Last Updated 6/21/19
There are countless ways to find apartment investment opportunities, from common methods like building relationships with commercial real estate brokers to unique approaches like cold calling or creating a meetup group.
However, the most unique approach I’ve come across is a lead generation strategy implemented by James Kandasamy – who I interviewed on my podcast here. Using the following seven-step process, James found the majority of the assets that make up his 340-unit portfolio, including two apartment communities. What’s his secret? He texts the owners!
This process can be used to find any type of deal, whether you are a fix-and-flipper, wholesaler, SFR investor, etc. But for the purpose of this post, you will learn how to apply this approach to finding and investing in apartment buildings.
1. Identify a Target Area
First, select a target market. If you haven’t already, check out this blog post where I outline a step-by-step process for selecting and evaluating a real estate market.
2. Identify a Property Class
As a value-add apartment syndicator, I invest in class B property types. If you are a turnkey investor, you’ll pursue class A opportunities. If you are a distressed apartment investor, you will pursue class C or D opportunities.
3. Define Additional Investment Criteria
For me, my additional investment criteria are the number of units and age of the property. We want properties that are 150+ units and that were built in 1980 or later. Based on your investment strategy, what factors do you look for in a potential deal (i.e. equity, delinquent taxes, recent evictions, signs of distress, sales date range, etc.)?
4. Obtain a List of Properties
Using online resources like the county auditor site or ListSource, create a list of properties using the three pieces of information above (market, property type/class and investment criteria).
An additional factor you can filter by are apartment buildings that were purchased 5 years or more ago. James has found that owners who’ve purchased a property in this time frame will have likely built up enough equity to accept a below market offer price because they’ll still make a profit.
5. Find the Owner’s Contact Information
For properties listed in an individual’s name, you should be able to locate the owner’s contact information when you pull the list. If it is listed under an LLC name or a property manager, use skip tracing software to get the owner’s phone number and/or mailing address or look up the entity on the Secretary of State website. Here’s a good resource for how to track down owner information, JF1065: How to Track Down Vacant Property Owners with Larry Higgins.
6. Conduct a Marketing Campaign
Send marketing information to the list of property owners, either via direct mail, phone call, or text message. That’s right. A text message!
James actually obtained the majority of his deals via text messaging. His initial message is, “Hi. I’m a prominent investor in (insert target area). I saw your property at (insert property address) and am interested in buying it. You can sell it directly to me without any broker’s commission. Would you like to talk further?”
Standard replies he’s received and that you can expect to receive are:
- If they are interested
- You can talk to XYZ member of my team.
- Can I have more information about you and your business?
- What can you offer me?
- If they aren’t interested
- I am not interested in selling right now
- I am not selling anytime soon
Regardless of the response, follow-up is key to investing in off-market apartment buildings. James said that most people will send out one batch of letters and then forget about it.
If the owner is interested, you need to obtain the rent roll and the trailing 12-month P&L to determine an offer price.
If they aren’t interested, James recommends following-up (via direct mail, phone call, or text message) every 3 to 6 months to gauge their interest in selling again, to build rapport and be top-of-mind for when the owner is interested in selling. It’s all about timing.
For every 500 marketing pieces James sends, he receives a 1% response rate. Of the 1%, he will close on less than 0.1%. But as long as you’re persistent and follow-up, you’ll find that 1% of owner’s who are interested in selling.
Are you a newbie or a seasoned investor who wants to take their real estate investing to the next level? The 10-Week Apartment Syndication Mastery Program is for you. Joe Fairless and Trevor McGregor are ready to pull back the curtain to show you how to get into the game of apartment syndication. Click APARTMENT SYNDICATION MASTERY to learn how to get started today.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action