Using a broker in multifamily

Multi-Family and Apartment Investing
5yFollow

Using a broker in multifamily

Courtney M.
Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes

I've been reading a lot of books about multifamily and one piece of advice I seem to read over and over is a lot of people buying multifamily don't use a buyer's agent - that seems to be frowned upon in this space.

I'm sure it's impossible to say what is standard in this market across the country, but I'd love to know if you've found this to be true in your experience.

I am starting to look at buying multifamily and it seems, to me, it would be disastrous to go about this. The listing agent is going to do his or her best to sell me on the property - I need someone else on my team that isn't trying to sell me.

What's your experience in this space like?

8Reply
66 views

Most Popular Reply

Danté Belmonte
Real Estate Agent · Syracuse, NY · Member since 2019 · 164 posts · 90 votes
5y

Hi Courtney! Once you enter the multi-family space you are right. “Co-brokering” a deal or have a buyer and sellers agent is not common or really doesn’t exist. In a competitive environment like it is today for aquisitions, an offer with a 2nd agent that has to split the commission won’t look good. The listing broker most likely will not try to “sell” your offer to the seller. Also if you have a buyers agent, odds are they will know nothing in particular about the deal. They will know as much as you do. They will continue to go back to the listing broker to get info and it’s like the game telephone every time you have a question about the property or deal. 

Once you get in the multi-family game, you really need to know your stuff and should only lean on brokers for their deal-flow, not let them “sell” you on why you should buy it. You should be savvy enough in this area to make your own decisions for yourself, your company and your investors, if you have them. Your real estate attorney should be the one looking over your shoulder on the legal side to make sure you aren’t being taken advantage of and then your property management company you plan on having should look over your shoulder as well during due diligence. Same with contractors on the physical due diligence part. Multi-family is a different game and you are only as strong as the team supporting you. I hope this helps and good luck on your multifamily journey! 

5Reply
See this reply in the discussion

27 Replies

Jump to latestLatest
  • Mark Delgado
    Real Estate Broker · Sacramento, CA · Member since 2021 · 15 posts · 24 votes
    5y

    I'm in Sacramento and so far I've had a very similar experience over the past 13 months - offers where I have representation separate from the listing agent and the offer seems to get pushed to the bottom of the pile. But earlier today I reached out to have the listing agent represent me on a 14 unit apartment building. Will see how it goes. 

    5Reply
  • Courtney M.
    OP
    Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes
    5y

    Thanks for the feedback @Mark Delgado!

    I don't feel confident enough in this space to go it alone - it seems a bit bizarre for larger properties this isn't common.

    Good luck on your bid! Is the property in the Sacramento area?

    2Reply
  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    5y

    @Courtney M. I think it depends; if it is on the MLS your buyer's agent will get paid anyway. If it is not listed and if you are experienced enough-have done lots of transactions, then perhaps you can go commando! I have always used an agent for the peace of mind and I make them work for their dollars.

    2Reply
  • Danté Belmonte
    Real Estate Agent · Syracuse, NY · Member since 2019 · 164 posts · 90 votes
    5y

    Hi Courtney! Once you enter the multi-family space you are right. “Co-brokering” a deal or have a buyer and sellers agent is not common or really doesn’t exist. In a competitive environment like it is today for aquisitions, an offer with a 2nd agent that has to split the commission won’t look good. The listing broker most likely will not try to “sell” your offer to the seller. Also if you have a buyers agent, odds are they will know nothing in particular about the deal. They will know as much as you do. They will continue to go back to the listing broker to get info and it’s like the game telephone every time you have a question about the property or deal. 

    Once you get in the multi-family game, you really need to know your stuff and should only lean on brokers for their deal-flow, not let them “sell” you on why you should buy it. You should be savvy enough in this area to make your own decisions for yourself, your company and your investors, if you have them. Your real estate attorney should be the one looking over your shoulder on the legal side to make sure you aren’t being taken advantage of and then your property management company you plan on having should look over your shoulder as well during due diligence. Same with contractors on the physical due diligence part. Multi-family is a different game and you are only as strong as the team supporting you. I hope this helps and good luck on your multifamily journey! 

    5Reply
  • Todd Dexheimer
    Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    5y

    Correct, most listing agents don't want to deal with a buyers rep. If they do, it is because you are paying the buyers rep out of pocket. 

