MF Deal Sourcing

[Jordan Decuir]

Ok...I get it...apartment investing is THE best way to use real estate to escape the rat race in a short-ish period of time. How are you sourcing and financing the deals to allow for the escape of the 9-5?

[Rick Snow]

Hey Jordan, 

I would recommend staying away from Loopnet if at all possible. By the time the asset has made it to Loopnet it has already been passed-on by the listing agents preferred buyers list and backup list of buyers. 

The best way to source good MF deals (in my opinion) is to 

A) Research markets in the path of economic development 

B) Reach out to every CCIM you can find in that market. Note: A CCIM or Certified Commercial Investment Member is like having a .pHD in commercial real estate. They are the best people to have on your team if you are pursuing multifamily investments. 

C) Get on their approved buyers list and 

D) Follow up with them regularly 

You might also want to send them a POF (Proof of Funds) or SREO (Schedule of Real Estate Owned) document so they know you are serious. If a CCIM brings you a lead they hope you can close on it.

Once you get the lead make sure you have gone over the financials. T12, 3 months rent roll, CAPEX for the past 24 months and information on the existing debt.

When you're ready to put your offer in. Depending on how strong the deal is and how much you want it. You can offer an EMD (Earnest Money Deposit) be careful with this and make sure you have either inspection contingencies or financing contingencies in place or you could lose your deposit (or more) due to non-performance.

30 day Due Diligence and a 60 day close is pretty standard. However these terms can be negotiated with the seller. You will almost always split closing costs. 

Financing the deal is the final piece and it's really where science meets art. You can work directly with Fannie/Freddie or go through CBRE. CBRE is the largest provider of FNM/FMC debt in the world and (I have some really strong contacts there I coule give you if you contact me directly) Any lender will require a track record, HNW (high net worth) individuals, an operating agreement and an equity partners PFS (Personal Financial Statement) if you are bringing in help to complete the JV side of the financing. If any of this is confusing or you need help sourcing JV / Mez partners just contact me directly.

Once you get the deal manage it well. Keep the occupancy up, keep up on the repairs / maintenance / landscaping etc then sell or 1030 exchange into a larger asset. 

MF investing is the most fun you can have in real estate but it's tricky. Work hard and build the right team around you and you'll do fine. 

I hope this helped shine some clarity on the practice. 

Rick

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Rick Snow: Real Estate Investor/ Multifamily Investments. Sacramento CA