February 14, 2019

JF1626: How To Find Your First Apartment Syndication Deal Part 6 of 6 | Syndication School with Theo Hicks


Part 6: Two more deal finding case studies

Yesterday Theo talked to us and walked us through an example of cold texting to find an apartment syndication deal. Today, we get two more case studies of deal finding. One case study is from Joe on how he was able to secure a couple of deals over every other investor fighting for one of them. The other case study is with a previous guest, Daniel Ameduri on how he eliminates his competition in the market. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Free document for this episode:



Daniels episode explaining his strategy:



Best Ever Tweet:



Get more real estate investing tips every week by subscribing for our newsletter at BestEverNewsLetter.com


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 the majority of these series, including this one, we offer a document or a spreadsheet or some sort of resource for you to download for free, that accompanies what was discussed during the Syndication School series. All of these free documents, as well as previous Syndication School series can be found at SyndicationSchool.com.

This episode is going to be the final part of a six-part series that is focused on how you will find your first apartment deal. In the first four parts, which happened the previous four weeks, we introduced you to the difference between the two main types of deals – the on-market and the off-market deals. In part two we discussed how to find on-market deals and off-market deals through real estate broker relationships.

In part three we talked about one of the main ways to find off-market deals, which is through direct mailing campaigns. Then in part four we discussed, I believe, nine more ways for you to find off-market apartment deals. Then yesterday, in part five, we went over a seven-step process for finding off-market deals via cold texting.

Part five and this part (six) are gonna be focused on some real-world case studies that investors have used to find apartment deals, that weren’t necessarily discussed in the previous four parts.

In this part we’re going to go over two more case studies. The first is gonna be how to find deals in a hot market, following a case study from Joe and his company. Then we’re gonna go over another case study, which is how to eliminate the majority of the competition in your market. For that case study, we’re actually gonna go over two different ways to accomplish that.

Let’s hop right in with case study number one, which is the secret to finding deals in a hot market. First, a quick story – Joe and his company were sent an on-market opportunity from a broker in Texas. It was a little bit over 300 units, and the unit mix was primarily one-bedroom. Now, the deal met their investment criteria – it was built after 1980, it was in a major city, it was the right number of units, and there were opportunities to add value; however, it was a highly marketed property, which is typical for on-market properties. The broker makes an offering memorandum, they send it out to anyone who subscribes to their e-mail list, and really allows anyone to submit an offer on the deal.

So because of this competition and because of this marketing, the price kept going higher and higher. They’d submit an offer, then the broker would come back and say it’s not enough, and kind of kept going higher and higher until it got to the point where they weren’t confident in their ability to actually achieve their return goals for their investors, because the price was just too high.

At the same time, they noticed an apartment complex across the street, that was a 200+ unit apartment community that was primarily two and three bedrooms. So what they decided to do was ask the broker to contact the owner of that property to see if they’d be interested in selling. One thing led to another, and after some negotiation they ended up actually putting this deal under contract, and since it was an off-market deal, they were able to negotiate a price that was well below the market value of the property.

Now, because of the discount they were able to achieve on that off-market deal, they were able to bid the higher price on the on-market opportunity, and were also awarded that deal. Essentially, they bought both properties.

Now, the benefits of this strategy are fairly straightforward, but first of all it is a way to find deals in a hot market, rather than just focusing on that on-market deal, and once the price goes too high you just kind of give up and move on to the next one. Instead, you try to find a complementary off-market deal in that same area and put that property under market at a discount, and then tap into that discount to buy the on-market deal.

More succinctly, for every on-market deal that you come across, you should reach out to the owners of the surrounding properties and attempt to purchase both properties – the on-market property and the off-market property. More specifically, you should pursue off-market properties that naturally complement the on-market property.

In this particular example, the 300-unit on-market deal was primarily one-bedroom, whereas the complex across the street was 200 units and primarily two and three-bedrooms. The benefits of purchasing that complementary off-market deal with the on-market deal is 1) the economies of scale. Think about the reduced expenses due to having two properties directly across the street from one another. Rather than having two maintenance people for each property, you’re gonna have one maintenance person. Same thing with the contractors and vendors you’re working with – pest control, security – they can just do both properties.

You can advertise and market the properties together. You can split the costs of commissions and salaries of your leasing and office personnel, property management teams. Really, the majority of the expenses aren’t gonna be cut in half per se, but they’re going to be reduced because they are essentially a 500-unit apartment community that’s split by a street.

Another benefit – and this is where the off-market deal being complementary is important – is that you’ll have a natural referral source. If someone comes to your building and is interested in buying a two-bedroom, rather than turning them away and saying “We only have one-bedrooms”, you can say “Well, we only have one-bedrooms here, but we actually are also managing the property across the street, and we’ve got openings for two and three bedrooms, so why don’t I put you in contact with that leasing person?” Or maybe the person they’re talking to is the leasing person for that property as well, and rather than losing that customer, you can refer them to your other property. But again, if you look at it from the perspective of it being a 500-unit apartment community, then you’re just saying “Well, we don’t have that here, but across the street we have that here.”