    There are 2 reasons for this: 

    1. The listing rep needs to best represent the offers and if they don't know who is presenting the offer, they are not confident they can close, which if they don't close, tarnished their reputation. The listing broker feels confident if he knows you as a buyer. The better relationship you have and better track record of closing, the more likely you will be getting the offer accepted. 

    2. They don't want to share the commission. They worked had building the relationship with the seller - often times many years or decades. To share the listing with a buyers rep that did very little to earn the commission doesn't seem like a great proposition, especially when you combine that with #1 above. 

    So what do you do? Build relationships with the listing brokers and work the deals they present to you. You could always hire a mentor to look at the deals and guide you along the journey. That will likely cost less money that a buyers rep and get you more deals.

    3Reply
  • Justin Goodin
    Investor · Indianapolis, IN · Member since 2018 · 1k+ posts · 756 votes
    5y

    @Courtney M. Going off of what others have said already, a broker to represent the buyer is simply not needed. 

    Speaking to your point about confidence, you should start by educating yourself in this space. Nobody, or very few, people will go after large multifamily assets alone. 

    I would start buy reading books about multifamily syndications, listening to podcasts, and networking with local investors in your area. If you feel that this is the path for you, the next steps could be hiring a mentor or adding value to a more experienced investor to help take down your first deal. 

    5Reply
  • Justin Goodin
    Investor · Indianapolis, IN · Member since 2018 · 1k+ posts · 756 votes
    5y

    @Danté Belmonte I agree with these points. Multifamily is a whole different ball game. You should take time to educate yourself about the business and the process so that the brokers can take you seriously. Building your team is also really important when starting. 

    1Reply
  • Peter Nikic
    Investor · New York & TN · Member since 2019 · 325 posts · 219 votes
    5y
    Originally posted by @Justin Goodin:

    @Courtney M. Going off of what others have said already, a broker to represent the buyer is simply not needed. 

    Speaking to your point about confidence, you should start by educating yourself in this space. Nobody, or very few, people will go after large multifamily assets alone. 

    I would start buy reading books about multifamily syndications, listening to podcasts, and networking with local investors in your area. If you feel that this is the path for you, the next steps could be hiring a mentor or adding value to a more experienced investor to help take down your first deal. 

     This. Also, if you're not confident enought to go on your own (by not using a buyers agent), then you should re-think going in at all. The buyers agent in these cases do not add any value to you, they only take away. 

    Having said that, there are some cases where it could be an advantage to have a buyers agent. Like if it's listed on MLS, there are already provisions in place to compensate the buyers agent, so there is less resistence to work with a buyers agent. There are also lots of reasons why an agent will list a multi family on the MLS, like as an example, the listing agent does not bring any value to the table (they were just in the position to get the listing), so they're asking for other agents to be involved because they need help. This would allow a savy buyers agent to benefit you by having more control over the listing agent.

    Good luck.

    2Reply
  • Justin Goodin
    Investor · Indianapolis, IN · Member since 2018 · 1k+ posts · 756 votes
    5y

    @Peter Nikic Great feedback!

    1Reply
  • Joe Bertolino
    Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
    5y

    Pay your own broker or a consultant for your first few deals.  You will save more money in the long run.    Just going strait to the listing broker for your first multi family deal is not a great plan unless you have a seasoned vet guiding you through the process.  I don't do large multi units but I do keep an eye on the market and what I often see is newbie mom and pop operators "landing deals" that the experienced operators have been shying away from for one reason or another.   

    3Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    5y

    Maybe this is regional but every MF transaction I have done has a buyers and sellers agents. 

    Some split commissions and some dont but advising someone to purchase an asset w/o representation seems risky - esp if it is commercial 

    2Reply
  • Greg Dickerson
    Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    5y
    Originally posted by @Courtney M.:

    I've been reading a lot of books about multifamily and one piece of advice I seem to read over and over is a lot of people buying multifamily don't use a buyer's agent - that seems to be frowned upon in this space.

    I'm sure it's impossible to say what is standard in this market across the country, but I'd love to know if you've found this to be true in your experience.

    I am starting to look at buying multifamily and it seems, to me, it would be disastrous to go about this. The listing agent is going to do his or her best to sell me on the property - I need someone else on my team that isn't trying to sell me.

