February 13, 2019

JF1625: How To Find Your First Apartment Syndication Deal Part 5 of 6 | Syndication School with Theo Hicks


Part 5: Cold Texting

Welcome back to syndication school! This week, Theo is wrapping up the series on “how to find your first apartment community”. Today he’ll be covering cold texting owners of apartment buildings and communities. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Joe Fairless: There needed to be a resource on apartment syndication that not only talked about each aspect of the syndication process, but how to actually do each of the things, and go into it in detail… And we thought “Hey, why not make it free, too?” That’s why we launched Syndication School.

Theo Hicks will go through a particular aspect of apartment syndication on today’s episode, and get into the details of how to do that particular thing. Enjoy this episode, and for more on apartment syndication and how to do things, go to apartmentsyndication.com, or to learn more about the Apartment Syndication School, go to syndicationschool.com, so you can listen to all the previous episodes.


Theo Hicks: Hi, Best Ever listeners. Welcome back to another episode of the Syndication School series –  a free resource focused on the how-to’s of apartment syndication. As always, I am your host, Theo Hicks.

Each week we air two podcast episodes that focus on a specific aspect of the apartment syndication investment strategy, and for these episodes we will be offering some sort of document, or a spreadsheet or a resource for you to download for free. All of these free documents, as well as past Syndication School series can be found at SyndicationSchool.com, or you can tune in Wednesday and Thursdays to the Best Real Estate Investing Advice Ever Show podcast.

This episode is going to be a continuation of a series entitled “How to find your first apartment deal”, and per the title, the series is focused on explaining exactly how you can find your first deal. Now, I highly recommend that you listed to the first four episodes – this is going to be part five – because in the first four episodes we introduced the differences between the main types of deals, as well as how to find deals from brokers (off-market and on market deals) and then we kind of went over a variety of different ways to find off-market deals, and how you can position it to the owner to not necessarily convince them, but to explain to them how they will benefit by selling their deal to you off-market.

In this part, as well as the next part, we’re gonna focus on a few case studies for how apartment syndicators or apartment investors actually found their deals. So the past episode was focused on more general ways to find deals – direct mailing campaigns, cold calling – but in the next episode I wanted to focus on some real-world examples of how people find deals, just so you can put the theory to reality, in a sense.

So in this episode we’re gonna go over one case study from an interview guest from a past episode, that I briefly mentioned — I think I mentioned it on one of the past Syndication School series, but I didn’t go into detail, so I’m gonna go into detail on that in this episode. Then in the next episode I’m gonna go over three more case studies.

One of the concepts has actually two examples of it, so we’re gonna go over three case studies for how you can find off-market apartment deals, and then at the end – this is going to conclude this series, so it’s gonna be a six-part series in total – we’re going to give away a free resource for you to use to help you in your deal-finding journey.

So let’s hop right into this first case study. If you remember from last week’s episodes, or if you’re listening to this in the future, parts three and four, we discussed ten ways to find off-market deals, and one of those was to send a direct mailing campaign, which involved creating a list and a letter to send to that list, and then you would send your direct mailing letter to that list of owners based on some sort of criteria you’ve set, and then you would screen incoming phone calls with the purpose of eventually negotiating a deal with that owner.

Now, a variant of that strategy is to cold-call. So instead of mailing these owners, you just pick up the phone and give them a call instead. So a very similar approach to direct mailing, except the only difference is instead of mailing a letter to that list, you call the names on that list. Now, a variant of that, which is going to be the case study discussed on this podcast, is going to be cold texting. This is a strategy implemented by James Kandasamy, and he was a guest on the podcast  — if you google “joe fairless james kandasamy”, that episode will come up… But you don’t have to necessarily listen to that episode, because I’m going to go into detail on the advice that he outlined in that episode.

He has essentially a seven-step process for how to find off-market deals via cold-texting, and I believe he said that he has found two of his three or four apartment deals through this method.

Step one is to identify a target market. If you’ve been listening to the Syndication School series in full, you’ve already done that. Back in series number five we went through the process of selecting one or two target investment markets. These are gonna be MSAs or cities that we are interested in learning more about. Then in series number six we performed an in-depth analysis on those MSAs or cities to get a neighborhood, street-by-street level understanding of that market, in order to determine 1) will we continue to pursue that as our target investment market, and if we are, 2) what are the neighborhoods to avoid, and what are some of the neighborhoods that it makes sense to invest in.

