What is the best way to find investment properties?

Question

Hey All,

I am wondering what the best route to finding properties is. I have been using a realtor that primarily deals with residential properties and not so much investments. I am in the market for a 4+ unit buildings but every time I see a good deal on the MLS, it is sold before I can get to it. Not to mention that there aren't many good deals to begin with.

Do you use a realtor that specializes in investment properties, or have a different method?

Thanks

Marc C. · Answer

There is less competition in the 5+ units than with 2-4-units. Including fewer Realtors who know the differences as far as valuation and actually specialize in them. Right now, the apartment market in many places is HOT: You just have a lot of competition.

I recommend direct mail. Work on getting a list of property owners and send them a letter directly. Repeat every quarter, but change up the method and message (letter one time, Christmas card next year, postcard another quarter). You are primarily looking for those who are looking to retire from multifamily. They've been thinking about it, but haven't taken any action. If records show they are from out-of-state or they've owned the building for more than 20 years, pay a "skip trace" service to find the owner's phone number and call him or her. Try to build a relationship...they will only sell to someone they like.

We mail only to owners of buildings we've actually driven by and wouldn't mind owning. Yesterday, I had the owner of a 16-unit (out of state; owned it since 1978!) call me from a letter dated Oct. 22. My partners and I toured the vacants and then sat with the owner and his wife and answered their questions about our business, discussed our respective backgrounds, and tried to learn their motivation. I will have them a Letter of Intent within a week (sent Priority Mail to their address back home) that outlines 3 options: Master Lease/Option, Real Estate Contract, and Cash Sale. All will have a different price. Since they didn't have their financials, I will start my LOI with an estimated, proposed budget (APOD) based on what I do know. With a note: "The actual price we can afford to pay depends on the actual financial records for the property (tax returns, bank statements, etc.)" If we are way off on our numbers, then I need to know now, and invite them to dispute my assumptions.

Another place to get leads: Property management companies. They know which owners are out of state, who's about to retire, etc. Offer to pay them a 2.5% commission if the law allows and they give you a lead you end up buying.

Another place: Get your real estate agent to pull all of the EXPIRED listings from the last two years that meet your criteria, and make him/her call each one of them to find out what the outcome was (did it sell or not? If not, "I have a buyer who is hot to trot.") This hasn't worked for us, so far, however.

Christopher Phillips · Answer

1-4 unit buildings are considered residential. If you want 5+, then you should work with someone that does commercial real estate. Not everyone works on them. There tends to be a long time between deals.

Matthew King · Answer

@John T.  Using a Commercial Broker is your best option to source Investment properties (4+ units).  Commercial Brokers concentrate on strictly Commercial product, have the knowledge and expertise to lend to a deal and have access to the Commercial MLS system that many Residential agents do not have access to.  Good Luck on your search!

Tom Ott · Answer

Find an agent who knows a lot about house hacking, 203k loans, or even just investment properties. There are a few companies around that do such work. Make sure to do your research on the company before you dive in!

I'd like to wish you the best of luck! Feel free to send me a message.

Patsy Waldron · Answer

A residential RE agent is not going to be much help if you are looking for properties above 4 units. You need to get in touch with a commercial broker. Look up Mauricio Rocha with Keller Williams- Greater Cleveland West. Work with him to establish what you are looking for in terms of size, neighborhood, price point, etc. He is good at finding the right deals for serious buyers.

Also second the suggestion about property management companies, which are very good sources of info about everything from owners to neighborhoods/tenant quality to rents.

Eric Bilderback · Answer

Marc has some good advice.  If I was being a wiseass I would say the best way to get properties is however you get them.  I have tried everything including direct mail and calling them personally, MLS, etc.  My best advice would be to have your criteria down and when you see something that hits be aggressive lock it up and close it (obviously you need to do your due diligence.

John T. · Answer

Marc C - This is excellent advice. I'm glad to hear about the 16 unit, congrats!

Olga Roginkin · Answer

@John T., I recommend finding a good real estate agent who can advise on these types of investments. You are correct, the best deals are rare and far between. That is the reason why you need one specific agent, to establish a good  relationship with him, show him that you are serious about your business, and that you know what you want. Help him by being very specific about your parameters, providing your financing info, and answering as many questions about your business as possible. All that would help your agent know what you expect.

Once you start receiving listings from the agent, do not forget to follow up! Do not expect results right away. Give him a call and analyze the deals together. This will help both of you understand if you are moving in the right direction with the search. Good luck!

Michael Le · Answer

How long have you been looking? Finding good deals take a while. So if you've only been doing it a month or two don't get discourage. Also, it seems like you already know the problem with how you're doing your searches. If you've using a realtor that doesn't deal with investment property... then switch to one that does.

What is the best way to find investment properties?

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