How to Find Off-Market Apartment Deals

28 Replies

Most of my off-market deals come from real estate brokers. Because of my track record and reputation,brokers come to me before they list their buildings. I follow through and close on every deal I put my EMD on so I never run out of deals.

But, in preparing to give a seminar on how to succeed with apartment investing, when I look back over the 20 years I've been doing it, I realize I have used many ways to find good OFF-deals. Here's one:

TALK TO PROPERTY MANAGERS

Why You can Get Good Off-Market Deals from Property Managers - PMs and property management companies know the different buildings in town and some are hired as "receivers" in a foreclosure situation for example. A few PMs will know of owners who are running out of cash (maybe because of a critical illness or personal problems not related to the building) or they just took over a building that has been mismanaged by a previous PM.

If you can talk to enough PMs and show them you have the experience and financial capability to take down apartment deals, then a few of those PMs will call you if they have owners who are thinking of selling (of course, they will not share info with you until they get the owners' permission first). 

An Actual Deal Brought by a PM

One of my earlier deals in my career is a 30-unit building in Over the Rhine area of Cincinnati. The owner was quite motivated and the Property Manager of the building brought it to my attention. I struck a deal with the owner to buy the building via land contract and I just take over the management. $0 down deal.

Here are the Numbers:

"All in" Purchase Price and Rehab: $170,000

Re-sale Price: $285,000

Profit (not including cashflow): $100,000+

Time frame: about 2-3 years (I don't even remember exactly by now)

So what about the experienced apartment syndicators out there? What ways other than real estate brokers referring you deals have worked for you? Please share it here so other apartment investors can benefit. Calling on @Ben Leybovich , @Alina Trigub , @Brian Burke , @Greg Dickerson , @Tj Hines , @John Casmon , @Ola Dantis

@Michael Ealy 

One of our strengths at Dwellynn.com is finding off TRUE market deals. Occasionally, some Brokers will send us deals that have been marketed and maybe an expired listing only to find the deal on our trash OR in the spam section of my emails. 

Consequently, we have become very solid at sourcing TRUE off-market deals via

AUTHORIZED VENDORS

The TWO main challenges for many people looking to source off-market deals:

  1. REJECTION
  2. PIERECING THROUGH LLC (or other gatekeeping elements)

Using Online Authorized vendors such as CoStar allows us to pierce through the LLCs and calls the Owners directly. As you the number of units grow, it can get increasingly difficult to reach a decision-maker in an organisation. So, we combine our cold calling strategies with sophisticated direct mails to the firms that own assets in our target markets. 

REAL-LIFE EXAMPLE

I called a firm that owns assets in one of our target markets in TX, and I was able to get on the phone with one of the owners, the son of the owner. It is a family operated MF firm and they self manage all their assets. 

The guy said "Ola you couldn't have called at a better time as we you are in the property disposition phase and looking to move $20,000,000 off our portfolio (3 multifamily assets)". We underwrote the deal and can back with a price and during the time 1 of the 3 deals went to a national broker in prep to go on-market because someone else in the company made the decision to do that (the father possibly, so that they can get the best Sales price, understandably)

Though we were unable to take down all 3, we are now in talks to get one under contract. 

Yes, it is a lot of effort but we are fully aware of the Law of Averages and use it to our favour!

Originally posted by @Ola Dantis :

@Michael Ealy 

One of our strengths at Dwellynn.com is finding off TRUE market deals. Occasionally, some Brokers will send us deals that have been marketed and maybe an expired listing only to find the deal on our trash OR in the spam section of my emails. 

Consequently, we have become very solid at sourcing TRUE off-market deals via

AUTHORIZED VENDORS

The TWO main challenges for many people looking to source off-market deals:

  1. REJECTION
  2. PIERECING THROUGH LLC (or other gatekeeping elements)

Using Online Authorized vendors such as CoStar allows us to pierce through the LLCs and calls the Owners directly. As you the number of units grow, it can get increasingly difficult to reach a decision-maker in an organisation. So, we combine our cold calling strategies with sophisticated direct mails to the firms that own assets in our target markets. 

REAL-LIFE EXAMPLE

I called a firm that owns assets in one of our target markets in TX, and I was able to get on the phone with one of the owners, the son of the owner. It is a family operated MF firm and they self manage all their assets. 

