The multifamily market is sizzling right now — you know that, I know that, everyone knows that. Good for owners but challenging for buyers trying to find deals that pencil. As such, I figured it could be helpful for you if I shared three proven ways to find a multifamily deal.
Before we get going, I’m making a couple of assumptions. They are:
- You are educated on multifamily investing and have the right team in place to execute the business plan.
- You know your market incredibly well so that when you come across a good multifamily deal you can act quickly.
- You’ve got a CRM and you’re not afraid to use it. Actually, scratch that, you’ve got a CRM and are using it! 😊
If the above assumptions about you are correct, then let’s proceed. If not, then you’ll want to get the above things addressed first.
Okay, here are three ways to get multifamily deals in any market.
1. Create Property Management Partnerships
I asked my Best Ever Facebook community how they found their most recent multifamily deal and sales agent and investor Slocomb Reed said, “I found my deal by networking with property managers to get ahold of opportunities before the owner officially sells. I got my offer accepted a week before it hit the market. It’s a 26-unit building in Cincinnati.”
On my first handful of deals, I partnered up with a property management company. Not only did they help with liquidity, net worth, and experience (things I didn’t have when I started), but they also brought deal flow from their relationships. We closed on multiple deals as a result of that relationship.
2. Hire a Qualified Director of Acquisitions
When seeking a director of acquisitions, you want to make sure the person brings pre-existing relationships to the table, and they need to have done what you’re looking to hire them to do. This might seem obvious to some people, but I’ve seen this mistake happen over and over again.
For example, I’ve seen people hire directors of acquisitions who have been on the lending side and know the underwriting through and through, but they can’t bring broker relationships to the table. That’s a big mistake because relationships and track record are what wins deals in a competitive market. Relationships with brokers aren’t built overnight, but you can benefit from strong broker relationships overnight by bringing on someone who already has them.
Bring on a qualified director of acquisitions and give them ownership in the first handful of deals if that’s what it takes — whatever you need to do.
But having relationships with sellers, members of sellers’ companies, and brokers is what’s going to set you apart when finding deals right now.
Another tip for finding an all-star acquisitions person is simply to ask the brokers you’re speaking to who they would recommend. When you hire that person, you establish an in with that broker — and probably other brokers.
But what if you’re just starting out and don’t have a salary to pay the acquisitions person?
Well, you can still put a job posting up. List compensation as negotiable, and then bring prospects in as partners, because you never know. Perhaps they have been making a high salary for years and have saved up a good amount, but there’s no opportunity in their current company to get equity ownership in deals. They may have lots of contacts but need someone like you to help them with other pieces of the puzzle. You might be reaching out to them at the perfect time, and suddenly, you’ve got built-in connections through your new partner.
3. Commit to Finding Deals
You’ve got to be more than simply interested in finding deals — you need to be committed. If you’re saying to yourself, “There’s just no deals out there at all. I can’t find anything,” that’s because you’re not committed.
You’re probably looking for a shortcut instead of executing the right strategy.
There are three categories of people that will help you find deals: owners, brokers, and vendors.
It’s imperative to start attracting owners and building a database. You can send direct mail to owners or find their contact information through skip tracing and text message or call them. But what do you say?
You want to add value to their life. For example, if you have an in-person or virtual meetup, you could reach out with a direct mail piece and say, “Hey owner, do you want to learn how to increase NOI in the XYZ market because others have applied the same strategy? Attend my meetup.” You can start attracting owners this way.
Additionally, if you want to hyper-target a certain owner, you could ask them to speak at your meetup and then build the relationship that way. You’re giving them something of value, which is crucial to do before you ask about buying their property.
You should implement a multistep follow-up process with brokers. Most investors sporadically follow up with brokers because they don’t have a system in place. Investors looking for deals should use a CRM along with strategic follow-up ideas.
Here are three ways to add value to a follow-up:
- You can be a power connector. Judy Robinett wrote a great book called How to Be a Power Connector, which involves introducing brokers to people they want to be introduced to. You just have to know a little about what the broker is looking for. For example, perhaps the broker has a kid who is looking for an internship. You could be resourceful and offer to introduce their kid to some people you know who are looking for interns.
- Send them alcohol. One investor I know landed a deal after sending a bottle of wine to a broker.
- Pay them as a consultant to give you advice on a certain market. You might mention in conversation that you have money burning a hole in your pocket.
Also, if you don’t get a multifamily deal that the broker was marketing, you could send a gift basket (or note, or whatever they might like based on what you know about them) to the broker to leave off on a positive note — you never know when another opportunity may arise. I got this last idea from J Scott when discussing this topic during this podcast episode.
Take every opportunity to reach out and network with multifamily vendors. First, make a list of all the multifamily/apartment vendors in your market. Then, reach out to them and build relationships with them. They could be the key to finding your next multifamily deal.
Do you think a commercial restoration company that cleans up flooding at properties could know of some motivated sellers? You bet.
We live in an instant gratification society. This is helpful for Googling if that funky-looking caterpillar on your porch is venomous, but not so much when trying to build a business the right way. Because a lot of investors want instant results and, when they don’t give them, they give up. That’s not how this (or any) business works.
We must put instant gratification aside in order to find the right strategies, execute them, and continue to optimize. The above 3 strategies work. They are proven, and if you stick with them, you will find some of your best-ever deals.
For more on apartment syndication, check out the Best Ever Apartment Syndication Book.