Finding Larger Off Market Multi-Fam Deals....

13 Replies

HI BP,

I have been wholesaling/flipping SFR's for a couple years now full time. Typically I am using Direct mail and web leads to get my deals. We have recently obtained funding to do a larger Multi-family deal (10-40 units). Just seeing if anyone has experience in finding great off market deals in this type of property? If so what type of marketing or hustling are you doing to get those deals?

@Ryan Lockstein  Everyone wants the elusive "off market" deal.  But, by definition, it doesn't exist.  If a property is available for sale, it's on the market.  Now, it may not be widely marketed, which means it is only marketed to a select number of proven investors, but that is about as close as you will get to an "off market" deal.  Another word for these deals is "pocket deals," so-called because brokers share them only with their go-to investors.

That last phrase should give you an idea where this is going.  If you want a broker's pocket deals, pretty much the only way to get there is to have closed a deal or two with that broker in the past.  You need to establish yourself as an investor with the proven ability to close before brokers will start showing you their pocket deals.

The only other way is through some kind of personal connection.  We got our first deal  (102 units) because one of our partners is partnered on several deals with the broker's uncle, so we were taken seriously by the broker from the get-go.  Our second deal (132 units) was a pocket deal we got from the same broker because we closed the first deal with them.  Now we're seeing pocket deals from these brokers on a regular basis.

You could, in theory, try to network with owners and deal with them directly to get off-market deals.  But it's a bit unlikely that they are going to take you seriously unless you've already closed some deals you can show them.  And, most likely, a seller is going to want to go through a broker, because they are going to get a better price from a widely or selectively-marketed property.  That's why there really is no such thing as "off-market" deals.  If you were selling a property, you'd want to get the most money for it, and that really involves going through a bidding process with a best-and-final round designed to extract every last penny from the buyers.

Medium tb logo 130211 finalJonathan Twombly JD, Two Bridges Asset Management LLC | [email protected] | http://www.twobridgesmgmt.com | Podcast Guest on Show #172

@Jonathan Twombly  I would agree with all that you stated except there are occasionally off market deals.  A broker I had used in the past was making some cold calls on some properties when the owner agreed to sell a property that was not previously for sale or on the market.  This doesn't happen often but it does happen.  I would rely more on broker relationships to find the off market or narrowly marketed deals.

Medium sig  3 Jeff Greenberg MBA, Synergetic Investment Group, LLC | [email protected] | 805.372.1799 | http://www.synergeticig.com | Podcast Guest on Show #115

@Jeff Greenberg  

I agree with you.  They exist, but you can't look for them.  You have to have a pre-existing relationship with the person who stumbles onto an off market deal to get the off market deals.  Brokers are the ones who sometimes create these deals.  But if you call them and ask them to show you off market deals, they'll laugh at you.  You need to close some deals with a broker first, and then they'll bring their pocket deals to you without you asking.  

Medium tb logo 130211 finalJonathan Twombly JD, Two Bridges Asset Management LLC | [email protected] | http://www.twobridgesmgmt.com | Podcast Guest on Show #172

@Jonathan Twombly  Absolutely, perform and they will look for you.  Brokers need us as much as we need them.  The worse thing you can do in a relationship with a broker is to take his time and energy and not be able to perform.

So the question that always comes up is how does a newbie get started.  Sometimes it can be with the smaller deals as we did, but you can also partner with someone with more experience and get the bragging rights to performing on a deal.

Medium sig  3 Jeff Greenberg MBA, Synergetic Investment Group, LLC | [email protected] | 805.372.1799 | http://www.synergeticig.com | Podcast Guest on Show #115

@Jeff Greenberg  and @Ryan Lockstein  

Ryan, consistent with Jeff's excellent advice, perhaps you can go back to the brokers you did SFR deals with, and see if they have bigger deals. Or, perhaps their colleagues have bigger deals on offer. Close a few of those, and then you can start getting access to the quieter stuff.

Another possibly interesting avenue is to explore deals that are off-market because they have been taken off the market.  A much more senior investor once told me that his group's method, which was very successful for them, was to approach brokers and ask them if they had any old deals sitting around that never closed for one reason or another.  If so, they asked the brokers to go back to the owners and see if they would sell now.  Often the sellers would be happy for the chance to sell and sell at a reasonable price.  Or, sometimes the deals did not close because they had hair on them, and that meant they could be picked up reasonably.