The guy said "Ola you couldn't have called at a better time as we you are in the property disposition phase and looking to move $20,000,000 off our portfolio (3 multifamily assets)". We underwrote the deal and can back with a price and during the time 1 of the 3 deals went to a national broker in prep to go on-market because someone else in the company made the decision to do that (the father possibly, so that they can get the best Sales price, understandably)

Though we were unable to take down all 3, we are now in talks to get one under contract. 

Yes, it is a lot of effort but we are fully aware of the Law of Averages and use it to our favour!

 Nice Ola.

That's good to know you can use CoStar to go straight to the LLC owners. I will look into that.

Thanks for sharing this valuable tip!

@Michael Ealy Like you I have been in the business for over 23 years and have built a reputation as a closer in my areas so I have had all kinds of deals deals come form all kinds of sources. Developers, Brokers, Lenders, Bankers, PMs, Lawyers, Accountants, Architects, Engineers, Vendors, Subcontractors, other builders, employees, neighbors, friends and good old fashioned cold calling on larger more specific deals I heard about through the grapevine.

One of the more interesting cases easierIn my career was a 101 lot subdivision my engineer brought to me. He was doing the civil engineering for a developer who could not complete the project or pay the bill so the developer gave him the property to satisfy the bill. The engineer called me and offered to give me the property for the amount of the bill which was $25k. Since all the Enginering was complete and ready to permit I jumped all over it. Total development cost was around $10k per lot and all lots sold for $30-$40k. Needless to say this was a pretty sweet deal.

Bottom line is if you develop a reputation as a closer and are easy to work with deals will find you. Especially in a down market.

Speaking as an owner of thousands of units I can tell you that I get calls and letters and postcards all the time from people wanting to buy my properties.  The letters and postcards go straight to the trash before I even see them.  My staff is trained to do exactly that.  Most phone calls end up stuck in our phone tree or voice mail and go unreturned.  Every once in a while an email or phone call actually gets to me.  It either gets deleted, or I politely tell the person that we aren't interested in selling, even if we actually are.  So any advice to send mail, email, or cold-call is futile if all owners do the same thing I do.  Of course, not all do so the law of averages says that after thousands of calls or letters or whatever you might find one person willing to engage.  Chances are, that is also the same person that simply sees a sucker on the other end of the phone hungry to purchase their overpriced or challenged property that no one else wants.

Here is why I won't sell to the caller or letter writer:  I am sitting on gold.  I'm not talking about the value of the property.  I'm talking about the value of the deal.  Here's what I mean:  It is a seller's market.  Buyers want my property, and brokers want my commissions.  But I'm also a buyer, looking for off-market deals.  I need one to get the other.

Let's say I have a property I'm ready to sell.  I can sell it to the letter-writer and get my price, then I have to go out and pound the pavement like everyone else and try to find my next deal.  What a waste.  Or, I can call my favorite brokers.  Not to ask them to bring me a buyer, but to tell them that if they want my listing they have to bring me two "true" off-market deals.  

You can say that your relationship with the broker will have them bringing you deals, and that may be true.  You can say that your reputation as a closer will have them bringing you deals, and that's probably also true.  But nothing is stronger motivation than holding the broker's next paycheck in your hand.  That will have them bringing you deals.

Getting real off market deals is like climbing a ladder.  Newbies get "off market" deals that everyone else has already seen--the ones that are priced too high or are garbage.  The senior class gets "off market" deals that that broker is showing to everyone else too, and there might even be other brokers also showing that deal to their clients.  But the post-graduates...they get the real off-market deals.  The ones that no one has seen and they can just make a deal with the seller without all of the other external noise.  Getting those takes relationships, reputation, AND leverage!

@Michael Ealy appreciate you tagging me in this post! At the moment we're using Reonomy to fill our pipeline with True/real off market deals. We love it because it gives you all of the maturity dates of when the owners loan is coming due, email addresses and phone numbers (Yes
plural). Before then we were using listsource. It's okay but the interface works well only with duplexes, tri-plexes, quads and SFRs. We love it because it gives you all of the maturity dates of when the owners loan is coming due. We know at this point they gotta make a move. You can craft your copy differently with letters for direct mail.

We use 3 mediums to touch base with the owners. Direct mail, SMS text and rvm's. Make sure you scrub the list for DNC to stay compliant as well as skip trace the owners of the list once the list has been scrubbed for the personal names of the LLC.

