How are you finding a multi family in a no supply market?

46 Replies

There seems to be zero inventory in our market. 

My husband and I have began an initial search for 4 unit muti-families in the North of Boston suburbs - Lowell, Methuen, Salem, Woburn. 

There are either no listings or they are overpriced and gone the next day. 

If I search FSBO, for every over-priced multi-family listing - there are 15 ads "We buy your house for cash and a free pony at closing".

We haven't tried direct mail yet,  but im not sure how effective that would be in this market. 

What other methods are you using?  

Most multi family around here is snatched at a high price by owner occupant, or someone who has had luck the last few years with appreciation. Closer to the city more so then lowell, there are still deals to find up there but, they are getting slimmer. Are you using an agent? I have a handful of things that come across my desk before hitting the market, as im sure most agents do. Its our job to find you a product, on and off market. 

Additionally, If you arent going to do direct mail at a high level, you are competing with the folks who do, so Id get clear on what your target / end game is. Id love to chat with you if you want. I also work with some developers doing a ton of direct mail and have more deals then they can buy, so they usually give me a heads up. Like I said id love to connect if you want

What you're calling a "no supply market" is really a "limited supply on the market market." If you aren't doing direct mail or some other form of off-market targeted prospecting, you can't expect to get a deal in a solid market. There are always deals everywhere, in every single market in the country, you just don't know about them if you are only searching on websites or MLS feeds. Hot markets will get multiple bids and the only way to win in those markets is to get ahead of the curve and develop an off-market gameplan. But, you have to find the pockets in the market where less investors are raining down marketing. It's not easy, but when you find the funnel, it will open wide.

Originally posted by @Michelle Reid :

Thanks for the info.  You give me hope that there may be ONE MF left in MA under 7 figures.  It sounds like most things,  networking is key.

A couple of options would be to build ground up. You could search for vacant land or look for tear downs and or existing properties siting on multiple lots and do boundary line adjustments.

With MLS look for properties that have been on the market for a while and have not sold or expired listings and make an offer that works for you. This is especially effective on vacant properties or overpriced properties that sit on the MLS for a while.

Finally would be direct to seller with mail, motivated seller website using SEO and paid ads.

The main thing is to be making offers and a lot of them. Some markets are taking 100 offers or more to get a deal right now.


 

Originally posted by @Greg Dickerson :
Originally posted by @Michelle Reid:

Thanks for the info.  You give me hope that there may be ONE MF left in MA under 7 figures.  It sounds like most things,  networking is key.

A couple of options would be to build ground up. You could search for vacant land or look for tear downs and or existing properties siting on multiple lots and do boundary line adjustments.

With MLS look for properties that have been on the market for a while and have not sold or expired listings and make an offer that works for you. This is especially effective on vacant properties or overpriced properties that sit on the MLS for a while.

Finally would be direct to seller with mail, motivated seller website using SEO and paid ads.

The main thing is to be making offers and a lot of them. Some markets are taking 100 offers or more to get a deal right now.

 @greg dickerson thanks for those ideas. I'd like to do development down the road. At this point I'd like to test my rehab systems on a not-too-far-gone multi.What would be some motivated seller websites?

 

@greg dickerson thanks for those ideas. I'd like to do development down the road. At this point I'd like to test my rehab systems on a not-too-far-gone multi.What would be some motivated seller websites?

There are 2 keys:  Networking and doing your own marketing for deals.  On the first, start attending every group you can, especially the larger ones, because wholesalers frequently show up with a deal to sell, they don't need to list on MLS, if it's a good deal they sell it within their own network or at a meeting.  On the second, the best and most prolific real estate investors do their own marketing for deals, and get most of their deals that way, not the MLS.  They sell off the thinner deals to others as a wholesale.  :-) 

My suggestion would be to get software like propstream or something similar, pull a list of all multifamilies in your market and skiptrace them. From there either hire some cold callers, or you can do it yourself. I hired some cold callers on Fiverr and they were insanely effective. Something like $12 for 50 contacts. With this data you can also start a mail campaign or even an email campaign in tandem with the calls. Hope this helps!

