Buyer's agent for multifamily? out of state investor?

Question

Hi,

I've been buying SFHs for a number of years, using local buyer's agents, sight unseen. Now, I'm interested in MF (Central and South Florida), and I'm getting the impression from agents, that in MF things worked differently. i.e. you need to get "deals" sent to you from listing agents, and work with them.

Is that how it generally works?

Any suggestions for an out of state investor?

Even if I did fly in, and spend some time in the area, I would never know it like a local, and I would need to rely on someone local to know which are the best sub-pockets to buy in.

I'm interested in the $800K range.

thanks,

Ron

Joel Owens · Answer

Yeah overseas investors it is tough. I get contacted all the time by investors overseas with maybe 100k cash to 400k.

Unless they want to partner it is a very tough road to hoe to get anything done. Sellers do not want to go under contract with an investor who hasn't seen the property. Some sellers will say to visit and drive the area and if you still like it put in an LOI. For a foreigner this could take weeks to set up versus a local investor who can drive it today or tomorrow and say lets put in the offer.

The best loans for foreigners are non banks but they play in the larger loan space in the millions to start. In commercial a 2 million loan is small. You get into an 800k purchase and 25% down you are talking a 600,000 loan which is like a 30,000 house in residential. If a foreign investor is paying all cash in the lower price points then it is easier to accomplish. If a foreign investor simply wants to invest cash with a syndicate or fund and the fund operator can do what investments they choose then that is more optimal to someone like me if I have the fund.

For an investor buying directly from overseas and wanting to get a loan I usually like them to be putting down in the millions if they do not want to partner so I know that financing and quality of the asset and scale size being managed professionally for them will not be an issue to close a deal.

It's not that I do not want to help. I have just learned over the years the realities of the time, effort, and energy it takes to close a transaction with a foreign investor and the challenges you have to overcome which are substantial.

You start layering in hands off, wants to buy small property, needs financing from local bank and is overseas, etc., etc and the odds keep going down of a deal actually closing. Not saying to not pursue this but make sure your returns are in reality to expectations of the market. I got another call the other day for GA from New York. They were seeking a 10 cap multifamily. I told them they were about 3 to 4 years late to the party.......... : ) About the best to expect with a well underwritten property is an 8 cap. You will see all these numbers out there for a high cap but it is crap as the numbers are not realistic.

Joel Owens · Answer

The first problem is that you are overseas.

Now if you find a deal in a hot market you have to schedule and fly all the way over to see it. That takes an awful lot of time. Next is the 800k range.

Are you buying all cash or trying to get finance?? If finance for a foreigner it is very tough. In the commercial space at 800k price range if doors are 50k apiece you are talking maybe a 16 unit property. The local banks are usually the ones to finance. Many want local investors and will not lend to overseas. Then you also have your currency conversion issues and entity creation and taxation holdbacks for international tax agreements.

All of this really puts you at a strong disadvantage. A local commercial broker knows the easiest buyer to sell to will be a local investor who already knows the area and is adding another 10 or 20 unit to their 5,10,15 in the area etc. So they work the most probable buyer first and go down the list.

Are you just looing for a passive return in the U.S?? That is very different from being a direct owner.

Ron K. · Answer

Thanks Robert.

The reasons I'm looking at Florida is that it's a great growth area with consistent demand due to all the various drivers (tourism, industry, etc.). Also, over the years I've purchased houses and built up some parts of a team. I may look at other areas (Texas).  I may just with smaller multifamily.

Robert Breen · Answer

I would definitely seek a buyer agent.  Even in commercial the selling agent has a duty to the seller.  While they may reprisent you as the buyer I'm not sure that's the best thing for you as a buyer especially since you are out of the country.   Just wondering how you got interested in the FL market as opposed to other areas.   Always curious to know why people look in what areas of the country.   There are a lot of good deals in  a lot of places.

Ron K. · Answer

Thanks Joel,

Agree, there are a lot of difficulties.  I am a US citizen though, so at least for the single family homes, I was able to get financing, although the process was more complicated.

I would be a passive owner, with hopefully, with an excellent local property manager.

The entity issue is more complicated, but I feel I have a handle on that.

I see that agents are not running to get my business, but I have been sent a few names, for example, by an agent that said she can't handle it.

I guess I would really have to trust someone, assuming I can get the financing. I probably wouldn't be given the best property, but maybe something good, to get started in multifamily.

Ron K. · Answer

Thanks.  I am looking at 5+, and I've had some difficulty getting interest. Then I was told by a multifamily agent, they don't really have buyer's agents in multifamily.

Rob Beland · Answer

Typically commercial agents work a bit differently than residential agents but the process is basically the same. It's more about the numbers than the color of the carpet and walls. You should do a search for agents in a particular area that specialize in multis. You should have no problem finding an experienced buyer's agent. You could also  likely find one here on BP. You do want to be sure you don't hire a residential agent with no real experience in multi-family deals. You need a commercial agent.

Buyer's agent for multifamily? out of state investor?

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