How to Jumpstart Your Investing Career as a Multifamily Deal Finder

by | BiggerPockets.com

So you want to be a real estate power player?

Perhaps you’re one of those investors who, like me, prefers multifamily to single-family residential as a long-term strategy for exponentially growing your wealth. Furthermore, perhaps you agree with the premise that there are significant benefits to jumping into multifamily at a higher level.

Though there is nothing wrong with starting on a duplex and working your way up to four units, 12 units, 20 units and so on, I found that it was a long and painful path for me to start down. Especially since the jump from single-family flips to multifamily was a career choice I made later in life.

But…

Perhaps, like a lot of people I speak with every week—some of you BiggerPockets readers and other folks I interact with through my multifamily syndication business—you don’t know how to get started at this higher level.

It could be because:

  • You don’t have personal funds to buy a multimillion-dollar property.
  • You don’t have access to investors it would take to acquire that level of equity funding.
  • You don’t have credibility with commercial brokers or multifamily sellers (it’s a vicious market right now).
  • You don’t have the millions in net worth and liquidity needed to qualify for a non-recourse, commercial multifamily loan.
  • You have a full-time career and a life, and you don’t have the time to devote to amass assets and run a multifamily operation.
  • Your specially trained dolphin has not been able to interpret the coded multifamily insider information yet.

Well, if any of this rings true for you, you may want to read on.

The favorable demographics of multifamily investing; the massive amount of U.S. and foreign capital rushing into this asset class; the record occupancy, rent increases, and profitability; coupled with record asset sale prices make this a hard time for even experienced investors to find good deals.

I’m talking about good multifamily deals with a price tag that will allow for nice cash flow, appreciation, and safe loan-to-value ratios in the event of a downturn.

I’m in a mastermind group with some of the sharpest minds in the multifamily investing world—syndicators like Michael Blank, Reed Goossens and Jake and Gino, who are well-respected in both the podcast world and on BiggerPockets. We meet monthly by phone, and the big issue is usually the same:

“How do we find good deals—in great markets—that make financial sense?”

Historically, in many businesses, and especially in the real estate development realm, one of the main challenges has been access to capital. But this is not the case anymore. Well, at least at this point in history.

This is where you come in!

Earn Your Seat at the Commercial Real Estate Investment Table

You can bypass years of headaches and frustration by partnering with an experienced multifamily syndicator to bring them what they need most:

DEALS.

Rather than me continuing to pontificate, let’s look at a few real-life stories of others who parlayed their way into a successful multifamily career this way.

Related: 5 Habits of Highly Miserable New Real Estate Investors (& How to Kick Them!)

Dr. Dennis the Dealmaker

I know a brilliant guy named Dennis who is a physician in California. At least, he was. Though he’d studied and worked hard for years to get his medical license, over time he found he wasn’t happy practicing medicine. The long hours and constant stress were taking a toll on his life and family. When Obamacare hit, that really put him over the edge.

Dennis began researching real estate. Like many others, he decided that commercial multifamily was the most profitable route for him. But Dennis soon realized that the massive barriers to entry would be a hurdle too high for him to jump—especially while working a demanding full-time job.

Dennis began researching credible multifamily syndicators, and he linked up a great operator/syndicator. Dennis got to know them well, did a good bit of mentoring under them, and started researching deals in their favorite markets (which happened to be in the Southwest).

It was a lot of work. Dennis started building relationships with brokers, scoured online resources, and spent a good bit of time on the ground there. Dennis eventually sourced and referred a deal to the syndicator. He was off to the races in his new multifamily career.

I recently checked in on Dennis. He has not only helped the firm acquire several other deals, but they actually invited him to join the company. Perhaps Dennis took temporary cut in pay while transitioning (I have no idea), but he has parlayed “trading hours for dollars” into a lucrative opportunity to build real long-term wealth. And I’m guessing he’s a lot happier, too.

From Cell Towers to Apartments

John and Larry spent two decades locating cell tower land for some of the nation’s big carriers. Though they liked their work, they were getting older, and they came to a realization:

“Why are we giving the best years of our lives to make other people rich?”

They were already in the real estate business. After some research, they concluded that multifamily investing was the route to build a great income stream and multi-generational wealth.

