8 out of 10 MF brokers are ghosts
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
9yI used to do smaller multifamily under 3 million about 7 years ago. That is a lot of heavy lifting and the owners sometimes self manage or have crappy accounting records.
These days I mostly do commercial retail.
Everyone right now that is starting out in multifamily seems to be (chasing the unicorn). They want small stuff class B area with C building built 1980's or newer blah,blah,blah.
About 90% of this stuff traded 3 to 4 years ago folks. It still exists for sure but is a very rare bird. Brokers get contacted all the day by people claiming to be REAL BUYERS. A seasoned broker cuts through the bullsh*t real fast like in under a minute fast.
Those rare properties that do come up the broker likes to go with a seasoned buyer they have closed deals with before on multifamily versus an unknown. A quick deal they can sell fast. Often problem properties will not have complete records. That is why it is a problem property! lol
I have a buyer now for multifamily that is a proven performer looking up to 40 million for a property. I will spend time on that. I won't do it on dinky deals for multifamily that take up a lot of time and have lot's of problems to overcome. Top brokers want velocity of transactions just like investors want velocity of deals. Investors that see brokers as just transactional are making a mistake. Many brokers especially in the commercial space are investors themselves. They value their time and the ability to generate revenue. They do not want buyers with UNIQUE or long shot strategies.
Too many buyers that are doing 1031 exchanges or that are buying out of state and are happy with 6 to 7 caps when their state has 4.
Sellers are not usually going to give personal records to someone they are not even under contract with. That is private information and without a CA agreement the potential buyer could blurt out all over creation or leverage for another property down the street.
Institutional buyers for commercial are generally not buying any of the smaller stuff under 15 million because of economies of scale. Some do but most don't. Those are usually ultra high net worth investors or syndicates playing in that space. Institutions on larger properties can get very special relationship financing from lenders not available to the average investor.
On the retail properties I usually work on properties 1.5 million and above but NNN deals tend to be cleaner than value add apartment properties that suck a lot of time in the low price range to close. Any buyer that contacts me I want to know their deal structure. The minute they stutter on an answer or I catch them bending the truth the call is done. Buyers do not need to be something they are not. It gives them a very bad rep in the marketplace. Some brokers will not want to work with the buyers because of their strategies they want to use but best to know that upfront. If a buyer lies and makes the broker look bad to the seller from a failed deal that is a way to stop getting deals in the marketplace.
If brokers know a buyer is fair for price but a closer then more and more opportunities usually start to come their way. I ask for buyers financials at first contact. If they resist or give me grief it's bye,bye time. Are some brokers pushing 1 year bubble numbers for multifamily a 6.5 cap based on 3% vacancy, 4% rent growth,35% opex when it's really historically 10% vacancy, 1 to 2% rent growth, 50% opex? Sure and then the cap is really in the 5's. If you are buying a 5 or 6 cap then my clients buy NNN properties with national credit tenants and set it and forget it with long primary term leases and set rent increases baked in.
Finding deals isn't easy people. I have for retail thousands of contacts nationally to source properties and I only like about 20% of what I see. Lot's of trash for sale in all asset classes. Best thing I can say is just be real as a buyer and realistic for the market you want to invest in. If the market does not have the returns you want then look to another market or possibly build ground up.
Brokers try to stay away from "dinky deals" and avoid (flaky buyers) like the plague. I find for every 10 initial leads I get about 2 lead to a closing. 3 are dreaming, 3 are thinking about an asset class but but serial lookers, 2 might be trying a 1031 but have not been able to sell their property etc. 2 actually end up buying something and are realistic for the market and put in the time to close a deal.
I don't mind wading through the 10 leads fast as the 2 that close I usually get six figures per deal. The brokerage side is a numbers game just like the investors side. Investors look at a lot of coal to find the diamonds. Brokers have to go through a lot of flaky and cruddy buyers to find the real and capable ones. I have many that are first time commercial buyers and I gladly work with them but they still have money with financials to show and they follow direction well. I don't mind answering questions along the way where we work as a team but if they do not follow directions from experience then it's a no go. I don't change how I do business based on one buyer.
37 Replies
- Developer · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes9y
That's the Pareto Principle. Just like any other field and endeavour in this world, 20% of the people produce 80% of the output. Take any large metroplex and I bet you can count on your two hands (and maybe just one) all the multifamily brokers that do 80% of the volume. Then you have the brokers who occasionally gets thrown a bone and actually have a real listing.
- Real Estate Agent · Plano, TX · Member since 2015 · 734 posts · 511 votes9y
@Jack B. welcome to multifamily in 2017. It's called the "fat cat syndrome".
