What is your method of finding value add apartment complexes?

Question

I only know LoopNet and similar sites. I rarely see any multifamilies through my wholesalers.

Rob Krach · Answer

@Joel Owens You are absolutely correct, I have countless clients (strictly multi-family in Chicago) who at the end or near the end of their prepay put the building up for sale just to see if they can get someone to overpay, and if they can't they are already working with me to complete the refinance and lock it up for another 5 - 7 years. In the past year I have financed one purchase that actually supported a loan at 75% loan to value, the rest are all closer to the 70% mark.

Tyler Kastelberg · Answer

@Patrick Philip

ARA Newmark is one of the biggest multifamily brokers in the US. They have a great email distribution system that disseminates new deals ... sign up!

http://aranewmark.com/

Patrick Philip · Answer

Good post. I hope this is the truth.

I've found a few apartment complexes that have obvious renovation needs. But I wasn't sure if the neighborhood would allow for rent increases.

And now I know I don't have to join the Freemasons.

Richard Sherman · Answer

Any blanket statement about "there are no deals other than pocket listings and off-market" is total BS. Let me translate that statement. "Finding deals is hard, and I do not like hard and want an excuse to do nothing."

Now, are there tons to pick through, no, is there a ton of competition in big and hot markets, sure. However, there are some absolutely lazy/incompetent/uncaring brokers out there that list properties with HUGE mistakes in them (SF, unit count, lot size, etc). I am just south of one of the hottest markets in the US (Portland OR), and of the 58 units we have bought this year and 14 additional in contract on: 2 were MLS, 2 were off-market (same broker, who was in the office of the seller of one of those MLS deals.)

There is no magic pocket listing club that a secret handshake gets you into. You just have to ALWAYS be shufflin...everyday...haha. As in look at it all, MLS, Trulia, Zillow, LoopNet, craigslist, etc. There are deals out there, and there are always more deals than YOUR ability to buy them. FEAR of loss and FOMO is a tool of sellers (including brokers) to drive irrational purchasing decisions. Intentional or not, this is a truth. Just do the work and keep looking everywhere.

Matt Lefebvre · Answer

You need to network more @Patrick Philip.  As a real estate agent, when I have a listing coming up that is a larger value-add apartment building, I go call up people in the following order:

• My top client list with buyers I know can perform
• Broker colleagues I know that have buyers that perform
• My buyer list with people I haven't done business with or don't know as well
• Public marketing (MLS, Loopnet, CREXi, etc.)

I'm sure many other brokers probably follow a similar model.  If I know a buyer can buy something and they have cash in the bank and don't complain about every little issue in a property, I'm going to call them first.  If I know a broker that has a client that buys and doesn't back out, I'm calling them next.  In deals where the seller is in a distressed situation and wants out, I'm going to call the "closers" first even if it has a lower sale price because ultimately, dealing with unfamiliar buyers is not always worth the headache for the seller.

Get to know brokers in your market that sell apartment complexes and show them that you can perform and you don't back down.  Show them you have money in the bank, you have a lender lined up, and that you know what you're looking to buy.

Ellie Perlman · Answer

If you are interested in larger deals, ty to look at the large brokerage firms' websites. Some also appear on CoStar.

Richard Sherman · Answer

@Patrick Philip   Ahhh, yes, and this is also part of the process.  Learning the areas so that you KNOW what the rents should be and what the property should look like and be priced at.  You know professional wine tasters/beer tasters etc...you are a professional apartment/house taster...i.e. you better have tried a WHOLE LOT to know what is good and what is not.   The nice thing is that looking online and driving by etc is free.

There is a lot of good advice above, but also....do not ever assume you know a seller's motivations OR that realtors are competent.  I detailed in some other posts how 2 of the last 6 deals I have done have had unit count mistakes.  As in the realtor was so incompetent/uncaring that the listing was for FEWER units than the property had.  LISTING: 5 unit building, 2 bedrooms 1.5 bath townhouse style. ACTUAL: 7 unit, 3 bedrooms, 1.5 bath units.    LISTING: 18 unit 2 bed, 1 bath.  ACTUAL: 19 unit (they were not counting managers unit) + unit converted to laundry, which we will convert back.  Both of those mistakes added 200k+ to my bottom line.

I LOOK for mistakes, i look for SF numbers off what the specs tell me (i.e. 1200 sf 2 bedroom...wtf is that?) etc.  Look and keep looking and you will be come an expert and close deals and when you close deals the brokers come to you because they know you can perform.  Find your niche...and be the best at that area.

Patrick Philip · Answer

How do you find the off market deals? What does "listed internally" mean?

Joel Owens · Answer

I focus on mainly retail commercial these days but started out selling larger apartment buildings.

The company mentioned above and a ton of others likely use a bid system these days. It is almost like auction style but with rounds of bidding. The seller tries to extract every single basis point out of the property and looking for a buyer to (make the market).

The properties with lot's of eyeballs on them get bid to ridiculous levels where buying at that cap rate everything has to go almost to perfection to realize the upside being touted with the property. Literally THOUSANDS - not joking of so called syndicators (newbies) are looking for this stuff. Sellers want the newbies because they know the old guard that underwrites conservatively will not touch the numbers they want to sell the property for. So you really have to get something off market or listed internally to have a chance.

When I look for clients on retail properties I ask the listing brokerage or the seller this question. ( Is the owner trying to extract every single basis point out of the property OR are they looking to go with  a buyer that is solid with a price they can sell at?).

The answer is very telling as to the current mindset of the seller and also in the future if that mindset might change. I am looking for highly motivated sellers with problems that need solving either a time target, cash issue, management issue, or all of the above. If a seller is just testing the market and will refi if they do not get top dollar that is a property I put zero time into. I can't blame the sellers. If I was selling I would be looking for the buyer to pay top dollar as well.

What is your method of finding value add apartment complexes?

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