Where to find bigger multifamily deals?

Question

Hey guys,

Our real estate portfolio has grown to 35 doors, all ranging from single townhouses to quadplexes. We would like to find bigger deals for multifamily properties. Into the $5 million and with a 10% cap rate at least. I am OK with C class areas. Does any one have any advice on where to find them? I have tried traditional avenues such as MLS, and Loopnet. I have not directed a direct mail campaign to them. Preferably would like to see deals in Orlando, Tampa, or Miami area.

Thanks

Josh Caldwell · Answer

I think I can help.

the good deals will almost never be on the MLS or loopnet.   focus on Loopnet more than the local MLS.  On loopnet, brokers from CBRE and Marcus and Millichamp and a host of others place their "bait" property.  These are the property for the general public.  The good deals go to their buyers list.

The way that you get on a buyers list is that you prove to the brokers that you are a real buyer and not just some idiot who read a book.   Call a broker on a property that doesnt quite meet your criteria.  Ask a few questions about NOI, differed maintenence, and demographics to establish yourself as someone who knows what they are talking about.  Then politely explain that the property you are looking at doesnt quite meet your criteria, and ask the magic question "what else do you have?"

I will never understand why commercial brokers play the game this way, but that is how you have to do it.    If the broker believes that you are a real buyer, they will gather up their current inventory and send it to you, that broker will also put you on their buyers list.  From there, you may find what you are looking for or at least something close to it.  Make sure that you find one broker from each of the big firms and be sure to make contact with the smaller botique firms as well.  People tend to look past them

I hope that helps

Josh

Ps feel free to connect with me on BP

Joel Owens · Answer

Your going to need to do direct mail and be the sellers only choice.

10 caps for stabilized multifamily in decent areas were trading 2 to 3 years ago.

Now everybody of course wants to buy them at that but they are not out there hardly at all anymore.

You will get claims of a lot of 10 or 11 cap but they are claiming fantasy holding costs numbers of 25 or 35% in a C area when it will run 55% to 60% costs per year. When you factor that in their 10 cap is now a true7 in a C area ( bad deal ). So it's all about underwriting properly.

Joel Owens · Answer

I am a principal commercial broker and an investor myself. I absolutely do qualify buyers before giving them access to off market properties.

Sellers come to you because your a closer and get it done. How you get it done is to qualify buyers ahead of time. Those that send me the PFS statement of liquidity and net worth with banks statements showing liquid get on the list. I also have a risk assessment for a buyer if they are a direct buyer local to the property with liquid funds to do a deal then that is number one. If they are group that is local that has a track record that is number two. If it is a buyer from out of state 3. Group out of state 4. Foreign individual 5. Group of individuals that are foreign 6

I know based on metrics that the more variables that are entered for a buyer the higher the chance of the closing not happening due to all the hurdles to overcome.

The sellers appreciate you filtering buyers and giving analysis on odds of the purchase going through. Many sellers do not want to publicly market it. They just want you to privately handle it for them on the commercial side. Business is handled differently a lot in some cases than residential.

I find many buyers are not honest and upfront about their capabilities so you have to scrub them for the sellers. If the buyers say forget it and get defensive they are usually hiding something or feel they shouldn't have to go through those steps.

Joel Owens · Answer

The listing broker represents the seller. My clients tend to be ultra wealthy but are not experts in commercial asset classes so need and want help. The seller is expecting to co-op the commission they are paying out in most cases anyways.

If you are a sophisticated fund that buys tens to hundreds of properties a year then it's usually whoever brings you the deal you haven't seen yet. So sometimes they use a buyers broker and sometimes they go direct through their own resources when they are  a professional buyer.

If you go direct just DO NOT ask a commercial buyer broker to come in mid deal and have to unravel the mess from mistakes made if you are not seasoned. The listing broker won't like it and the buyers broker will not want to just get paid a paltry consulting fee instead of a commission and then have to fix a ton of problems.

Buyers have to own their decisions no matter the outcome.

Rick Versace · Answer

@Joel Owens Thanks for spelling out what you are looking for in regards to buyers and your "depth chart" so to speak. I think that is definitley helpful for people to know when they are reaching out to brokers for the first time in a given market.

Something I have considered in the past (and chime in on what your thoughts are) is that it may be beneficial to go directly to the selller's broker, opposed to letting another broker be a middle man on the deal. Not to say you should cut somebody out of the deal if you have a relationship with that broker, but in my experience the fewer lines of communication between the Buyer and the Seller the quicker the deal tends to move.

Zamir Kazi · Answer

@Josh Caldwell Yeah that's exactly what happened with us on Loop Net, I am now on Marcus and Millichamp's buyers list, and they have been sending me emails periodically. I haven't tried any small boutiques I will give that a shot.

Zamir Kazi · Answer

@Joel Owens Thanks for the advice! Where do I find lists for multifamily? I have used list source for SFR Flips will this work?

Where to find bigger multifamily deals?

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