SMS response rates are the best out of all 3 mediums. We make sure we keep the message in the sellers face to build memorable rapport. The ones who express interest but not quite ready, we capture their email address and now they're thrown into a funnel with automated marketing messages with copy tailored fit. So now we're touching them using 4 mediums!

We've also come to find out that even though brokers may say "Hey we off market deals" are they really off market?  I mean we aren't direct to the seller. The broker is. Off market in the broker world - in our world only means they're going to show a few close people who they know can perform and we get em all the time. But what we quickly figured out is doesn't affect the price of the asset, as if you were direct to the seller with no broker. The price usually still will trade at the same avg price per door for that area.

So again, my question is when brokers say off market - is it really truly off market?! Me ...ehhh - I don't think so. There's no discount on price.

I definitely agree with you as having property managers as a source of potential deal flow, as well as contractors, and or all licensed tradesmen.


Originally posted by @Brian Burke :

Speaking as an owner of thousands of units I can tell you that I get calls and letters and postcards all the time from people wanting to buy my properties.  The letters and postcards go straight to the trash before I even see them.  My staff is trained to do exactly that.  Most phone calls end up stuck in our phone tree or voice mail and go unreturned.  Every once in a while an email or phone call actually gets to me.  It either gets deleted, or I politely tell the person that we aren't interested in selling, even if we actually are.  So any advice to send mail, email, or cold-call is futile if all owners do the same thing I do.  Of course, not all do so the law of averages says that after thousands of calls or letters or whatever you might find one person willing to engage.  Chances are, that is also the same person that simply sees a sucker on the other end of the phone hungry to purchase their overpriced or challenged property that no one else wants.

Here is why I won't sell to the caller or letter writer:  I am sitting on gold.  I'm not talking about the value of the property.  I'm talking about the value of the deal.  Here's what I mean:  It is a seller's market.  Buyers want my property, and brokers want my commissions.  But I'm also a buyer, looking for off-market deals.  I need one to get the other.

Let's say I have a property I'm ready to sell.  I can sell it to the letter-writer and get my price, then I have to go out and pound the pavement like everyone else and try to find my next deal.  What a waste.  Or, I can call my favorite brokers.  Not to ask them to bring me a buyer, but to tell them that if they want my listing they have to bring me two "true" off-market deals.  

You can say that your relationship with the broker will have them bringing you deals, and that may be true.  You can say that your reputation as a closer will have them bringing you deals, and that's probably also true.  But nothing is stronger motivation than holding the broker's next paycheck in your hand.  That will have them bringing you deals.

Getting real off market deals is like climbing a ladder.  Newbies get "off market" deals that everyone else has already seen--the ones that are priced too high or are garbage.  The senior class gets "off market" deals that that broker is showing to everyone else too, and there might even be other brokers also showing that deal to their clients.  But the post-graduates...they get the real off-market deals.  The ones that no one has seen and they can just make a deal with the seller without all of the other external noise.  Getting those takes relationships, reputation, AND leverage!

 I totally agree with you about paying the broker handsomely. I am a licensed broker myself but whenever a broker brings me deals, specially the truly off-market deals, I don't take any commission. In fact, I do this even with my house. I just moved to a million dollar home (I know in your neck of the woods that's no big deal but here in Cincinnati, Ohio...it is a big deal) - and an agent brought it to my attention. It took her about a year to find a house I like at a price where there's some discount (I can't stop being an investor man). She found one that is really worth $1.4M, needs about $100K in updating but we got it for $1M. She got the entire $50K commission even though I could justify getting $25K of that.

And I like your analogy about the ladder.

I've been getting truly off-market deals lately: I am the first one to even take a look at it...so I guess I am in the post graduate class now :) Of course, it was not like that when I started. IBut now, I cherry pick and only buy the great deals and turn down most of the off-market deals they show me.

Originally posted by @Tj Hines :

@Michael Ealy appreciate you tagging me in this post! At the moment we're using Reonomy to fill our pipeline with True/real off market deals. We love it because it gives you all of the maturity dates of when the owners loan is coming due, email addresses and phone numbers (Yes
plural). Before then we were using listsource. It's okay but the interface works well only with duplexes, tri-plexes, quads and SFRs. We love it because it gives you all of the maturity dates of when the owners loan is coming due. We know at this point they gotta make a move. You can craft your copy differently with letters for direct mail.