John and Larry used their contacts to locate owners of large multifamily assets. They also tapped commercial brokers they knew well. Before long, they had located and referred a 150+ unit apartment to a seasoned syndicator. The syndicator granted them a piece of ownership in the deal, which included a healthy piece of the acquisition fee (not a commission).

Related: The Ultimate 60-Day Action Plan for the Paralyzed Newbie Longing for a First Deal

As importantly, they were able to co-sponsor the deal (they had their names on it) to gain credibility with brokers, lenders, investors, and future sellers. It occurred to them that they could do deals themselves. They referred another similar deal to boost their credibility, then they launched out on their own.

Now they have built a multifamily investment fund with investor capital. They have raised and deployed millions already, and they are targeting a few hundred million in the coming years.

John and Larry went from employees to principals, and their wealth and future prospects multiplied exponentially. And they have the flexibility of working for themselves.

So, How Do I Get in on This?

I’m glad you asked.

  1. Do you know of multifamily assets that are or will be for sale? Perhaps you can convince the owners to save some commission by letting you introduce them to a buyer.
  2. Do you know syndicators/sponsors looking for deals? Ask them if they would give you a spot in their next general partnership if they refer a deal to you. (I know my company would if the deal was right.) If you don’t know syndicator/sponsors, you can look them up here on BiggerPockets.
  3. Do you know brokers? Some commercial multifamily brokers come across deals that are too small for them to take to market. They may consider giving you access to these deals off-market, and you could pass them along to your favorite syndicator.

Have none of these advantages? Thank goodness that (at least most of) you live in America! You can go out and make it happen.

6 Tips for Pursuing This Strategy

1. Don’t just blindly throw deal referrals at operator/syndicators.

Find out their criteria first and only send them what they’re looking for. If they’re like us, they are already looking at dozens of deals per month, and they will appreciate you only sending them deals in their markets and asset types.

2. Analyze the deal.

Do a brief analysis on it yourself, and summarize the pros and cons, plus the financials, in a few paragraphs. Tell them why you like the deal and any pitfalls you see. This will be good practice for you, and you will add value to the potential buyer. And you’ll cause him to take you more seriously.

3. Negotiate an ownership share before you start bringing deals.

The syndicator will likely offer you a piece of ownership for the introduction, and as in other areas of life, it is important that you have financial details worked out in advance to save misunderstandings, hurt feelings, and legal battles later. Get it in writing.

4. Don’t take a commission.

You don’t want to cross a legal line into the realm of real estate brokerage. If you are an unlicensed individual, it’s important that you don’t take a commission. You are playing an important role on the buyer’s team, and you should ask for a slice of ownership, which is often more beneficial anyway. (Please don’t write me and say this is essentially a commission. There are specific things that a broker is licensed to do—things like representing the parties and negotiating price and terms. You need to avoid these activities.)

5. Use this as a learning opportunity.

As part of the deal, ask the syndicator to include you in the whole process. Analysis, due diligence, the closing process, lending, cursory asset management, and a hundred other details provide a great training opportunity for you to learn more about the business and prepare you to do your own deals.

6. Get it on your resume.

I know a deal finder who has done this for a third party buyer for 24 years. He has been credited by buyers and brokers as a key player, so he gets access to many deals that have not hit the market. And if he chooses to do his own deal, he has quite an impressive resume of several hundred million in multifamily acquisitions over the past decades. Even if you don’t want to be a syndicator/operator yourself, if you have access to deals, you could make a career of this. And your track record would be a great credibility-boost when you speak to investors.

One Warning

I hate to end on a down note, but I want to warn you that this is not a slam dunk. There are thousands of eyes looking for deals right now, and this is not something you can waltz in and make a fortune at. Not in these crazy times, at least.

But the times will change. There will come a day when there are more deals than buyers again, and you could be well-positioned if you start now.

If you have unique connections with multifamily brokers or owners and you’ve found a deal to share, you should certainly give this a shot. I’m sure many potential buyers would be eager to speak with you.

While this is hard, it is certainly possible.

I mean, someone actually came up with semi-boneless ham, and the public bought it. Jumping into large scale multifamily seems eminently more doable to me than that.