Due to the high demand, brokers only want to work with highly qualified buyers that have a proven track record of closing. Because of the high demand, they don't need to work with new investors and tend to forget that there is a cycle there and new investors like you will remember them when the market turns and it's a buyers market again.
One more thing to remember, loopnet is usually where deals go to die and many agents post the properties that are already under contract so they can capture seller leads.
- Rental Property Investor · Brooklyn, NY · Member since 2014 · 722 posts · 1k+ votes9y
I write and speak about this topic a lot. I call it the "New Investor Catch-22". No top broker will deal with you unless you're a proven closer. But you can't become a proven closer if no broker will deal with you. It operates regardless of the state of the economy.
When I got started, it was the aftermath of the Great Recession, and brokers weren't making any money. They STILL did not want to deal with us because we were not proven in the marketplace. They assumed we would not be able to close and would waste their time. In a recession, the top brokers know it's even more important to focus on real closers, with access to capital, than to chase possibilities.
Even in a recession, only the desperate new brokers, who don't have deals, are willing to take a chance on an unproven investor who comes from a Loopnet listing.
Hopefully, I won't run afoul of the moderators (and if I do, please just delete this one paragraph, rather than the whole post), but I do offer a free resource about how to overcome this problem. I will give it to you if you contact me privately.
- Real Estate Agent · Plano, TX · Member since 2015 · 734 posts · 511 votes9y
@Jack B. a while back I wrote a blog post about this issue and how to overcome it.
- 9yJack B.Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votesOP
Originally posted by @Joseph Gozlan:
@Jack B. welcome to multifamily in 2017. It's called the "fat cat syndrome".
Due to the high demand, brokers only want to work with highly qualified buyers that have a proven track record of closing. Because of the high demand, they don't need to work with new investors and tend to forget that there is a cycle there and new investors like you will remember them when the market turns and it's a buyers market again.
One more thing to remember, loopnet is usually where deals go to die and many agents post the properties that are already under contract so they can capture seller leads.
Joseph, you aren't kidding. I actually realized pretty quick that loopnet deals were garbage. I fount out from Grant Cardone and an Investment adviser I started rubbing shoulders with recently that loopnet is all the garbage deals the institutional investors passed up.
I'm still wondering where exactly to go and find large MF properties though. Redfin seems to be less than 10 unit deals, loopnet is garbage and the brokers are MIA, so tough to get pocket listings.
I even followed Grant Cardone's advice and told the brokers in my email that I was well qualified to buy, had done deals before, I like the deal and am ready to buy, etc. to get their interest. Crickets...............................
- Real Estate Agent · Plano, TX · Member since 2015 · 734 posts · 511 votes9y
@Jack B. the only other way is to partner with an experienced operator in the market you are targeting that have the connections with the brokers and gets the off-market opportunities.
- Developer · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes9y
If you haven't done so, I would suggest putting together a CV with your REO schedule and possibly even a proof of funds, to send to some brokers to show you're serious.
- Rental Property Investor · Fort Lauderdale, FL · Member since 2017 · 151 posts · 94 votes9y
I’m having this same issue, I have cash to spend, but since I’m a new investor I get promised everything under the sun for about a week or two and then it’s as if I never talked to them at all. Even when I make the effort, texts, emails and calls I still don’t get any traction or even a reply. It's extremely frustrating
- Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes9y
@Jack B. Maybe I'm nuts, but unless you're shotgunning across the U.S. you really only need one broker to get back to you. You can use that broker (who responds in minutes) to get details of the other deals. Or maybe they refer you to someone else in their brokerage. For what it's worth, it's surprising similar outside of Loopnet. They see someone from California (my opinion) and just hit "delete" or it goes into a spam folder somewhere. I don't even get to the point where I could send them a bank statement to show that I'm not all-hat-no-cattle as those folks say in the great state of Texas. That said, those deals where I do get a response usually end up being garbage. There are no "actuals" only a pro-forma analysis, the deal has been around for 2 years, etc. I have these periodic delusions that (even on a stale deal) I'll see opportunity where others haven't. Inevitably, I end up disappointed! But I keep at it.
- 9yJack B.Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votesOP
Originally posted by @Andrew Johnson:
@Jack B. Maybe I'm nuts, but unless you're shotgunning across the U.S. you really only need one broker to get back to you. You can use that broker (who responds in minutes) to get details of the other deals. Or maybe they refer you to someone else in their brokerage. For what it's worth, it's surprising similar outside of Loopnet. They see someone from California (my opinion) and just hit "delete" or it goes into a spam folder somewhere. I don't even get to the point where I could send them a bank statement to show that I'm not all-hat-no-cattle as those folks say in the great state of Texas. That said, those deals where I do get a response usually end up being garbage. There are no "actuals" only a pro-forma analysis, the deal has been around for 2 years, etc. I have these periodic delusions that (even on a stale deal) I'll see opportunity where others haven't. Inevitably, I end up disappointed! But I keep at it.