Or vice-versa – if you’ve got someone who wants to downgrade from a two-bedroom to a one-bedroom, rather than saying “Well, we only have two and three bedrooms here” you can say “Well, across the street we’ve got plenty of one-bedrooms available for you”, [unintelligible [00:09:26].25]

Then another benefit is going to be the flexibility with your underwriting. As I mentioned, because of their ability to put the off-market deal under contract at a reduced price, they were able to tap into that discount to buy the on-market deal. Again, the purchase price for that alone was too high, but since they were buying it as a package, the two purchase prices together combined with the stabilized NOI and the stabilized cashflow resulted in a return projection that met and exceeded their investors’ goals, where that wouldn’t have happened if they had just purchased the first deal.

So from now on, especially now in a hot market, when you’re looking at deals or the broker sends you a deal, I always personally go ahead and visit those properties in person, and I’ll make a list of the surrounding properties and consider reaching out to the owners, if the only reason why I’m not buying the deal is because of price.

Most of the deals I’ve come across have been eliminated not because of price, but for other factors. But once I do come across a deal that the only reason why I can’t buy is because it’s too expensive, then I will focus on trying to find a complementary property in the  surrounding area and try to buy those two deals together as a portfolio, have the investors invest in the portfolio, so that I can tap into that discount to buy the on-market opportunity. So that was case study number two (number one was yesterday), which is the secret to finding a deal in a hot market is to make a list of the properties surrounding an on-market opportunity, ask your broker to contact the owner, and attempt to put that deal under contract at a reduced price, so that you can tap into the discount to buy the on-market deal, as well as benefit from the natural referral source, as well as ongoing economies of scale.

Now, the last case that I wanted to talk about was focused on how to eliminate competition. Similar to this first one, it’s essentially how do you find deals in a super-hot market? One of them is to kind of make your own deals, so pursue those off-market opportunities. Another strategy is from Daniel Ameduri, who was a guest on Joe’s podcast, so if you wanna listen to that, google “joe fairless daniel ameduri.” He had a three-step process for eliminating 99% of his competition in a particular market.

Essentially, what he would do is he would buy the properties that nobody else wanted to buy. So step number one of this process was to identify a problem in the market. This would be, as I said, a property that nobody wants to actually buy. So what he would do is ask around with local investors, he’d ask wholesalers, realtors, brokers, really anyone who is involved in the real estate industry, and he would say “What is the property type that nobody else wants to buy, the one that scares away most investors?”

Daniel does smaller deals, but this concept can definitely still apply to apartments. It’s the concept that’s important, not the specifics. So in his market, since he was a single-family investor, the problem in his market (and most markets as well) is foundation issues. People avoid properties that have foundation issues, so if they hear or read or see anything about a foundation issue, they’ll automatically just disqualify the deal and move on, because of the costs associated with the foundations issues, or the perceived costs associated with foundation issues, as well as the fact  that most banks won’t loan on a property that has foundation issues, because it’s too risky of a bet on their end.

So in your market, doing the same thing – ask the brokers and wholesalers and people at meetup groups what are the types of apartments that nobody wants to buy. Then step number two is to find a solution to that problem. Figure out, based on those responses, how can you solve that issue in a cost-efficient manner.

For Daniel’s example, as it relates to the foundation issues, he came across his solution kind of randomly, he said. He went to buy a single-family home for himself, and it happened to have a foundation problem; and rather than just running away and finding a new house, he went the entrepreneur/problem-solver mode and figured out “Okay, how much is this actually going to cost? I’ve heard people say it’s gonna cost $50,000 because they’re gonna have to lift the property, which may result in broken pipes, and cracked beams that need to be replaced, cracked walls… So how much is it actually gonna cost?” And they reached out to a vendor and got a quote for $3,500. His mind was blown, and he was like, “Wow, this is not as expensive as I thought it was gonna be”, so because of that — obviously, step two is to find the solution, but step three, because of that, he decided to become the go-to person for those types of deals.

He reached out to all the brokers and all the wholesalers he could talk to and asked them to notify him whenever they come across a deal that has a foundation issue, because he’s got a guy who can fix the problem very cost-effectively.

Now, for this particular strategy he has to pursue seller financing for most of these deals, but the owners are more than happy to do that because everyone’s afraid to buy their property.

