Should I Sell My 45-unit Apartment Without a Broker?

Multi-Family and Apartment Investing
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Should I Sell My 45-unit Apartment Without a Broker?

Lee Yoder
Rental Property Investor · Lebanon, OH · Member since 2016 · 220 posts · 228 votes

I'm considering selling my 45-unit apartment portfolio in Dayton, OH (29-unit, 8-unit, 8-unit all within 3 miles of each other). The property is completely turn-key and we're going to sell it at a true 7-cap. In this crazy buyer's market, apartments sell so easily. So, I'm wondering if I should just sell this apartment portfolio on my own instead of losing 3-6% to a brokerage. I've listed through an online brokerage before and only had to pay $300. Heck, my partner is actually still a realtor, so I guess he could sell it. 

Has anyone gone this route and had success?

I know brokers will say that they can sell for a higher price, but in this market, I'm not so sure that's the case. I do believe that brokers control nearly all of the deals in this market, so selling with a brokerage could help to increase my relationship with them which could potentially yield a deal in the future. For this reason, maybe selling without a brokerage is a mistake in the long-run. 

What are your thoughts?

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
4y
commerical brokers who deal in MF are not your typical beginner agents who are just starting out selling houses etc.

commission are negotiable.  I suspect if you have a desirable MF brokers are already calling you saying they have clients

you could ask them to have their clients pay their fee thats done in the industry.

good luck.. as rates climb if rents dont go with them cap rates are going to be affected to the benefit of the buyers I would think.
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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    commerical brokers who deal in MF are not your typical beginner agents who are just starting out selling houses etc.

    commission are negotiable.  I suspect if you have a desirable MF brokers are already calling you saying they have clients

    you could ask them to have their clients pay their fee thats done in the industry.

    good luck.. as rates climb if rents dont go with them cap rates are going to be affected to the benefit of the buyers I would think.
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  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    4y
    Originally posted by @Jay Hinrichs:
    commerical brokers who deal in MF are not your typical beginner agents who are just starting out selling houses etc.

    commission are negotiable.  I suspect if you have a desirable MF brokers are already calling you saying they have clients

    you could ask them to have their clients pay their fee thats done in the industry.

    good luck.. as rates climb if rents dont go with them cap rates are going to be affected to the benefit of the buyers I would think.

    With 7% inflation, do you have reason to think rents won't climb?

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Originally posted by @Eric James:
    Originally posted by @Jay Hinrichs:
    commerical brokers who deal in MF are not your typical beginner agents who are just starting out selling houses etc.

    commission are negotiable.  I suspect if you have a desirable MF brokers are already calling you saying they have clients

    you could ask them to have their clients pay their fee thats done in the industry.

    good luck.. as rates climb if rents dont go with them cap rates are going to be affected to the benefit of the buyers I would think.

    With 7% inflation, do you have reason to think rents won't climb?

    I dont have a crystal ball but I suspect there is a ceiling as wages are not going up as fast and for renters they are generally on pretty tight budgets could be that rents plateau to the mean and what folks can reasonably qualify for IE the 3X income which most landlords use.  Or they rent properties that are not as nice as they would like.

    I do recal though for about 10 years here in Oregon rents were flat to declining then in 2013 to 2014 starting going up up up. 

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  • Peter Nikic
    Investor · New York & TN · Member since 2019 · 325 posts · 219 votes
    4y

    One thing a broker does is that they shield you from many aggressive buyers who try to break you down. It's creazy how people want to practically force you to sell them your property at the price they want to pay. 

    7% cap rate is pretty high in most good markets, you might be abe to get the same price (possibly higher) while the broker does all the work. In general, if a broker does not provide value, then something is wrong. Good luck.

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    4y

    I don't generally use brokers much, but one reached out to me about one of my commercial MFs and I said if you bring a legit buyer in at this price plus your commission I will listen. 

    We are under contract now (just waived feasibility) and closing 2/28.

    It's weird. He's not really my broker or the buyers but he discounted $10k for the buyer to reduce my asking price and it seems to be working.   

    I couldn't have found this buyer on my own without listing it and having several showings, so yes, I recommend  a broker experience like I have. 