If you haven’t identified your target market yet, then you can’t pursue  James’ strategy, and you’ll need to listen to series number five and series number six at SyndicationSchool.com in order to select your target market and to have a deeper understanding of that target market.

Once that’s done, James’ next step is to identify a property class, so what is going to be the property class that you are going to target. Again, if you’ve been listening to the Syndication School, we’ve already done this as well. In series number eleven we went over how to define your investment criteria, and the purpose of defining that investment criteria was to screen incoming deals in the context of on-market deals with brokers. So when you tell your broker your investment criteria, then they’ll make sure that they only send you those types of deals… Which isn’t necessarily going to happen – they’re probably going to send you all of their deals, so you use that investment criteria to screen out the [unintelligible [00:08:40].23] so to speak.

In the context of cold texting, or direct mail, or really any off-market lead generation strategy, you’re going to use your investment criteria to create your list of owners that you’re going to target, and one part of that is going to be the property class. If you are going to be a value-add investor like Joe, then you are going to target class B and class C properties. Now, I’m sure there are going to be some value-add opportunities with class A and class D, but the majority of the value-add opportunities are going to be class B and C.

If you’re gonna pursue the distressed investment strategy, which is to buy a property that’s basically non-stabilized because the property is distressed for some reason, and non-stabilized means it’s got an occupancy level below 85%, then you’re likely going to be focusing on C and D properties, so class C and D are for distressed.

Then if you’re going to pursue the turnkey model, which you probably aren’t, but if you are, then you’re going to focus solely on those class A properties. Again, those are just general guidelines for those investment strategies. As I’ve mentioned, there might be some A’s that are value-add opportunities, or there might be some B’s that can be turnkey opportunities, but in general those are guidelines for the property classes that you will target based on your investment strategy. So that’s number two, identify a property class.

Number three is going to be to define additional investment criteria. Again, if you’ve listened to series number eleven you already know this, but just as a reminder, your additional investment criteria are going to be 1) the number of units, which will be based on how much money you’re capable of raising… Number three — so you’ve got property class, you’ve got number of units, and number three is going to be age of construction, so when was the property built. Those will be your main criteria. Obviously, you’ve got your market, so that’s number four, and then you’re gonna want to determine some other criteria that you want to pursue, that will indicate that the seller is motivated. Because if you remember in part three when we talked about the direct mailing campaigns, in order to increase your conversion rate you’re going to want to send mailers to owners who are more likely to be motivated to sell.

And we went over a whole list of ways to determine if an owner is motivated to sell in part three, and I went into — not extreme detail, but I went over them in detail… So I’m just gonna go over the list quickly right now, just as a refresher, but if you want to know more about what each of these individual strategies are, definitely listen to part three of this series. So in order to find owners who are motivated to sell, you can drive for dollars, you can go to or look up the eviction listings, you can look up the list of building code violations, delinquent taxes, you can contact out-of-state owners, you can look at the property on Apartments.com, and more specifically look at the profile picture on Apartments.com, you can contact property owners whose tax assessments went way up the previous year, you can contact the owners of expired apartment listings, you can contact the owners of properties that are likely owned without debt, you can contact property owners who are facing health code violations, or foreclosure, or they are late on their loan payments. You can target Section 8 approved properties, or you can target properties that have liens on them.

So not an exhaustive list, but those are some ways/ideas to determine if an owner is motivated to sell. And again, if you want to know more about each of those individual strategies, check out part three.

So far we’ve essentially defined our investment criteria, and we have the information we need to create our list. Step four is going to be to obtain a list of properties. You’re gonna want to use your target market, your property class, your additional investment criteria and those things that indicate an owner’s motivation to sell, to create a list of owners to contact.

Now, James uses either the county auditor or appraisal site, which allows you to create a list for free, or he will use a paid service like ListSource.com. Depending on the market that you’re in, the county auditor might have enough information to allow you to create a list based on that criteria, but worst-case-scenario you just have to use ListSource, who is a provider that can definitely create a list for you based on the market, property class, additional investment criteria and those motivated seller indications.