Now, how can this concept apply to apartment investing? Well, step one, you can ask around and find apartments people don’t wanna buy – whether it’s a type of a property, or a condition of a property, or  allocation of a property – and then figure out what can you do to buy that property without having to lose money on that deal, basically. Like, how can you buy that problem-property and make money… Whether it be a property in a low-income area, maybe there’s one particular type of property or issue with the property that you know how to fix really well, because either you can do it, or you know a guy who can do it for cheap… This is, again, kind of a general strategy, and it depends on you and your background and your market, but just figure out, what don’t people wanna buy, and then brainstorm for however long it takes ways to buy that property for it to make sense financially.

Then once you do that and you’ve proven that you can do that, then become the go-to person for those types of deals. You might not wanna be going on podcasts and tell everyone about this strategy, because you don’t want people stealing that strategy in your market, but again, that’s really up to you… I think something interesting that one of the guests on Joe’s podcast said – because he was giving out some really rock start advice, and Joe said “Thank you for offering this advice. I’m surprised you give away your secrets, because you don’t want people to compete with you and steal those strategies and use them to compete with you”, and the person responded saying, “No, most people that are listening to this or most people that I tell this are never gonna do it anyways. 99% of the people aren’t gonna take action anyway”, so I guess at the end of the day if you find another strategy you can tell it to people because they’re probably not gonna do it anyways. But anyways, we’re kind of getting out of point now.

If you become that go-to person for those deals, then you’re gonna be the only person that’s looking at them, that’s pursuing them, because everyone else is running away from them, because you’re focusing on properties that nobody wants to actually buy.

To learn more about this strategy and how Daniel implements it, to maybe give yourself some additional ideas or a starting place, definitely check out that episode by Daniel Ameduri.

Now, another way to eliminate competition is to uncover some sort of investment strategy that nobody else knows about. When I first made the outline for this, I was gonna stop after Daniel, but yesterday I actually met with a local Tampa Bay investor named Armando… And I don’t believe he’s been a guest on the show yet, but I think he should be a guest at some point… He is a developer in the area, and he was telling me yesterday at lunch about this really  unique investment strategy that he discovered, that no one else really knows about, so he didn’t really have any competition.

He learned about it from his mentor, so I guess mentor knows about it, but his mentor is worth tens of millions of dollars and isn’t necessarily focused on these smaller types of projects… Armando is kind of the only guy in Tampa that’s pursuing these types of deals.

I’m not gonna go into extreme detail on what the strategy is, because if Armando comes on the show I don’t wanna steal his thunder, but essentially there are certain locations in Tampa that are zoned residential single-family, but can be rezoned to residential multifamily, based on the zoning laws on those specific plots.

An example he gave is that he bought a single-family home that was 7,800 square feet zoned RS, and he was able to after a form of process rezone that plot to RM, and ended up knocking down that building. I think he said he developed eight units, an eightplex, on that lot. Again, this is a specific example, but the concept is what’s important – figuring out what is some creative strategy, some loophole that you know about, that no one else knows about. What’s that unique thing that you can do or you know about that others don’t, that you can leverage to find deals that others can’t, or have deals that make sense, that don’t make sense for other people. You get the idea.

That concludes this episode. The first case study was how to find deals in a hot market which involved searching for properties surrounding on-market opportunities in order to tap into that discount, as well as the economies of scale and natural referral source to buy both properties together. Then case study number two was strategies to eliminate 99% of the competition in your market for the types of deals you’re looking at, and one is to essentially buy properties that nobody else wants to buy, and figure out a cost-efficient solution to whatever issues that property has, and then be the go-to person for those types of deals.

Then the other one was, again, from Armando, who discovered a creative investment strategy that nobody else knew about, so he was able to instead of being the guy who bought a single-family house, knocked it down and built another single-family house, he knocked it down, rezoned it multifamily, and was able to develop multifamily buildings on those units.

That actually concludes part six, as well as the series for how to find your first apartment deal. As promised, we’re gonna give away a free document, and this is  going to be a deal-finding tracker. It’s going to be a spreadsheet that allows you to track deals that you are finding through literally all of the different ways I told you you can find deals in this six-part series. From brokers, from off-market deals, new deals from your thought leadership platform, deals you find through your meetup group, this document will allow you to track all of that – track the progress, track the conversion rates of your direct mailing campaigns, track which brokers send you qualified deals and which brokers aren’t etc.

In order to download that document, it will be in the show notes of this episode, or you can download that document at SyndicationSchool.com, under the series “How to find your first apartment deal”, which is going to be series number twelve. Series number twelve, part six, Deal-Finding Tracker – download your free document, and check out the other SyndicationSchool.com.

I really appreciate you guys listening today, and I will talk to you guys tomorrow on Follow Along Friday.

    Get More CRE Investing Tips Right to Your Inbox

    Get exclusive commercial real estate investing tips from industry experts, tailored for you CRE news, the latest videos, and more - right to your inbox weekly.