How hard is it to find reliable brokers?

Question

I've started looking at what's available in my price range over the past few weeks ($400k-$550k), and currently my main road block is finding reliable brokers/agents. Two didn't even bother to return my calls, while two more which I spoke with over the phone still haven't emailed me a basic profit/loss sheet which I had asked for. Is this level of unreliability normal? I've shopped for single family homes before and everyone I dealt with was extremely professional and responsive. Any tips on finding someone reliable and professional for commercial RE?

Thanks, Dave

Joel Owens · Answer

Dave,
It all depends on what you are trying to do. You say buy an apartment building.

Where are you trying to buy it (state,location)??

How did you arrive at the 400k to 550k range??

How much cash do you have to purchase an apartment building??

Are you looking at 4 units or less or a larger complex??

Are you looking for totally vacant and rehab and flip,semi-performing with value add,fully performing with value add,or topped out fully performing in nicer areas with lower risk??

The first thing a quality commercial broker will do is VALUE THEIR TIME just like a buyer or seller does.The way I would do that is too see if what you are trying to accomplish is realistic or  a pipe dream.

If it isn't realistic then you need to change your buying criteria in the area you want or purchase in another area to meet your goals.

If someone calls me I know exactly what stuff is trading at and the returns they can expect in my area.

Joel Owens · Answer

Yeah Johnny the number one thing I see with apartment sellers is they buy something brand new or in fairly great shape.

Then as the years go by they do the bare minimum and hoard the cash and show little expenses thereby showing an unrealistic cash flow.

They might have made the great cash flow but at the detriment of deferred maintenance and upkeep of the building.There is a cost to that when they go to sell.They either have to put the money in for repairs and improvements before listing or expect a lower sales price.

Some also self-manage but many buyers will not so right off the top to 80% of your buyers the property will be overpriced.

Unless the buyer is paying all cash any lender will take the sellers financial documents with a grain of salt.The lender if they have to foreclose will run it from far away until it sells.This means they will not run it like a local operator.

This means the lender for the buyer will add in management fees,landscaping,pest control,accounting,advertising fees per door,standard vacancy for the area etc.,etc.

So a seller could show 40% as the actual expense numbers but the lender will use 55%. Since the lender is giving the money they make the rules.

Rich Weese · Answer

Dale- I've always been given both- actual and performa. Maybe, I just get better service or agents. Not sure why you wouldn't be receiving actuals. Rich

Account Closed · Answer

Thanks, via this thread I've connected w/ Joel, and plan to give him a call this coming week. In general though, when looking at ads and calling brokers associated with the property, it's been very hit and miss, and so far, 100% miss.

Account Closed · Answer

Thanks, I've included responses below:

>>Where are you trying to buy it (state,location)??

I'm looking throughout the US, I don't have a specific location in mind. Lately I've been doing a lot of searching via Loopnet.

>>How did you arrive at the 400k to 550k range??

Based the fact that I want some diversification (not fully invested into one building), and with a 20% down payment, I could afford 2-3 buildings in this price range.

>>How much cash do you have to purchase an apartment building??

Right now I'd be looking to invest ~$250,000, but not all at once.

>>Are you looking at 4 units or less or a larger complex??

Generally larger complexes

>>Are you looking for totally vacant and rehab and flip,semi-performing with value add,fully performing with value add,or topped out fully performing in nicer areas with lower risk??

Something I could get financing on, so I'd want to see a reasonable occupancy rate (maybe 80%-85%+) and a solid current cash flow. Value add properties I would definitely consider, though I wouldn't want to buy a building then immediately put down a $50-$100k capital investment - I'd prefer something performing decently well as it is, really with or without a lot of value add potential.

Also, I want to avoid bad neighborhoods.

If you'd be interested in working with me (as you're a broker), feel free to message me.

Thanks

Joel Owens · Answer

20% down is the minimum on apartments.Most banks now want 30% down.

You can find specific apartment lenders that will do 80% LTV but you can count on the debt service rate being higher.The lenders want more yield for accepting a higher ltv position.

Another option if the bank or apartment lender allows is to get the seller to hold a 10 to 15% second loan.This decreases your cash down into a deal and can also allow you to leverage into a bigger complex.

For regular apartment loans lenders typically like 90 percent or higher occupancy.

Johnny P. · Answer

Wow, this is very entertaining for me!

If anyone wants to know how it really works, feel free to ask me!

Most of the time I actually ADD expenses based on what the owner gives me.  For example - Grossing up the taxes for a new buyer, increased repairs and maintenance expenses, management fee etc etc etc.

If you've ever met with an apartment owner, you'll find most of them will give you very low expenses that need to be adjusted for a new buyer.

Steve K    I'm local to orlando, what deal did you see.. Dean Woods?

Dale Osborn · Answer

Just thought I would check back with you to see how the search for a "reliable broker" was going. Have you found someone to work with?

Joel Owens · Answer

I am not going to say anything about M and M.There are one of about 20 plus big commercial brokerages  in the United States.

I will tell you most of their stuff tends to be overpriced.

The lenders lenders strongly  dislike these 50 page offering memorandums  some of these companies send out.

Can you imagine buyers sending a lender multiple times a day 50 pages worth of junk when they only need a one page synopsis with key data to know if they can possibly fund it or not??

Some brokerage break out 2 different ones.One is just a few pages and the other is the 50 pager if the buyer wants more detail.

They have a disclaimer that all info is provided by the seller and not guaranteed.I can tell you much of this information is inaccurate when you dig down into the real numbers.

Steve K · Answer

The most recent M&M package I saw was using fantasyland numbers also.  Unfortunately these are a direct influence on the banks pricing decision.

How hard is it to find reliable brokers?

Most Popular Reply