Originally posted by @Michelle Reid :

There seems to be zero inventory in our market. 

My husband and I have began an initial search for 4 unit muti-families in the North of Boston suburbs - Lowell, Methuen, Salem, Woburn. 

There are either no listings or they are overpriced and gone the next day. 

If I search FSBO, for every over-priced multi-family listing - there are 15 ads "We buy your house for cash and a free pony at closing".

We haven't tried direct mail yet,  but im not sure how effective that would be in this market. 

What other methods are you using?  

 Finding smaller deals (2-4 units) is hard because you have more competition.

Everytime the barrier to entry is small, you have more competition.

More competition means less deals.

My advice: go bigger.

Don't have the funding to go bigger? 

1. It's actually easier to qualify for bank financing for bigger deals than smaller deals. 

2. It's actually easier to raise capital for bigger deals than smaller deals.

@Michelle Reid if they are gone the next day, then they are not overpriced.  You need to adjust expectations to what the market gives us today, not what the market gave us 10 years ago.

@Ann Bellamy your next Burlington Black Diamond meeting is on my list of attending!  Thanks for the info.  I need to zone in on the process.

@Wes Beale Thank you! That does help. I've heard great things about fiverr.  Is the software pricey?  Have you gotten deals this way?

@Michael Ealy That is my long-term plan. Hopefully the next deal as I am not 22 years old.  Although this would be my 2nd investment property. I've been out of the game for a few years.  If I'm going to make mistakes.  I'd rather it be on a $4-500k prop than a $2m investment.  Would you agree?

@Russell Brazil I hear you.  The market doesn't care what I want to pay.  

I've just been burnt 2x buying in these hot markets.  First 2 family - bought mid-height, then recession, rents went down, bled money for 2+ years, then got sued due to tenant stupidity, then sold after taxes and depreciation walked away with about .50.  Primary residence = bought for $425k sold 10 years later for $425K.   I just can't make the numbers work at the prices they are selling for vs. current rents.  I don't know how others are.  I really don't want to repeat the same mistake.

@Michael Corey I've often thought about it.  I just can't see how I'd assemble a team long-distance.  I know others have done it.  I think I'd be more confident with some deals under my belt.  I've looked into turnkey there as well.  I also don't know about the community, employment etc.

Sarasota Fla area. I have a couple of multi families that Only have one water meter and I pay the bill. Does anybody know of a company in the area that can Individually meter each unit?


@Michael Ealy That is my long-term plan. Hopefully the next deal as I am not 22 years old.  Although this would be my 2nd investment property. I've been out of the game for a few years.  If I'm going to make mistakes.  I'd rather it be on a $4-500k prop than a $2m investment.  Would you agree?

I've just been burnt 2x buying in these hot markets.  First 2 family - bought mid-height, then recession, rents went down, bled money for 2+ years, then got sued due to tenant stupidity, then sold after taxes and depreciation walked away with about .50.  Primary residence = bought for $425k sold 10 years later for $425K.   I just can't make the numbers work at the prices they are selling for vs. current rents.  I don't know how others are.  I really don't want to repeat the same mistake.

Your experiences show you need to do 1 or both of the following:

1. Get the right KNOWLEDGE on how to do acquire deals the right way

2. Partner with experienced real estate investors on your next deal

The right knowledge is key. Buying properties that are nice, up and running and listed on the MLS selling at market value - is NOT the right way to make money in today's market and in any market. With the right know-how, you will know how to find the right deal, how to analyze them correctly, how to add value, etc.

I made MORE money during the Great Recession than at any time in my investing career because I bought at the right price, in the right location and I added significant value to my buildings.

A lot of investors try to do things by themselves. In buying bigger deals, you're actually forced to bring in people who are more knowledgeable than you like Property managers, leasing agents, contractors, and venture partners. 

By having a team of people helping you - and if you buy right - it's actually harder to make a mistake with bigger deals than smaller deals.


 

Originally posted by @Michelle Reid :

@Michael Ealy hmmmm.  You make a lot of sense.  But how does a newbie convince venture partners to deal with them?  What does someone new to the game without a ton of capital or experience bring to that table?