No I need more than one broker to get back to me, because when I do have one respond, it's usually a garbage deal. I too am frustrated with the endless proforma's (I have other threads on here about this) despite asking for a T12 or schedule E, etc. I think once maybe twice I got that, and it was immediately clear their proforma was nothing but lies. The property was losing 20K a year based on their actual numbers.
MF seems to be an insiders game. I've debated sticking to SFH but, alas, it's difficult to scale and it's difficult to retire off in Seattle OR Las Vegas (where I intend to relocate). Even with paid off houses it's still difficult in this market. Forget about leveraged houses in LV, over there you can't get cash flow in this economy. It's gone up too fast.
- Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes9y
@Jack B. Why can't the one (with the garbage deal) represent you with the other multi-families listed by people that won't get back to you? Broker-to-broker responsiveness (in my case) is much quicker than investor -> Loopnet -> broker responsiveness. I don't think you're ever going to get away from the "endless proforma's" as that's just part of real estate. Nobody listing agent is going to run to you screaming "buy my overpriced garage deal". You take the T12, use it to back into the purchase price that makes sense to you, and make an offer. Most will get rejected but that's to be expected. All you care about is the one that gets accepted. You just need someone funneling you enough T12s and pro-formas so that you can at least make offers. And that only takes one (hard working) broker and you'll likely have to show proof of funds, a pre-qual letter, etc. to get them to work hard for you.
- Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes9y
Anyone with a 1031 transaction will be welcomed to the MFU party as that's tried and true funds. The sole caveat will be the buyer's reserves and of course the specific DSCR of the property. Present your 1031 to commercial RE agent and a local commercial bank and this is a smooth path - - at least it was for me
- 9yJack B.Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votesOP
Originally posted by @Andrew Johnson:
@Jack B. Why can't the one (with the garbage deal) represent you with the other multi-families listed by people that won't get back to you? Broker-to-broker responsiveness (in my case) is much quicker than investor -> Loopnet -> broker responsiveness. I don't think you're ever going to get away from the "endless proforma's" as that's just part of real estate. Nobody listing agent is going to run to you screaming "buy my overpriced garage deal". You take the T12, use it to back into the purchase price that makes sense to you, and make an offer. Most will get rejected but that's to be expected. All you care about is the one that gets accepted. You just need someone funneling you enough T12s and pro-formas so that you can at least make offers. And that only takes one (hard working) broker and you'll likely have to show proof of funds, a pre-qual letter, etc. to get them to work hard for you.
Brokers aren't national, their licenses are good for specific states....The only one I have had respond to date with the requested data was in Alaska. Garbage deal and no other deals there. Another seller in Florida was self selling (trying to dump his garbage on an unsuspecting buyer) and refused to provide anything other than a proforma claiming he didn't have any tax returns (despite having owned the place for 1.5 years...red flag X2). Other than that I've received NO contacts.
Yes, nobody's listing agent is running to me screaming to buy their overpriced garbage, but that's my point, I can't get these idiots to give me the actuals except in the rarest of circumstances. And that's when the glaring inflation of the proforma becomes super evident. I thought you are having the same problem. Have you closed a MF deal? If not then how is your advice valid?? You aren't producing any better results...
- Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes9y
@Jack B. Hence my original comment of "unless you're shotgunning across the U.S.". If you are, it's just a world of market-by-market work. If you're focused on 2-3 geographies you have a better shot of being successful.
And I think you're making my point for me, you can't get "these idiots" to send YOU the actuals. What I'm saying is that if you have a buyers agent working for you (not just for the deals that they list) you might have better luck. If/when I sell one of my commercial MFRs I'm sure as heck not going to tell my agent to spam my property financials around to anyone that asks.
My personal experience is that my agent gets more information back (and faster) than when I make contact myself. Can she get what I want to see 100% of the time? No. Can she get it (for whatever reason) the information more often that I can? Yes. Can I can around about why a deal has been on the market for 12 months? Not really. Can she ask around and get me some insight? Yes, it's happened before.
Have you *tried* to find a broker to work with you on the buy-side? Told them that their deal wasn't right for you but asked about 3 others in the area that you found on Loopnet? Or do you just go silent when you do your analysis and find out that their deal isn't right for you?
- Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes9y
@Jack B. Yes, I've closed a multi-family deal. More than one. I have results, do you?
- 9yJack B.Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votesOP
Originally posted by @Jeff B.:
Anyone with a 1031 transaction will be welcomed to the MFU party as that's tried and true funds. The sole caveat will be the buyer's reserves and of course the specific DSCR of the property. Present your 1031 to commercial RE agent and a local commercial bank and this is a smooth path - - at least it was for me
The only flaw with this is that a 1031 requires you to identify the replacement property within 45 days. Fat chance....considering limited inventory, questionable brokers, and garbage deals.
- 1031 Exchange Qualified Intermediary · Bend, OR · Member since 2015 · 44 posts · 10 votes9y
This may not be related, but I want to suggest that when a buyer's agent contacts a listing agent for financials, the listing agent knows that the buyers agent has already prequalified this person. So the comment that you might have better luck working with an agent is a valid one. If you only knew the time agents spend responding to clients that turn into ghosts too .....
In terms of doing a 1031, it's always wise to have a strategy before you even list the property you are selling. The key I think is finding a good 'team' of professionals that you work with and trust. As a QI, realtors in the industry call me all the time and ask if I have a client that might be interested in ....... whatever they have. They'd rather sell it off market than put it on the MLS any day. So yes, they go to their connected contacts first. There is no law that Real Estate has to be publically listed for sale.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes9y
I used to do smaller multifamily under 3 million about 7 years ago. That is a lot of heavy lifting and the owners sometimes self manage or have crappy accounting records.
These days I mostly do commercial retail.
Everyone right now that is starting out in multifamily seems to be (chasing the unicorn). They want small stuff class B area with C building built 1980's or newer blah,blah,blah.
About 90% of this stuff traded 3 to 4 years ago folks. It still exists for sure but is a very rare bird. Brokers get contacted all the day by people claiming to be REAL BUYERS. A seasoned broker cuts through the bullsh*t real fast like in under a minute fast.
Those rare properties that do come up the broker likes to go with a seasoned buyer they have closed deals with before on multifamily versus an unknown. A quick deal they can sell fast. Often problem properties will not have complete records. That is why it is a problem property! lol
I have a buyer now for multifamily that is a proven performer looking up to 40 million for a property. I will spend time on that. I won't do it on dinky deals for multifamily that take up a lot of time and have lot's of problems to overcome. Top brokers want velocity of transactions just like investors want velocity of deals. Investors that see brokers as just transactional are making a mistake. Many brokers especially in the commercial space are investors themselves. They value their time and the ability to generate revenue. They do not want buyers with UNIQUE or long shot strategies.
Too many buyers that are doing 1031 exchanges or that are buying out of state and are happy with 6 to 7 caps when their state has 4.
Sellers are not usually going to give personal records to someone they are not even under contract with. That is private information and without a CA agreement the potential buyer could blurt out all over creation or leverage for another property down the street.
Institutional buyers for commercial are generally not buying any of the smaller stuff under 15 million because of economies of scale. Some do but most don't. Those are usually ultra high net worth investors or syndicates playing in that space. Institutions on larger properties can get very special relationship financing from lenders not available to the average investor.
On the retail properties I usually work on properties 1.5 million and above but NNN deals tend to be cleaner than value add apartment properties that suck a lot of time in the low price range to close. Any buyer that contacts me I want to know their deal structure. The minute they stutter on an answer or I catch them bending the truth the call is done. Buyers do not need to be something they are not. It gives them a very bad rep in the marketplace. Some brokers will not want to work with the buyers because of their strategies they want to use but best to know that upfront. If a buyer lies and makes the broker look bad to the seller from a failed deal that is a way to stop getting deals in the marketplace.
If brokers know a buyer is fair for price but a closer then more and more opportunities usually start to come their way. I ask for buyers financials at first contact. If they resist or give me grief it's bye,bye time. Are some brokers pushing 1 year bubble numbers for multifamily a 6.5 cap based on 3% vacancy, 4% rent growth,35% opex when it's really historically 10% vacancy, 1 to 2% rent growth, 50% opex? Sure and then the cap is really in the 5's. If you are buying a 5 or 6 cap then my clients buy NNN properties with national credit tenants and set it and forget it with long primary term leases and set rent increases baked in.
Finding deals isn't easy people. I have for retail thousands of contacts nationally to source properties and I only like about 20% of what I see. Lot's of trash for sale in all asset classes. Best thing I can say is just be real as a buyer and realistic for the market you want to invest in. If the market does not have the returns you want then look to another market or possibly build ground up.