We use 3 mediums to touch base with the owners. Direct mail, SMS text and rvm's. Make sure you scrub the list for DNC to stay compliant as well as skip trace the owners of the list once the list has been scrubbed for the personal names of the LLC.

SMS response rates are the best out of all 3 mediums. We make sure we keep the message in the sellers face to build memorable rapport. The ones who express interest but not quite ready, we capture their email address and now they're thrown into a funnel with automated marketing messages with copy tailored fit. So now we're touching them using 4 mediums!

We've also come to find out that even though brokers may say "Hey we off market deals" are they really off market?  I mean we aren't direct to the seller. The broker is. Off market in the broker world - in our world only means they're going to show a few close people who they know can perform and we get em all the time. But what we quickly figured out is doesn't affect the price of the asset, as if you were direct to the seller with no broker. The price usually still will trade at the same avg price per door for that area.

So again, my question is when brokers say off market - is it really truly off market?! Me ...ehhh - I don't think so. There's no discount on price.

I definitely agree with you as having property managers as a source of potential deal flow, as well as contractors, and or all licensed tradesmen.

TJ, thanks for sharing REONOMY - I heard of it before so I will look into that specially as I expand into other markets.

With regard to off-market deals that come from brokers, when you're doing this business for as long as I have, eventually, you will get truly off market deals where you have no competition. Does it necessarily mean you will get the best price? Not always but if the broker vouches for you and tell the seller that you can close deals (and as Brian Burke said - you pay the broker handsomely), then you will likely get a better price than competing in the open market.

Of course there are so many more ways to find off-market deals other than brokers and that's the whole purpose of this post.

Thanks again brother!

 

@Michael Ealy

Appreciate the tag. Great topic! 

While I haven't been investing for 23 years like some of you out there, but for us a truly off market deal comes through cold calling. It takes several hundred calls to get to that one true deal. In one particular case, it was an older gentleman whose 50 to 60 years kids didn't really want to bother caring for the properties he accumulated over many years of investing. So he was selling them one by one. It took us almost a year to court him (or more specifically one of his properties we were interested in), but finally our turn came. He called and offered to sell it to us. We were on the top of his list since we stayed in touch and took the opportunity. 

Nothing beats establishing and maintaining relationships with other people: investors, brokers, property managers, attorneys, CPAs and many others. 

@Michael Ealy outside of networking with brokers to get off market leads. I'd say another good source is speaking to property managers that manage a lot of communities that might know owners who want to sell. Another good way to find deals off market is by networking with owners at conferences. @Brandon Abbott how else are you getting off market leads?

Originally posted by @Alina Trigub :

@Michael Ealy

Appreciate the tag. Great topic! 

While I haven't been investing for 23 years like some of you out there, but for us a truly off market deal comes through cold calling. It takes several hundred calls to get to that one true deal. In one particular case, it was an older gentleman whose 50 to 60 years kids didn't really want to bother caring for the properties he accumulated over many years of investing. So he was selling them one by one. It took us almost a year to court him (or more specifically one of his properties we were interested in), but finally our turn came. He called and offered to sell it to us. We were on the top of his list since we stayed in touch and took the opportunity. 

Nothing beats establishing and maintaining relationships with other people: investors, brokers, property managers, attorneys, CPAs and many others. 

Hi Alina,

That sounds like a lot of work and a lot of follow up. That's very commendable and it seems to pay off for you. Finding good deals in this market is harder and harder. Awesome work my friend and thanks for sharing!

 

Originally posted by @Danny Randazzo :

@Michael Ealy outside of networking with brokers to get off market leads. I'd say another good source is speaking to property managers that manage a lot of communities that might know owners who want to sell. Another good way to find deals off market is by networking with owners at conferences. 

 Thanks Danny.

That's exactly my example: property managers.

Great minds think alike.

How else do you find off-market apartment deals?

I do not have actual experience with this because I am still part-time RE investor (who has had some success) that has yet to invest in a 5+ unit. But if I were to go full time RE tomorrow, I think the first thing I would try is SEO. This would be for any RE purchase that I would desire (I do not see a reason why it would be limited to SFR to quads).

Try to have the sellers come to me.

I find it surprising that no one has stated it already.  Maybe it does not work as well as I would hope.

This would be in addition to trying to make as many contacts as possible.