Another thing not to forget is to treat brokers like people.  Brokers get a bad rap sometimes, and it's really not fair.  They're just doing their jobs, which is selling.  Their perspective is different from an investor, but the good ones try to put themselves in an investor's shoes.  You should cultivate brokers as you would any other business partner.  And if you ever close a deal with a broker, by all means, take them out to a nice dinner at the best restaurant in town to show your appreciation, even if they were the seller's broker and they got a nice commission check in the deal.  It will separate you from the rest of the crowd and speed up the day when you can see those deals they save only for their go-to investors.  I can't really emphasize this enough.  Treat your brokers as an equal and they will treat you like gold.

Medium tb logo 130211 finalJonathan Twombly JD, Two Bridges Asset Management LLC | [email protected] | http://www.twobridgesmgmt.com | Podcast Guest on Show #172

@Jonathan Twombly  Thanks for all of the advice.  I hear a lot of mention of brokers in all of these comments.  In my two years of wholesaling single family investments I did not once need to use a broker though. I found sellers/tired investors via direct mail and cold call marketing that didn't even know they wanted to sell their property until I called.  Those are the type of "Off Market" deals I am referring too. I always have worked direct with the seller.  I am assuming that I could do the same by contacting owners of 10-40 unit properties in my area that are under performing.  I was really just curious what everyone else was doing to contact large multi unit investors that worked for them.  To be clear, I am not looking for properties in which the owner has already decided to possibly list.  At that point I am too late.

Most apartment owners are fairly sophisticated. I don't think trying to market to them directly will be worthwhile. They understand the value of their property and are not going to deal with a wholesaler. Owners receive cold calls from brokers regularly and have no reason to deal with your directly unless you are a well known buyer.

Joe, I respectfully disagree.  I know I will be able to get in front of apartment owners of buildings of that size without brokers.  I am working a deal on an 8 unit as we speak that I found by sending a postcard to the owner (lead was mixed in with my single family marketing list).  He is older and tired of dealing with the building that is in disrepair.  We are in negotiations right now.  Again I wasn't looking for what you assume wouldn't work but rather someone who has done it and could tell me what works best.

@Jeff Greenberg  The mom and pop building you just purchased, how did you find it?  Broker, personal connections, or marketing?

Just to be clear, I appreciate everyone's input and advice and I am not opposed to working with brokers or property managers that may have deals for me. I encourage it.  As all of you have pointed out though, brokers look for people they have worked with in the past and are proven to close before they send them anything good.  I don't want to have to purchase a bad deal from a broker just so I can eventually get a good one.  

@ryan 

@Ryan Lockstein  anytime I'm in a market where I'm looking to buy, I always go up to the courthouse and attend tenant/landlord disputes. Then try and talk to the landlord rep - sometimes it's a property mgmt contact but other times it's the actual owner who is motivated. I haven't closed on any deals via this tactic but have established relationships that could yield deals later. 

Medium logo1Joe Fairless, Best Real Estate Investing Advice Ever | http://www.apartmentsyndication.com | Podcast Guest on Show #227

@Ryan Lockstein  The deal was from a cold call made by a broker I used before.  I was his first call even though he had others he could have called. He even lost a relationship with a cash buyer by coming to me first.

I respect what you are trying to do with the marketing.  I have difficulty getting good list in my areas of Texas.  Let me know if you find a good list source.

Medium sig  3 Jeff Greenberg MBA, Synergetic Investment Group, LLC | [email protected] | 805.372.1799 | http://www.synergeticig.com | Podcast Guest on Show #115

@Ryan Lockstein  Ryan, not all broker deals are bad deals.  In fact, every deal is a good deal at the right price.  The issue with brokers is that you may get into a bidding situation, which obviously takes some of your profit away.  But you can still do good deals with brokers right off the bat.  The trick is to cultivate them first.  And I'm a proponent of making contacts in the real estate world through your non-real estate friends.  If you are looking at a new market, ask your network if anyone knows a broker in that market.  You'll be surprised what you find, and these contacts will short circuit the process for you.

Our first deal was through a broker and we are going to kill it on that deal.

Medium tb logo 130211 finalJonathan Twombly JD, Two Bridges Asset Management LLC | [email protected] | http://www.twobridgesmgmt.com | Podcast Guest on Show #172