Brokers try to stay away from "dinky deals" and avoid (flaky buyers) like the plague. I find for every 10 initial leads I get about 2 lead to a closing. 3 are dreaming, 3 are thinking about an asset class but but serial lookers, 2 might be trying a 1031 but have not been able to sell their property etc. 2 actually end up buying something and are realistic for the market and put in the time to close a deal.
I don't mind wading through the 10 leads fast as the 2 that close I usually get six figures per deal. The brokerage side is a numbers game just like the investors side. Investors look at a lot of coal to find the diamonds. Brokers have to go through a lot of flaky and cruddy buyers to find the real and capable ones. I have many that are first time commercial buyers and I gladly work with them but they still have money with financials to show and they follow direction well. I don't mind answering questions along the way where we work as a team but if they do not follow directions from experience then it's a no go. I don't change how I do business based on one buyer.
- Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes9y
Originally posted by @Jack B.:
Originally posted by @Jeff B.:
Anyone with a 1031 transaction will be welcomed to the MFU party as that's tried and true funds. The sole caveat will be the buyer's reserves and of course the specific DSCR of the property. Present your 1031 to commercial RE agent and a local commercial bank and this is a smooth path - - at least it was for me
The only flaw with this is that a 1031 requires you to identify the replacement property within 45 days. Fat chance....considering limited inventory, questionable brokers, and garbage deals.
Clearly you have never done one :sigh: Yes there's pressure to find and identify the replacement - - which is why you have to burn both ends of the candle at the same time. Use a Letter of Intend to capture both ends before you start the clock!
- 9yJack B.Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votesOP
Originally posted by @Rick M.:
I’m having this same issue, I have cash to spend, but since I’m a new investor I get promised everything under the sun for about a week or two and then it’s as if I never talked to them at all. Even when I make the effort, texts, emails and calls I still don’t get any traction or even a reply. It's extremely frustrating
I actually just talked to three MF brokers in the last two days. Magically using sites other than loopnet the brokers are not only more responsive, but I actually had a broker send me actuals AND a proforma. Refreshing!!!
- 9yJack B.Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votesOP
Originally posted by @Andrew Johnson:
@Jack B. Yes, I've closed a multi-family deal. More than one. I have results, do you?
Really? You went from a long post about how you haven't found any deals and are having the same issues to being a successful MF investor in one thread??
Plus it sounds like your strategy is not really working very well, even if you did close a single deal...considering you just posted that you are having the EXACT same experience, I'd hardly consider any "one" lucky shot to be a winning strategy. It sounds like you're just doing the exact same thing as me....
"I don't even get to the point where I could send them a bank statement to show that I'm not all-hat-no-cattle as those folks say in the great state of Texas. That said, those deals where I do get a response usually end up being garbage. There are no "actuals" only a pro-forma analysis, the deal has been around for 2 years, etc. I have these periodic delusions that (even on a stale deal) I'll see opportunity where others haven't. Inevitably, I end up disappointed! But I keep at it."
Again, note that my updated strategy, the complete opposite of yours resulted in three brokers sending me the ACTUALS AND PROFORMAS on the first request. That was 3 out of 3 brokers I contacted...using my new strategy that I changed to today...(not yours that isn't producing consistent results, if any...).
- 9yJack B.Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votesOP
Originally posted by @Rick M.:
I've been getting ghosted left and right...Its rough in these streets
Try another venue than loopnet (assuming you are using loopnet). As I noted above to the guy who went from no one giving him the time of day and on the rare occasion they do respond sending only useless proformas to suddenly being a successful MF investor after he JUST told me he was having the same issues then offered his strategy that isn't producing any different results to me, I had three brokers contact me with the requested ACTUALS within hours of reaching out to them, as soon as I moved off of loopnet. That happened TODAY.
- 9yJack B.Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votesOP
Originally posted by @Account Closed:
This may not be related, but I want to suggest that when a buyer's agent contacts a listing agent for financials, the listing agent knows that the buyers agent has already prequalified this person. So the comment that you might have better luck working with an agent is a valid one. If you only knew the time agents spend responding to clients that turn into ghosts too .....
In terms of doing a 1031, it's always wise to have a strategy before you even list the property you are selling. The key I think is finding a good 'team' of professionals that you work with and trust. As a QI, realtors in the industry call me all the time and ask if I have a client that might be interested in ....... whatever they have. They'd rather sell it off market than put it on the MLS any day. So yes, they go to their connected contacts first. There is no law that Real Estate has to be publically listed for sale.
A college buddy of mine does syndication. He apparently also goes to a group of investors first before letting anyone else in. The good ol' boy network....
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