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Originally posted by @Steve Vaughan:

    I don't generally use brokers much, but one reached out to me about one of my commercial MFs and I said if you bring a legit buyer in at this price plus your commission I will listen. 

    We are under contract now (just waived feasibility) and closing 2/28.

    It's weird. He's not really my broker or the buyers but he discounted $10k for the buyer to reduce my asking price and it seems to be working.   

    I couldn't have found this buyer on my own without listing it and having several showings, so yes, I recommend  a broker experience like I have. 

    see some of us brokers are deal makers  ...  there is a big difference in Brokers you have deal makers and U have Brokers that get stuck and just cant negotiate a win win for all when it means the broker might make a little less.

    I have seen agents willing to kill their own deals over a new water heater or some other less than 1k item when they were going to make 10k or more.. crazy.. my wife and I we are deal makers  :)

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  • Eric Bilderback
    Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    4y

    @Jay Hinrichs

    Got work for the deal. 

    I would recommend people using a broker unless they really know what they are doing.  The downside risk can be pretty significant.  But if you eat sleep and breath this stuff you will probably be fine.

    1Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    4y

    @Lee Yoder May I ask why you’re selling and what you’re planning on doing with the $! Truly curious. Congrats and good luck

    1Reply
  • Zambricki Li
    Real Estate Agent · Los Angeles CA + Lake Tahoe, NV and CA · Member since 2021 · 180 posts · 158 votes
    4y

    In this market It's worth seeing what a broker (or 3) can offer you. They may have a buyer ready to go and take a reduced fee. At least get the consults.

    1Reply
  • Keenan Fitzpatrick
    Flipper/Rehabber · Anchorage, AK · Member since 2017 · 223 posts · 177 votes
    4y

    Why not have your licensed partner sell it? That seems like an easy solution.

    If I were in your situation, my considerations would mostly be how likely your market will allow the type of deal you expect and what your plans are afterward. If you plan on buying more real estate with these profits and agents in your market have a lot of control then you’re probably making it much more competitive for yourself to get one of those deals and you may be eliminating yourself completely.

    1Reply
  • Spencer Gray
    Syndication Expert and Investor · Indianapolis, IN · Member since 2016 · 591 posts · 808 votes
    4y

    There is no harm in having 2-3 brokers provide you with a BOV (Broker Opinion of Value). They will do this for free and it will essentially be an estimate for what they believe they can sell it for and their plan to sell it. You'll have to provide financials, rent roll, and answer some questions, but it's worth it. There's no obligation to have the brokers market it, but I think you'll find that they will be able to get you higher NET proceeds and a smoother transaction. 

    Fees are absolutely negotiable and you should be able to get closer to 3%. If they have buyers lined up already and don't have to do a mass marketing campaign, it should be less.

    2Reply
  • Lee Yoder
    OP
    Rental Property Investor · Lebanon, OH · Member since 2016 · 220 posts · 228 votes
    4y
    Quote from @Jay Hinrichs:

    good luck.. as rates climb if rents dont go with them cap rates are going to be affected to the benefit of the buyers I would think.

    This is a good point Jay. I could see rents plateauing, so if interest rates do rise (I'm not convinced they will), cap rates will adjust. This is one reason we're strongly considering selling.

    0Reply
  • Lee Yoder
    OP
    Rental Property Investor · Lebanon, OH · Member since 2016 · 220 posts · 228 votes
    4y
    Quote from @Peter Nikic:

    One thing a broker does is that they shield you from many aggressive buyers who try to break you down. It's creazy how people want to practically force you to sell them your property at the price they want to pay. 

    7% cap rate is pretty high in most good markets, you might be abe to get the same price (possibly higher) while the broker does all the work. In general, if a broker does not provide value, then something is wrong. Good luck.

    Great points Peter! I generally agree with you and for this reason, have always used a broker when selling MF in the past. It's just hard not to feel like brokers are making such easy money when everything sells itself in a market like this! Haha.
    0Reply
  • Lee Yoder
    OP
    Rental Property Investor · Lebanon, OH · Member since 2016 · 220 posts · 228 votes
    4y
    Quote from @Steve Vaughan:

    I don't generally use brokers much, but one reached out to me about one of my commercial MFs and I said if you bring a legit buyer in at this price plus your commission I will listen. 