 That's why it makes sense to get the knowledge. And work your @s$ off to line up a good deal.

Let me give you a real-life example.

A newbie investor in the hotel space (he is experienced with apartments but has not acquired any hotels) found this deal. 4 buildings (plus a parking lot) in total in downtown Cincinnati - all vacant. One building used to be an office space, another used to be leased by a large bank and 2 buildings leased by non profits.

He knew the owner and got him to reduce his asking price from $6M down to $4.6M and he believes he can get the seller reduce it down to $4M.

He approached me with the deal. I like it. I can envision converting the 2 buildings to a mixed commercial + apartment/STR and use government money to renovate the other 2 buildings (since they are historic buildings). I can get other JV partners - one can do the renovation, another can do the management and I can bring in some money partners too.

He tried doing that deal by himself for about a year but he couldn't. One call with an experienced developer/investor like me - changed that.

Connecting with the right people is the strategy I used all throughout my investing career specially when I transitioned to hotel investing.

You're one connection away...

My last 2 deals were from the MLS (Seattle region). In both cases the property was significantly underperforming due to poor management. The first required significant upgrades and improvements, but we refinanced 10 months later at double the purchase price.
The second was in solid condition just way under market.  It had 2 failed sales prior to my purchase because of debt service concerns by the lender.  I was able to show my lender what it was and what it should be (documented rent comps). We got creative to accommodate their underwriting (1 year interest only to get stabilized before amortizing met their debt service requirements).  In less than a year we again doubled the value through standard turnover upgrades, market rents on vacant units and structured increases on existing tenants. 

The takeaway is: know your market better than your competition.  Know what rent should be in your market And look for the outliers.  (in both cases we increased rents by $400-500/unit on turnover with between $2000-7000 in improvements). The price may look high for what it currently is, but not as compared to what you can make it.  

Good luck and be creative!

@Michael Ealy That's a great story.  Thanks for sharing.  Networking, creativity and thinking big seem to be the key.

@Curtis Bidwell Thanks for sharing. I have not gone deep enough into any of the MLS items as they just seem upside down from my initial analysis. Maybe I could dig deeper to look for opportunities to improve as you did.

Originally posted by @Michelle Reid :

There seems to be zero inventory in our market. 

My husband and I have began an initial search for 4 unit muti-families in the North of Boston suburbs - Lowell, Methuen, Salem, Woburn. 

There are either no listings or they are overpriced and gone the next day. 

If I search FSBO, for every over-priced multi-family listing - there are 15 ads "We buy your house for cash and a free pony at closing".

We haven't tried direct mail yet,  but im not sure how effective that would be in this market. 

What other methods are you using?  

Relationships. The compound effect of these are staggering. If agents are 100% convinced that you are going to close (i.e. they are assured of getting paid) they will bring the deals to you first. I have bought 21 units in 2020 already that I don't believe anyone else got a chance to even look at.

 

@Michelle Reid I understand the frustration you are feeling with struggling to find a property that matches up with your goal.  The market here in WA is also incredibly hot and the amount of inventory in the 2-4 unit space is quite thin.  Other than the good advise that others have already provided, I would add that you need to be ready for the opportunities that do arise.  This means having solid financials and financing all in place as well as the deep knowledge of your target market.  This will allow you to quickly identify the properties that will work with your strategy and be able to move on them quickly.  Additionally, don't forget that you don't have to simply compete on price, you can compete with terms as well (quick closing, rent/lease back option, flexibility for 1031 exchanges, etc.).  

Best of luck,

John 

@Michelle Reid one consistent way our clients seem to be finding them is through direct mail to sellers with issues.

I don’t have their secret sauce but :

You could do a small direct mail campaign with personalized material (since there really aren’t as many multi family deals) arriving on 5th of the month when payments could be pressing and rents past due to a list of landlords with recent evictions, liens, and possibly with out of town owners.

Essentially it’s putting yourself in the shoes of how you might have sell something discounted and off market and then reverse engineering the ways you can identify that scenario.

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