In the last 10 days I have bought over 500 units in Dallas, Texas. It consists of two apartment communities that are across the street from each other. This puts my company's portfolio at $132,000,000.
If you're just now following my journey then feel free to read this previous post which has links to all the other posts I wrote after I closed on a large multifamily property. I learn something new on every deal and post on BP. Here's the link:
The lesson learned from these two deals? If you want to get a deal in a HOT market then you must CREATE THE OPPORTUNITY.
Here's how we created the opportunity.
My biz partner and I got an email from a broker about an on-market deal he was marketing. It was a good one but we knew the price was going to get bid up, and up, and up since it was an on-market deal. So, my partner had the idea to look across the street and offer on the other apt community.
Because if we could buy both at the same time then we would achieve economies of scale on the management/operations side. A couple specific ways:
- share maintenance team
- share leasing agents
Plus, and this is the kicker, lower advertising costs because the on-market deal is 90% one bedrooms and the off-market deal is primarily two and three bedrooms. Therefore it presented a perfect referral opportunity. (need a 1 bed? Go here. Need a two or three bed? Go across the street.)
We ended up getting the property across the street under contract and that allowed us to pay a more market-rate price for the on-market deal because, together, the entire package is a phenomenal deal.
Moral of the story?
When you see an on-market deal, look at the neighbors and buy in bulk to CREATE an opportunity that nobody else is doing. I guarantee nobody else thought about combining both of those properties and, as a result, we got 500 units in a hot market at a below-market cost.
When you implement this tip I'm confident you get more deals done as well!
Nice work @Joe Fairless you guys are on another level!
Thanks @Brandon Sturgill . How is the Columbus market treating you? We tried to get a deal in New Albany but were bid out of the stratosphere.
It's nuts right now...a bit nervous to be honest. The residential market is on fire and the multifamilies are being bid way high...lot's of out-of-state firms buying up blocks of property right now for low CAP rates...we just can't compete and get the returns we are used to...
There are still some low end multi's available, but location is rough, or they are complete reno's...I'm staying optimistic...looking to take a few pages from your playbook and make the jump into some big multifamily properties :) Cheers!
@Brandon Sturgill good intel, thanks for sharing. The limited experience I have with Columbus aligns with what you said. When we bid on that New Albany property we have never come up against so many other buyers on a deal (over 31!). We weren't even close to what it ended up being purchased for.
no doubt. should have seen this Westerville property. not sure how whomever is purchasing it is going to make money. maybe sell the condos off individually.
@Joe Fairless thanks for sharing your tips and tricks. First step is to get my feet wet with a smaller apartment complex. I will implement this idea if the opportunity shows itself.
@Justin Young my pleasure, fortunately this tip works for any size or class of property.
Congratulations on the continued success, Joe! Hoping to put you into more debt soon :)
Great work and I hope all is well. Let's chat sometime when you have time.
Hey @Joe Fairless , exactly the same approach for me in working on 418 units 1/4 mile from each other in Texas.
As you said the economies of scale allow me to make a much more competitive offer on them both. Have the first one under contract and waiting to hear on property #2.
Just trying my damndest to be Joe Fairless some day. :-) You, Sir, are quite inspiring!
@Bruce Petersen , well, I love to hear that! Congrats! When are you scheduled to close?
That's a wonderful tip, thank you for sharing.
I'm wondering if the property next door was not on sale...the current owners were willing to share the property financials when you expressed an interest in buying?
@Sanjeev Vij yes, they shared the info with us. We have a great relationship with a broker and he knew the owners. He helped us with the conversations and got a fee for helping connect the dots.
If you didn't have a relationship with the broker, would you contact the owner directly? Or send the owner or their management company a letter in mail expressing an interest in the property.
Well played, @Joe Fairless !! Congrats on the deal and the growth. This business is fun when you hit your stride, isn't it?
How did you structure your capital stack?
Very cool tip. Wouldn't have thought of that. Congrats on yet another deal!
@Joe Fairless $132M is impressive - all Real Estate holdings (all rentals)?
How many people work for your company?
How many total units?
That is a serious number
Hello and thank you for sending that out! Bravery and luck had the most to do with you success. Or you used somebody that knows the neighbors and knew that they were interested. Whatever the case your knowledge contributed to that deal. Knowing the number of total unite involved will help me to determine what kind of deal that you got. Best wishes to both of you!
Congrats @Joe Fairless . It's inspiring to watch your journey and learn from your tips.
@Joe Fairless , close on #1 is on or around 5/5
@Sanjeev Vij if I didn't have a connection via the broker, I would have looked up who owned the property then reached out directly.
@Brian Burke we have a Fannie May loan and private equity (one investor + ours) that makes up the difference. By they way, I refer people the interview you did on my show many times to hear your approach to cap rates and initially analyzing deals.
@Michael Le thanks a lot. Any interesting projects coming up for you?
@Chris Purcell over 50 people if you include property staff. If not then 6 people. 1,971 units. All multifamily units.
@Joe Fairless , very proud of you brother - great share and tip!!
That's incredible @Joe Fairless - thank you for sharing your insights.