8 out of 10 MF brokers are ghosts

[Jack B.]

OK, maybe not ghosts but may as well be. I've contacted brokers on loopnet and other sites asking for a T12 or Schedule E, etc. Maybe 2 have not only responded, but responded with the requested data, and in just minutes.

Most of them seem to be ghosts on the other hand. I've had some that I've contacted multiple times over many months for different properties, and I never hear anything back. It's like, how do these guys EAT??

I've also had a guy that responded but didn't know what a trailing 12, proforma, or schedule E was. He claimed "they don't use those terms". Translation, he's never heard of the terms and works at Jiffy Lube during the day.

[Joel Owens]

I used to do smaller multifamily under 3 million about 7 years ago. That is a lot of heavy lifting and the owners sometimes self manage or have crappy accounting records.

These days I mostly do commercial retail.

Everyone right now that is starting out in multifamily seems to be (chasing the unicorn). They want small stuff class B area with C building built 1980's or newer blah,blah,blah.

About 90% of this stuff traded 3 to 4 years ago folks. It still exists for sure but is a very rare bird. Brokers get contacted all the day by people claiming to be REAL BUYERS. A seasoned broker cuts through the bullsh*t real fast like in under a minute fast.  

Those rare properties that do come up the broker likes to go with a seasoned buyer they have closed deals with before on multifamily versus an unknown. A quick deal they can sell fast. Often problem properties will not have complete records. That is why it is a problem property! lol

I have a buyer now for multifamily that is a proven performer looking up to 40 million for a property. I will spend time on that. I won't do it on dinky deals for multifamily that take up a lot of time and have lot's of problems to overcome. Top brokers want velocity of transactions just like investors want velocity of deals. Investors that see brokers as just transactional are making a mistake. Many brokers especially in the commercial space are investors themselves. They value their time and the ability to generate revenue. They do not want buyers with UNIQUE or long shot strategies.

Too many buyers that are doing 1031 exchanges or that are buying out of state and are happy with 6 to 7 caps when their state has 4.

Sellers are not usually going to give personal records to someone they are not even under contract with. That is private information and without a CA agreement the potential buyer could blurt out all over creation or leverage for another property down the street.

Institutional buyers for commercial are generally not buying any of the smaller stuff under 15 million because of economies of scale. Some do but most don't. Those are usually ultra high net worth investors or syndicates playing in that space. Institutions on larger properties can get very special relationship financing from lenders not available to the average investor.

On the retail properties I usually work on properties 1.5 million and above but NNN deals tend to be cleaner than value add apartment properties that suck a lot of time in the low price range to close. Any buyer that contacts me I want to know their deal structure. The minute they stutter on an answer or I catch them bending the truth the call is done. Buyers do not need to be something they are not. It gives them a very bad rep in the marketplace. Some brokers will not want to work with the buyers because of their strategies they want to use but best to know that upfront. If a buyer lies and makes the broker look bad to the seller from a failed deal that is a way to stop getting deals in the marketplace.

If brokers know a buyer is fair for price but a closer then more and more opportunities usually start to come their way. I ask for buyers financials at first contact. If they resist or give me grief it's bye,bye time. Are some brokers pushing 1 year bubble numbers for multifamily a 6.5 cap based on 3% vacancy, 4% rent growth,35% opex when it's really historically 10% vacancy, 1 to 2% rent growth, 50% opex? Sure and then the cap is really in the 5's. If you are buying a 5 or 6 cap then my clients buy NNN properties with national credit tenants and set it and forget it with long primary term leases and set rent increases baked in.

Finding deals isn't easy people. I have for retail thousands of contacts nationally to source properties and I only like about 20% of what I see. Lot's of trash for sale in all asset classes. Best thing I can say is just be real as a buyer and realistic for the market you want to invest in. If the market does not have the returns you want then look to another market or possibly build ground up.

Brokers try to stay away from "dinky deals" and avoid (flaky buyers) like the plague. I find for every 10 initial leads I get about 2 lead to a closing. 3 are dreaming, 3 are thinking about an asset class but but serial lookers, 2 might be trying a 1031 but have not been able to sell their property etc. 2 actually end up buying something and are realistic for the market and put in the time to close a deal.

I don't mind wading through the 10 leads fast as the 2 that close I usually get six figures per deal. The brokerage side is a numbers game just like the investors side. Investors look at a lot of coal to find the diamonds. Brokers have to go through a lot of flaky and cruddy buyers to find the real and capable ones. I have many that are first time commercial buyers and I gladly work with them but they still have money with financials to show  and they follow direction well. I don't mind answering questions along the way where we work as a team but if they do not follow directions from experience then it's a no go. I don't change how I do business based on one buyer.