Now, one extra thing that James mentioned about creating his list is that he will typically focus on buildings that were purchased five or more years ago. The reason why he said that he focuses on buildings that were purchased five or more years ago was because he’s found that owners are willing to accept a lower offer price, so it’s easier to negotiate with these types of owners because they’ve owned the property for five or more years, meaning that they’ve got some sort of equity built up in the property, which means that they can sell the property for slightly less than market value and still make a profit. It doesn’t mean they’re always going to do that, but the probability is higher when you’re targeting that type of owners.

Now, from an apartment syndicator’s perspective, if you target owners who have purchased their property five or more years ago, just like you, then they’re likely to be towards the end of their business plan, or at the end of their business plan.

For Joe’s business, they typically target between five and seven-year holds, so if someone happened to go to ListSource and look up all of Joe’s properties, and saw that he bought four of the properties five years ago, and they reached out to Joe, interested in buying the property, as long as the price was right, I’m sure Joe would sell them the property because he’s at that point in his business plan where he’s ready to sell anyways.

So that’s why motivated sellers aren’t necessarily owners of distressed assets. They could just be at the end of their business plan, or they could just be ready to move on to a larger project, or maybe they’re just liquidating for retirement. So it doesn’t necessarily mean that something’s wrong with the property, or something bad is going on in the owner’s life. It could just be something as simple as they’re at the end of their business plan.

But overall, step four is you’re gonna have to obtain your list of properties that meets your investment criteria, which brings you to step five, which is now that you have your list of properties, you’re going to need to find the owner’s contact information. The person who owns that property – you’re gonna need to find their address and their phone number.

Typically, for these larger deals the property is not going to be listed under the actual owner’s name. It’s more likely going to be listed under the LLC name. So if it happens to be listed under the individual’s name, it’s likely gonna be a smaller property [unintelligible [00:16:01].13] self-manage. If that’s the case, it’s gonna be a lot easier to find the owner’s contact information, because the contact information is likely going just going to be on your list already.

So you pull the list from ListSource, you’re gonna have the owner’s name as one of the columns, and if the name is that person’s name, then you can look over to the next column and see the address and phone number of that person. So that’s pretty simple. Now, if he’s listed under an LLC, it’ll take a little bit more effort in order to determine who the owner actually is. So first you can find out the owner’s name on the Secretary of State website. So go to the Secretary of State website for your specific state – I’d go to the Secretary of State website for Florida, and I would go to the section that allows you to look up various entities within that state, and using that search function you should be able to type in that LLC’s name and then click on it, and it should either show you the contact information, or allow you to click on the articles of organization which will include the owner’s contact information on there.

Now, for both of these strategies, whether it’s an individual or an LLC, you might just only find the owner’s address, and not their phone number. Now, you might be able to, for example, on the auditor’s site, download some file, maybe rental registration, with the County – they might have had to put their phone number on there, so you might be able to see that… But if you can’t find the owner’s phone number, then you may need to use some sort of skip-tracing software. That’s not gonna be the focus of this episode, but if you want to learn more about how to find the contact information of property owners, I recommend checking out episode #1065 titled “How to track down property owners of vacant buildings.” In that episode, the guest was an owner of a  skip-tracing company and he explains the best way to find that information.

Now that you have your list of properties, and for each of those properties you have an owner name and an owner’s phone number, the next step is going to be to conduct a marketing campaign. As I mentioned at the beginning of this episode, at this point you can either do direct mailing, cold-calling, or this unique strategy that James implements, which is cold texting. So if you wanna do cold-calling or a direct mailing campaign, then check out part three; we go into that in extreme detail. But if you wanna put a unique twist, as well as potentially increase your conversion rate and stand out from all the other investors who are just sending out letters, you can send them a text.

James send texts to his owners, and the exact text that he sends is as follows:

“Hi, I’m a prominent investor in this specific location.”

I’m gonna read this as if it’s me, just so I don’t have to keep pausing.

“Hi, I’m a prominent investor in Tampa, Florida. I saw your property at ABC Main Street, and I’m interested in buying it. You can sell it directly to me, without any broker’s commission. Would you like to talk further?”

