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.
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- Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes9y
@Jack B. Whew, you have a lot of frustration and rage in your heart. Come down to San Diego, escape the Seattle weather, I'll by you a beer.
I never said that Loopnet wasn't frustrating. Loopnet is frustrating, brokers are frustrating, MLS listings are frustrating, emails from wholesalers with horrid ARV values are frustrating, it can all be frustrating. It doesn't mean that I just give up on everything that throw in the towel. Finding the deals that work for me isn't easy, I never said that it was. I'm going to go out on a limb and say it won't be easy for you either. What I said was that it was *easier* when you can go broker-to-broker instead of individual-to-broker. If you're so emotionally tied into your Loopnet rage that you don't want to hear *how* other people have found success, great, say it.
I don't need 1/1 of the deals to be great, I don't need 1/10, I don't even need 1/100. I don't need it to be easy. So, yeah, I sift through a lot of garbage, have a lot of emails go unreturned, and find enough meaningful substance for my little niche of the real estate world.
Could my strategy work better? Sure.
Is it perfect? Absolutely not.
Do I run around on BiggerPockets deriding someone else's strategy if it works for them? Nope.
Seriously, take a weekend, come to San Diego. Get some sun, have a beer on me, and just relax.
- Jack B. To be fair though I've posted things for sale on loopnet and said "please do not just push the 'send me more info' button. If you have a question, let me know". Then I get 100 "send me more info" replies. I send emails back saying "uh, what questions do you have?" Only to get zero replies. Could be the brokers are tossing it up there and waiting for that buyer who contacts them and says "I like this listing and am ready to buy. Let's do it". Or one that can profoma the income/expenses since many times buyer don't supply them (I often don't get even leases when I buy a place. Or even keys. Welcome to class C) When you're buying low yield B+ or better stuff the brokers are more likely to have a complete package.
- Jack B. Oh and if a buyer started his email but asking for all that, including a schedule E, I might just pass it up. While those are not unreasonable requests, it could come off as a pain in the butt buyer. And in this market sellers (and sellers brokers) want easy.
- John Anderson is right. When I contact a broker for a property I treat it like a job interview. I know that seems backwards in a "customer is always right" world but I'm selling myself. I have a one sheet in properties I bought. Proof of funds. Brokers that will vouch for my smooth buying. Etc.
Originally posted by @Jack B.:
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.
Let me tell you why you're not getting T12s. Since no one is selling (I could get into the 'whys' at some point but maybe I'll do a blog post of my own since I type that same stuff off this site all the time), brokers are hungry to make a transaction happen. THey're not trying to find buyers anymore. They're trying to find sellers.
So they're calling owners and saying "Do you want to sell?" Most say "no" But the smooth talking broker will promise them that the market is red hot and they should give it a shot.
So the broker goes and takes some pics -- if even that -- and tosses it on loopnet. They didn't get T12s or anything else because the seller isn't really a "seller" in that they WANT to sell. They're only a "seller" in that they WOULD sell (big difference).Think about it: You have a 20 unit property that's running smooth. It's worth about $1m. Someone asks if you want to sell and you say "no". They say "Would yous sell for $5m?" You say "of course". They'll say "Ah! So you WOULD sell!". (I've said that to owners a million times :) They can't get you $5m but maybe they think they'll get you a number you'll take.
But since the broker sort of talked the seller into listing, the seller isn't going to go out of their way to supply a bunch of financials and info. The seller might say "Bring me an offer that is acceptable and THEN I'll send my financials"
SO. Here is my tip: FORGET ABOUT THEIR FINANCIALS. You should be able to proforma a property and come closer to what YOUR actuals will be than what you''ll see supplied by someone else. It's not complex. If you really want their financials (nothing wrong with wanting them), get them as part of your DD *after* you've gone under contract. I know when I'm selling I don't provide crap until I get *AT LEAST* an LOI that I can live with.Oh, and if someone asks for my tax returns / Schedule E I'd just laugh. Don't ask for that right off the bat. Almost any broker is going to delete that request.
Hope that helps. You just happen to hit on an issue that's close to me.
- Las Vegas, NV · Member since 2016 · 73 posts · 28 votes9y
It was replaced by wholesale whining. Cody ...
- Las Vegas, NV · Member since 2016 · 73 posts · 28 votes9y
OOPS! Sorry about that punctuation error, Cody!
Should have been: "It was replaced by wholesale whining, Cody ..."
I have tried a broker daily for the last 5 days, just to recontact me. The property is near me, it is not a hot area, and although I am not a big investor, I do have a proven record of closing transactions and have more than 15 properties from SFR, duplexes and land in the particular county involved.
I am disgusted with no response whatsoever. I have considered trying to go directly to the owner of the property which I know I can contact.
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