How to Approach Commercial Brokers to Purchase Large Multifamily

[Khaled Seirafi]

Hi all,

My family owns 2 properties (1 triplex and 1 mixed-use commercial property) in the Bay Area that we're wanting to sell in order to invest in multifamily commercial property (mostly thinking a large apartment complex, or several smaller ones) elsewhere. We're currently thinking Dallas, Austin, Atlanta, and/or Phoenix.

I'm not familiar with these markets, but I know that we want to get out of California as the laws are becoming so strict on landlords and I don't see it getting any better. In addition, we're wanting to focus on more cash flow markets and based on my research and what I've been hearing over the past few years, these cities seem to be solid bets. I'm wanting to follow David Green's suggestion of approaching brokers, interviewing them, narrowing it down to one broker per city, and then have them introduce me to their markets. Of course, I'm going to continue doing my own research and much more in depth, but I want to visit these cities and get on the ground information as well.

I'm trying to figure out what the best way to go about this would be. I understand that commercial brokers are tougher to approach and they don't take you seriously unless you have proof of funds. I obviously would prefer to do the research, meet the brokers, and see what kinds of properties they can provide me before we go ahead and sell. Ultimately, we're looking to make big purchases. The properties we own are fully paid off and are currently worth $5.5-$6 million. We're looking to use those funds as a 50% down payment(s). My intention isn't to brag, but these figures should mean something to a potential broker, enough to warrant them to work with us even though we haven't sold yet.

My questions are: 1. How do I best approach the best and most connected commercial brokers? 2. Should we sell before seriously beginning the buying search? Capital gains tax is not a real issue as these properties belonged to my father who passed away a year and a half ago, so we got a step up in basis.

Any thoughts would be helpful.

[Joel Owens]

Think about THIS. There are literally TENS of thousands (not kidding) multifamily buyers out there nationally.

A commercial broker doing a 10 or 20 million dollar property deal usually won't waste time with a 1 million or 3 million small property. Mainly only time I have seen is if they represent a large owner that has a few straggler smaller properties they want to sell. The broker then does it as a gift to the seller. They still make commission but the small deals can be a real pain in the butt to do with low money to be made for the broker.

The brokers already have proven performer buyers with strong balance sheets. If a broker knows they have a large property and an awesome deal they will take it to those who can buy it quick, are already a preferred buyer with a lender, etc. A broker doesn't typically want to take an amazing deal to a new buyer for multifamily. The new buyer presents so many potential issues they usually just show them retread properties or the overpriced dogs.

I disagree with the statement have a bunch of agents interview with you etc. That stuff might work in the small ball world of residential but when you get to larger properties and commercial those brokers make A LOT OF MONEY. The seasoned ones are multi-millionaires themselves and won't listen to all of that crap. They want you to SHOW THEM THE MONEY that you can perform and if they show you an internal deal that you are committed to them (at least for a specific area) with a written agreement.

If someone calls me on commercial properties and says they are talking to blah,blah,blah many brokers and see who digs up what I disconnect the call right away. The new desperate agents that need money to survive work on crap like that but they have little to no network either. If someone is a seasoned broker and very well connected that can be much more powerful to reach your goals than talking to a bunch of newbie agents with little network to speak of.

Now some brokers will work with buyers who aren't committed to anyone just for a transaction. Then there are other brokers that require an exclusive.  

It's just food for thought that if someone says ( Hey I am a new buyer, have little to no track record, have to pool money to buy property, and want to keep my options open,etc.) that's an immediate 3 strikes and your out buyer to 99% of commercial brokers.