the deals over your lifetime may not be.  For example I work with a great Broker here and I am a small fry....but over the years he has done well by my small deals and he will continue to do so as I grow.  For example my first purchase was just 2.5M.... this time around its 6.2M and my goal for the next deal with be 8M+ 

if a broker is aloof, then move on. You will find a person that has experience that will help. It may just take time. Feel free to pm me if you have other questions 

Hi all,

This is Swanny.  I was on Podcast 238 and talked about this topic a bit. I have found the best way to talk to brokers, when I was starting out was by finding a commonality in interests.  Talk to them about what you like to do and they tell me about what they like to do.  

You could also stalk them on Facebook, linked in etc... and find out more about their interests too.  

The third way is to show them the money, how many units you are a principal in or a GP in, running deals etc... Show them a strong Personal Financial Statement of you or the actual Sponsor that can get a large loan like this, that has purchased and operated a big deal like the ones this new broker friend will bring you.

Feel free to reach out to me and talk more.  I love to help people.  Listen to Podcast 238 where I was a guest of Brandon and Scott Trench.  Also, I was included in Ch1 pgs 25-26 of Brandon and Josh’s book called, How to Invest in Real Estate the Ultimate Beginners guide. 

That goes for anyone else out there that wants to pick my brain.  I love this stuff!!  My goal is to go from 230 units to approximately 1000 in the next few years!!


@Kal Seirafi

Couldn't agree more with what @Joel Owens said!

It's not to deflate you as you've done a great job of building your capital, congrats on that.

It's a tough love reality check that these folks are busy and very successful for the most part and don't have time to be vetted or interviewed by a novice. You can't big shot these folks so please don't try. 

Even if they do entertain you, the seller will make the final decision on who to sell to and for me if you aren't a proven commodity I'm not going with you and if for some reason I do you can bet I'm asking for a lot of hard earnest day one, just too much risk for me.

Get on multiple national groups email lists and start going through the deal flow you receive. You won't get the off-market deals this way but they aren't going to give them to you anyway at this point. Once you find a few, set up tours and fly in for them. This will start to develop a rapport and as long as you are perceived as a good and rational potential buyer they may start sending a few things your way.

It can be a long process to establish yourself but it's well worth it.