Do you have success parlaying your contacts or time into a successful investing career? Do you have the inside track on a deal right now?

Tell us about it. This may be your big break and the launching pad for your own multifamily empire! Feel free to message me privately if you don’t want to announce it to thousands of readers yet. Or reach out to your favorite Bigger Pockets syndicator – there are lots of us on here.

About Author

Paul Moore

Paul is author of The Perfect Investment – Create Enduring Wealth from the Historic Shift to Multifamily Housing, which you should probably get if you want to learn to invest in multifamily. He is a Managing Partner at Wellings Capital, a multifamily and self-storage investment firm, and hosts the How to Lose Money podcast. Paul was 2-time Finalist for MI Entrepreneur of the Year, has flipped 60 homes and 30 waterfront lots, developed a subdivision, and appeared on HGTV. Paul’s firm invests heavily to fight human trafficking and rescue its victims.

20 Comments

  1. Christopher Smith

    Sounds like a really great “story”, and I am sure there have been some folks that have had some real successes switching careers as described, but nearly every deal I’ve seen for a long, long, long time is either grossly over priced (at least by my standards), or involves a lot of highly undesirable risk assumption. I have the capital and the willingness to take “intelligent” risks, but there seems to be so many cowboys and yahoos out there willing to bid up prices on already extremely marginal deals that finding something even remotely attractive from a true risk/reward standpoint is getting very difficult.

    I guess I got a little spoiled having done my buying in the 2010 to 2013 time frame when there were many very attractive deals available, but that was then, and this is now. My last purchase that I was extraordinarily lucky to land was in Mid 2016, I’ve seen nothing really attractive since then. I don’t do this 24/7 so I am sure there were a lot of deals that passed me by, but I doubt many worth taking (again by my standard).

    • Anthony Wick

      I see a lot of comments like yours. My question is, are good deals better than no deals? Like when I see the 2% criteria. Where are these 2% deals? Isn’t grabbing a 1% deal better than no percent deal? I also have a full time day job. Which actually allows me to look for something that makes a decent profit instead of relying on something that I have to live off of.

  2. Rob Cook

    Paul, I like your premise, and cannot disagree with it. In many things, it is simply easier to leapfrog to the top instead of working your way up the ladder. As simple as a choice sometimes. I have literally multiplied 25X my own income over the last 30 years, by simply deciding my own time was worth X, and refusing to do work which did not pay me that amount. It worked!

    My largest MF is an old 7-unit building. I LOVE it, compared to SFD, Duplexes, triplexes, and 4-plexes I own a lot of. Maybe it is just my being able to “play” MF in a small way! But one thing I really like is the appraisal method applicable. As I understand it, when you go over 4 units, comparables method gives way to income method. And that is where the ability to drive value begins by increasing net operating income. Very exciting to have that power. Cut costs, increase property value. Raise rents or increase income otherwise, increase property value. I think this is a threshold aspect few investors outside of larger MF appreciate.

    Am I on track here?

    Thanks

    Rob

    • Paul Moore

      Rob.

      Absolutely true. It is a great thing to force your own appreciation.

      And I love your comment about not working for less than you are worth. That is what I am trying to do, and I am going through Keller’s “The One Thing” course to help me get there.

      Thanks for commenting. Great to hear from you again.

    • Paul Moore

      Hey Lior,

      I would look for large and growing markets. Many are in the south. Growing jobs, population, low unemployment, diversity of industry. Like Charlotte, Raleigh, Major TX markets, Greenville, SC, Atlanta, UT cities, etc.

  3. Na Na

    I agree with the first posts… just another theoretical story blog on BP. “It’s easy. All you have to do is know of deals and propose them to your syndicate and other investment groups you know about.” Even the most ludicrous deals that used to be listed on LoopNet are no longer around. Historically cheap loans and dried-up inventory equals minimal commercial deals that offer wealth-building opportunities for normal folks.

    • Paul Moore

      Like I said, this is hard. But I know a guy who has made a living doing this for 23+ years. From my post…

      I hate to end on a down note, but I want to warn you that this is not a slam dunk. There are thousands of eyes looking for deals right now, and this is not something you can waltz in and make a fortune at. Not in these crazy times, at least…

      While this is hard, it is certainly possible.

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here