    What's your experience in this space like?

    It all depends on the the buyer and the asset. For very large deals there is often representation on both sides but the buyer will generally compensate the brokers directly as this is compensation for thier time sourcing and vetting deals for larger and more institutional buyers. It's more for connivence and anonymity. Smaller deals generally trade through the listing broker unless listed in MLS with an offer of compensation.

    As suggested you should definitely goes a consultant or mentor if you are unsure of yourself as brokers who work on smaller deals are not always the most knowledgeable and have Thier own interests in mind.

    0Reply
  • Pete Harper
    Rental Property Investor · Streetman, TX · Member since 2018 · 527 posts · 495 votes
    5y

    @Courtney M.

    For my first successful MF deal I represented myself. I found an off-market deal from the county tax records and contacted the seller directly. We did the negotiations by email and I wrote up the contract. I was familiar with the State MF contract from other properties that I was not able to close through a buyers agent. As others have mentioned it is often cleaner to cut out the middleman in negotiations. I had my attorney review everything for a nominal fee. We did a thorough pre purchase inspection. I used the inspection to negotiate a new roof, GFCI upgrades, and replaced defective appliances. I was able to get everything I asked for in negotiations. In this case I can’t see where a buyers agent would have helped. It may have hurt in this case with this seller who didn’t want to pay a commission.

    2Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    5y

    @Joe Bertolino a "mom and pop" buyer may be able to make a property work because they may do a lot of the work themselves - ie management, cleaning, etc so they can make the bottom line work for them where a more "professional" company might see it as the cash flow being too slim. 

    @Courtney M. what size properties are you talking about? 4 units or less or 5 and more? 

    0Reply
  • Natalie Schanne
    Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Courtney M. - some great advice here. In my area, the small commercial (5+ units, average about 15-20 units) multifamily broker who had lots of connections ignored my requests to tour properties he had available with my clients back in 2017-2018. I have since learned that I can not expect to get any kind of cooperating brokerage commission from a commercial listing agent unless he or she is desperate for a buyer.

    Therefore, I suggest that you assemble a team of partners who can help you do due diligence and negotiate, whether for pay or for a percentage of the property (maybe they contribute capital as well).

    Team Roles: Accounting/Financials, Property Management (or managing the manager), Renovations/Construction, Leasing/Marketing, Coordinating Mortgages/Refinances, Raising Capital/Investor Relations, Deal Finding/Acquisitions/Negotiations, Legal/Insurance - the same person can play multiple roles.

    After you have your team, you should feel confident moving forward. If you want to own the property 100%, you can hire consultants or experts/mentors for a fixed fee to provide their expertise. I personally work harder when I have partners, but some people have issues with bad partnerships, so certainly be careful who you share equity with.

    1Reply
  • Mark Delgado
    Real Estate Broker · Sacramento, CA · Member since 2021 · 15 posts · 24 votes
    5y

    @Courtney M. Hi Courtney! Yes, the properties are in the Sacramento area - 2 are to the north and 1 is to the south east. I actually got a response to one of them. Fingers crossed that I can get it into contract! Do you work the Sacramento area?

    1Reply
  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    5y

    @Courtney M. I’ve been working with my agent off and on for 20 years. I’ve only stopped working with him if I’ve been out of the game. Over the last two years I bought two properties with him then listed and sold a property with him prior to starting my multi family journey.

    He knew I was looking for investment property but nothing was available in the immediate area. One night I found a 4-plex about 30 minutes away. I asked him to set up a showing. We closed 45 days later. In this instance he co-broked.

    Now he is bringing me a pocket listing that he’s been working on all winter long with a client he’s known for years. It’s a 3-plex and I’ll probably only have a couple hours to write up my offer after analyzing the deal as it will go live the next day if I pass on it.

    2Reply
  • Matthew Irish-JonesBusiness Member
    Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
    5y

    @Courtney M. It depends on how good your buyers agent is and if they add value to the transaction.

    If they walk through a building and ask you if you Ed t to buy it or not they are pretty much worthless.

    If they have a ton of experience analyzing deals, know the market, and can help set up a pro forma based on a walk through then it’s often worth having an agent represent you. They will look out for your best interest, provide insight, and be instrumental in assisting you in producing an accurate pro forma.