    We are under contract now (just waived feasibility) and closing 2/28.

    It's weird. He's not really my broker or the buyers but he discounted $10k for the buyer to reduce my asking price and it seems to be working.   

    I couldn't have found this buyer on my own without listing it and having several showings, so yes, I recommend  a broker experience like I have. 

    Great story @Steve Vaughan and a great example of how brokers can add significant value! Thanks for sharing.

    1Reply
  • Lee Yoder
    OP
    Rental Property Investor · Lebanon, OH · Member since 2016 · 220 posts · 228 votes
    4y
    Quote from @Eric Bilderback:

    @Jay Hinrichs

    Got work for the deal. 

    I would recommend people using a broker unless they really know what they are doing.  The downside risk can be pretty significant.  But if you eat sleep and breath this stuff you will probably be fine.

    I agree with you @Eric Bilderback, the downside risk can be significant. I sold both of my SF flips and I think I would have been better off using a realtor both times. These memories still haunt me a bit and are pushing me toward using a broker.

    0Reply
  • Lee Yoder
    OP
    Rental Property Investor · Lebanon, OH · Member since 2016 · 220 posts · 228 votes
    4y
    Quote from @Bud Gaffney:

    @Lee Yoder May I ask why you’re selling and what you’re planning on doing with the $! Truly curious. Congrats and good luck

    Good question @Bud Gaffney. We're strongly considering selling because we've basically executed our value-add strategy and achieved the projected value in just one year. Our NOI is where we thought it would be 2-3 years from now because rents have increased so much. Cap rates have also compressed over the past year. Because of these two factors, this property's value is where we thought it would be 3-4 years from now. So, it feels like the right time to sell.

    I would love to 1031 into a bigger MF property, but we may not find a good opportunity in time. Even if we (us and our investors) have to pay long-term capital gains, I'm confident that everyone will want to re-invest their capital into our next deal. So, we're looking hard for our next opportunity!

    1Reply
  • Lee Yoder
    OP
    Rental Property Investor · Lebanon, OH · Member since 2016 · 220 posts · 228 votes
    4y
    Quote from @Zambricki Li:

    In this market It's worth seeing what a broker (or 3) can offer you. They may have a buyer ready to go and take a reduced fee. At least get the consults.

    Good point @Zambricki Li!

    0Reply
  • Lee Yoder
    OP
    Rental Property Investor · Lebanon, OH · Member since 2016 · 220 posts · 228 votes
    4y
    Quote from @Keenan Fitzpatrick:

    If I were in your situation, my considerations would mostly be how likely your market will allow the type of deal you expect and what your plans are afterward. If you plan on buying more real estate with these profits and agents in your market have a lot of control then you’re probably making it much more competitive for yourself to get one of those deals and you may be eliminating yourself completely.

    Yes, this is exactly the calculation I'm making, @Keenan Fitzpatrick. The brokers do control almost all of deals in my area, so I would love to improve my relationship with them. Allowing them to sell my property and make money should help with that.

    1Reply
  • Lee Yoder
    OP
    Rental Property Investor · Lebanon, OH · Member since 2016 · 220 posts · 228 votes
    4y
    Quote from @Spencer Gray:

    There is no harm in having 2-3 brokers provide you with a BOV (Broker Opinion of Value). They will do this for free and it will essentially be an estimate for what they believe they can sell it for and their plan to sell it. You'll have to provide financials, rent roll, and answer some questions, but it's worth it. There's no obligation to have the brokers market it, but I think you'll find that they will be able to get you higher NET proceeds and a smoother transaction. 

    Fees are absolutely negotiable and you should be able to get closer to 3%. If they have buyers lined up already and don't have to do a mass marketing campaign, it should be less.

    I have my favorite broker working on a BOV right now, @Spencer Gray, and I tend to agree with you that a broker will likely NET me higher proceeds and I'm very confident the transaction will be smoother. 

    0Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    4y

    @Lee Yoder This is fantastic. CONGRATULATIONS! 

    1Reply
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