@Danny Randazzo and @Michael Ealy . The best way is through broker relations. However, you can also use Costar to find properties that fit your criteria and use the provided contact info within Costar to contact the owner directly. However, having a broker handle the deal is still advisable. You can use Costar to find out who brokered the last sale and contact them to see if the owner is interested in selling.  

Originally posted by @Dan Heuschele :

I do not have actual experience with this because I am still part-time RE investor (who has had some success) that has yet to invest in a 5+ unit. But if I were to go full time RE tomorrow, I think the first thing I would try is SEO. This would be for any RE purchase that I would desire (I do not see a reason why it would be limited to SFR to quads).

Try to have the sellers come to me.

I find it surprising that no one has stated it already.  Maybe it does not work as well as I would hope.

This would be in addition to trying to make as many contacts as possible.

 Dan,

This might work but I am not an expert to say for sure.

What I do know is this. The strategy with SEO with SFRs is to get owners who are motivated due to some financial hardship to call you. I guess in theory, this should also work with multi family. 

However, in practice, the MF owner recognizes that his/her best chance of selling his problem building is through brokers who already have investor-buyers lined up. 

SEO works for SFRs because the typical seller of problem properties are homeowners or small time landlords who don't have a good network of brokers who work solely with investor-buyers.

Originally posted by @Brandon Abbott :

@Danny Randazzo and @Michael Ealy. The best way is through broker relations. However, you can also use Costar to find properties that fit your criteria and use the provided contact info within Costar to contact the owner directly. However, having a broker handle the deal is still advisable. You can use Costar to find out who brokered the last sale and contact them to see if the owner is interested in selling.  

 That seems to be the consensus and supported by my own experience as well. Brokers are my best sources of off-market properties. I mean when I prepare one of my buildings to be sold, my first call is to brokers who already have vetted investor-buyers in their network.

Originally posted by @Tony Robinson :

So much knowledge being shared on this thread, thanks for sharing @Michael Ealy!

 You're very welcome Tony.

How's your real estate market for apartments?

Is rent control coming to your town?

@Michael Ealy , yes, rent control is coming to CA - though, my understanding is that it's a gradual roll out over the next several years. Even though I live in CA, I'm focusing my investing in Shreveport, LA at the moment. At some point, I'll look at apartments in my market, but wanted to "cut my teeth" in a lower-priced market first. 

Originally posted by @Tony Robinson :

@Michael Ealy , yes, rent control is coming to CA - though, my understanding is that it's a gradual roll out over the next several years. Even though I live in CA, I'm focusing my investing in Shreveport, LA at the moment. At some point, I'll look at apartments in my market, but wanted to "cut my teeth" in a lower-priced market first. 

 All of CA will have rent control on Jan 1 (retroactive to March 2018) but the increase is 5% + local inflation rate per year.  If your rent is near market rate, this is not very limiting. 

Where there is problems is under the following conditions:

  • The rent is currently significantly below market rent.  It could take years to catch up. 
    If the units are in need of minor rehab (major rehab have a buyout option in the regulations) that should result in a rent increase.  These rehabs likely will only occur on tenant turn over under these regulations. 
    if you have a poor tenant and want to get rid of them.  The regulations basically allow getting rid of tenant for lease violations that tenant does not address.  It is not very clear if they repeatedly break lease but each time address the issue that you can evict them.  

My Off-market success strategies have been identified in this thread, however, I have a quick tip for folks to find decent deals for On-Market Listings. This is how I started and is much more comfortable for a beginner:  

The real estate websites (Realtor, Trulia, Zillow) have an option to select multifamily in filters. When you do this, you will see what everyone else looking for multifamily sees.  

TRY THIS - select single-family, however, limit your search to 5+ bedrooms and 5+ bathrooms listings.  

Go to "List View" and scroll through the listings. 

You will quickly be able to identify the difference between a mansion and a multi-family property.

I have purchased two apartment complexes sitting on the MLS for over a year simply because the listing did not show up in multi-family. I offered well below asking and quickly closed. Just a tip for those who stay up late searching these sites.

Ramsey

Thanks so much @Michael Ealy for starting this conversation and to everyone else for responding. This is such helpful information to hear from the experts. 

Originally posted by @Brian Armstrong :

Thanks so much @Michael Ealy for starting this conversation and to everyone else for responding. This is such helpful information to hear from the experts. 

 You're very welcome Brian. Looking forward to seeing you in my next seminar!