Pretty simple. The only thing that stands out there is the mention of the ability to sell the property directly to James, without any broker’s commission. That could be relieving a pain point, because maybe the person has been interested in selling, but doesn’t wanna fork over six figures to a broker; they’d rather just sell it off-market, but they’ve never gotten around to it. So that is something that you definitely wanna include in your text, and you probably wanna include that if you’re sending out direct mail as well, and if that’s your plan, to buy the property without going through a broker.

So based on that text, the owner is either gonna be interested in selling or not interested in selling. If they’re not interested in selling, they either won’t reply at all, or they will just respond via text, saying “I’m not interested in selling now”, or they would say “I’m not interested in selling any time soon.”

Now, if they are interested, they might say that you can talk to someone on their team, and then send you their contact information. They may ask you for more information about you and your business, at which point you should explain to them — because again, in their mind, they want to sell their property at the highest price and as quickly as possible, so at this point is when you need to prove to them your credibility and your track record, which if you don’t have one, you’re gonna leverage the credibility and track record of your team. If you’ve been listening, you know this already, but just as a refresher; that’s the main theme for any conversations you’re having before you find a deal – they wanna know that you’re credible, they wanna know that you’re serious, and they wanna know that you’re trustworthy, and the best way to display that is through time, through a thought leadership platform and through leveraging the credibility of your team. So those are kind of the main replies you’re going to get.

Based on those replies, the final step is to follow up. If they are interested and they tell you to talk to XYZ team member, then reach out to that person and ask them questions about the property, with the purpose of putting it under contract.

The script for talking to these owners – I don’t wanna go over that right now either, because we’ve talked about that already in part three when we were discussing how to screen incoming calls from direct mailing campaigns, and that’s why it’s important to listen to the first four parts of this series first, because this episode is kind of building off of that.

So talk to the team member and use the strategies discussed in part three of this episode. If they ask for more information about you and your business that I mentioned, that’s when  you wanna display your expertise and leverage your team’s experience. If they ask “What can you offer me?”, well, you don’t really know, because you haven’t seen the financials, so that’s when you want to ask them if they can provide you with the T-12 and the rent roll, so that you can underwrite the deal fully.

Now, if they aren’t interested, just like the direct mailing campaign, they’re not off the hook yet, unless they are vigorously opposed to you reaching out to them again, at which point you can take them off your list. But if they’re not aggressive and angry, and they just either don’t reply, or if they say that “I’m not interested in selling now” or if they say that “I’m not interested in selling any time soon”, the next step is going to be to either mail them a letter, give them a call, or send them a text every 3-6 months to gauge their interest in selling.

You can essentially use a similar text and just say “Hi, this is Theo Hicks. I reached out to you a few months ago, and I mentioned that I’d follow up three months later. I just wanted to see if you’re still interested in selling your property directly to me, without any broker’s commission.”

That way, you are slowly kind of building rapport with this person and you’re still at the top of their minds. So if in a year from now they are prepared to sell their property, and you’ve been sending them texts every three months, then you might be the first person they think of.

Now, James said that for every 500 texts he sends out to this qualified list that he makes, he will receive about a 1% response rate. So every 500 texts he sends, he will get no reply from 495, and 5 people will actually reply to the text, saying they’re interested in selling. So I guess it’s not no replies; 495 people either don’t reply, say that they’re not interested in selling now, or that they’re not interested in selling any time soon. Five people will say “Talk to this person. I wanna know more about your business”, or “What can you offer me?”

And then he says that of those 500, he will end up actually closing on less than 0.1%. Now, that’s not a super-high conversion rate, but this strategy doesn’t necessarily cost you a lot of money, if any money at all. You already have a cell phone, and if you are able to create your list via a county auditor site, then the list is going to be free. You might have to pay some money to create your list on ListSource, but you’re always gonna have that person’s phone number, and you’re not gonna have to create a new letter every single time, unless you decide to pursue a letter for your follow-up.

So just an interesting strategy that someone has used to actually close on apartment deals, that isn’t just waiting for brokerage to send listings to them via e-mail.

That concludes part five, where we went over the seven-step process to find off-market deals via cold texting. In part six we’re gonna go over two more concepts and three more case studies in total for how to find your first apartment deal.

To listen to other Syndication School series about the how-to’s of apartment syndications and to download the free documents we have available, including the free document we’ll have for part six, make sure you visit SyndicationSchool.com.

Thank you for listening, and I will talk to you tomorrow.


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