    Irish Jones Realty4.947 Reviews
    View Page
    1Reply
  • Courtney M.
    OP
    Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes
    5y

    Thank you all for your responses!

    At this point I've only purchased single-family homes. My broker has provided a great deal of value insofar as knowing the market, and as my PM he also knows rents and the "good" areas.

    I've done quite a bit of reading about multifamily and am looking at deals all across the board. The value I'd be looking for a broker to add would be information on the market, rents, what is typical in a market for utilities, relationships with property managers and GCs.

    I live in SoCal and am investing in the midwest (Michigan and Ohio) so I do really need a trusted partner here.

    A lot of good thoughts. It may be worth it to pay a broker myself. Right now I'm looking at properties anywhere from 4 units to 20 units.

    2Reply
  • Courtney M.
    OP
    Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes
    5y

    @Mark Delgado - I live in SoCal but travel up to Sacramento frequently for work! 

    1Reply
  • Mark Delgado
    Real Estate Broker · Sacramento, CA · Member since 2021 · 15 posts · 24 votes
    5y

    @Courtney M. right on! That must give you great insight on the majority of the state. I read your update about looking for 4 to 20 unit properties in Michigan or Ohio. That sounds awesome, I hope you find some great deals. I just recently started opening up to the idea of out-of-state investing, helped in large part by Brandon Turner's book. I hope we both find sound, steady, and rewarding success out there. 

    2Reply
  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @Courtney M.

    From a buyer agents perspective, the seller pays the buyer agents commission so there’s 0 cost to the buyer to use a buyers agent.

    To take it a step further, a GOOD investor friendly buyer agent is going to know the local market like the back of his/her hand and not only will help you negotiate, but will FIND you amazing off market deals that are below market value thus covering the cost of their commission and increasing your equity by $10s of thousands.

    [email protected]614-363-2787
    Marc Rice | Investor Friendly Agent at Reafco Tailwind Team574 Reviews
    WebsiteView Page
    3Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    5y

    @Courtney M. at that size you need an experienced commercial agent and a commercial mortgage broker. Also good to have is an insurance agent. 

    Feel free to DM me - i have managed to do apprx $15 million in transactions since 2015 - was a learning curve,  but I hired the absolute best professionals In my markets and feel they added a lot of value. 

    In general your commercial agent will want a commission - in So Cal you may have a hard time finding a buyers agent (i know I did in N CA) so you may need to get creative. 

    I have had excellent results with using the large brokerages - colliers etc. 

    and of course money talks - do you have the means to close? Do you have 25-30% in cash for a DP? Do you have enough reserves for 6-18 months PITA? Do you have net worth equal to the loan you are seeking? These are all constraints that Can make or break a deal. 

    Good luck 

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Courtney M.:

    I've been reading a lot of books about multifamily and one piece of advice I seem to read over and over is a lot of people buying multifamily don't use a buyer's agent - that seems to be frowned upon in this space.

    I'm sure it's impossible to say what is standard in this market across the country, but I'd love to know if you've found this to be true in your experience.

    I am starting to look at buying multifamily and it seems, to me, it would be disastrous to go about this. The listing agent is going to do his or her best to sell me on the property - I need someone else on my team that isn't trying to sell me.

    What's your experience in this space like?

     That is why you hire an inspector and an appraiser when purchasing a property.

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
    Reafco512 Reviews
    WebsiteView Page
    1Reply
  • Courtney M.
    OP
    Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes
    5y
    Originally posted by @Remington Lyman:
    Originally posted by @Courtney M.:

    I've been reading a lot of books about multifamily and one piece of advice I seem to read over and over is a lot of people buying multifamily don't use a buyer's agent - that seems to be frowned upon in this space.

    I'm sure it's impossible to say what is standard in this market across the country, but I'd love to know if you've found this to be true in your experience.

    I am starting to look at buying multifamily and it seems, to me, it would be disastrous to go about this. The listing agent is going to do his or her best to sell me on the property - I need someone else on my team that isn't trying to sell me.

    What's your experience in this space like?

     That is why you hire an inspector and an appraiser when purchasing a property.

    Well, an inspector and appraiser can of course let me know about the condition of the property - but local market knowledge is where I'd assume a good broker would earn their fee.

    It's obvious I have a lot to learn so appreciate the insight!

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free