Buy Your Multifamily Properties With The End Buyer In Mind

Know who your buyer is on the back end, and focus on getting the property sourcing, but if you're pitching a 5 or 7 or 3-year-old to your investors, have you thought about who are you going to be selling this to on the back end. If you are buying a 10 unit or a 20 unit or a 50 unit or a 300 unit typically you're going to have a different kind of buyer on the back end so it just really depends on what your long-term play is.

You might want to keep it for forever, but if you're not and you're going to go and take care of the property and three to five to seven to ten years think about this think about who your end buyer is going to be in that time and even if you are planning on keeping it forever, there are always times that come up that you're going to need capital or something's going to change in the life structure of the hold. That you would need to divest that property and having that buyer in mind is going to make it a lot easier.

Generally, what you can think about is, are you selling this to another mom, pop or another investor or an institution, and if you can frame that by the type of properties, you're going after selling it on the back end is going to be a whole different thing. Typically when you're selling it to another investor even if they are running the numbers they're still looking at the per-unit price, where we're looking at institutional buyers and they're typically going to be buying larger assets 200 units 300 units, we're looking at par capital they're strictly looking at the basically the income and their cap rate so if you are now improving the property and you're going off cap rate that's going to be one type of customer generally with deeper pockets generally, not looking for so much edge and may just be looking to park capital.

However, if you are going after a smaller asset 75 units 12 units 20 units, well that buyer may be a doctor who is looking to just put some money in place or another investor. As many of us are right now that aren't on the institutional side and knowing that you have to think about how they're thinking from the mindset. The institutional buyer, on the other hand, is probably not looking at that 12, 15, 30 unit asset whereas they are looking at 300, 600 units portfolios, 200 units, something that makes sense for so much capital being able to go into the property where they're not just parking. A millionaire is able to park 20 million, where some of the other investors that were thinking off on a single investor entity or doing syndications we're okay with those smaller properties because we're able to meet the returns of our investors who aren't on the institutional-grade side.

The tip is, you find out one of these bigger investors in your neighborhood or even any investors in your neighborhood and they're having classes and maybe you can't make the classes, invite them to coffee and invite them to lunch, you get in front of them pick their brains and get out there and you'll learn something even if you think you know it all, you don't. One last thing on the buying song side, if you are selling to institutional investors, you probably want to focus on a more higher profile, more diverse market and that said, if we're talking in Chicago or submarkets we're talking some of the metro cities you're probably not selling to an institutional investor at least in this timeframe.

Learn how to buy large multifamily apartments: https://www.multifamilyfoundation.com/order-28415099