What Else Should I Be Doing?

[Tony S.]

Dear seasoned multi-family property closers,

How did you manage the massive list of to-do items and the many moving parts to buy your first multi-family investment?  Did you have everything lined up and figured out before finding the deal? Am I doing enough below to get that first deal?  

With cap rates so compressed, I'm looking for that off-market value-add play in an emerging market  (my backyard).  I'm actively identifying under-managed multi-family properties (2 to 50 units), doing my research into the owners of record and opening up dialogues on potentially making an offer.  

I've created a list of banks to visit to shop loans.

I have a list of property managers to call and vet to find that perfect match for the value-add strategy.

I've already got a great relationships with contractors/subcontractors with my background in construction and my experience owning and managing two rentals.

I'm going to as many networking events I can to tell everyone what I'm doing.  I'm also researching the criteria I can offer investors on their contribution to the down payment to acquire the property so I can begin soliciting friends and family.

Big picture-wise, am I missing something or do I just continue on this trajectory in hopes that one day I can call myself a multi-family property closer?  

[Ryan Cox]

@Tony S. I like the activities that you are engaged in on a regular basis to acquire your 1st property.  You're moving in the right direction.

Two things to consider:

1. I would think of investing in multifamily properties as a team sport.  It is very difficult to do all of the activities necessary to have a successful investment by yourself.  I usually see a division/overlap in roles between sourcing, operations and equity between two more people. Part of something is better than all of nothing.
2. Have the money lined up 1st.  If you find a deal without money, you're stuck.

[Lennon Lee]

Anatoly,

Congrats on all the hard work you've already put into getting your first deal under your belt. 

I believe you are doing a lot of the right things by building a team around you, and just know that you don't necessarily need to have everything perfectly arranged around you before finding a deal. Once you get the deal a lot of the things will fall into place and if by being resourceful you will get it done.

@Ryan Cox mentions something that is very very important, and that is to have the money lined up before getting the deal. Of course this does not mean you need to pass on a good deal if you don't have all the capital ready to go. 

Many investors play by the "If you have a good deal, the money will come" rule, and while that might be true sometimes, it's not always the case. If you are planning to bring equity partners into the deal I suggest you not only start building the relationships but go as far as to get them committed before having a deal on your hands. This is the "Always Be Raising Money" rule.

Many new investors find this to be difficult because "How am I supposed to get an investor committed to invest with me when I don't even have a deal, hell I don't even have experience". Well, this is where the power of partnerships comes in. While you might be a new investor, there are many experienced ones that will be willing to partner with you if they believe that you can add value (Money, a deal, marketing skills, construction management skills, etc). You will be able to leverage their experience and their track record when you sit down with potential investors. Now instead of being about what "I" have done, you are a team and the word "WE" is your best friend.

There sure are many other things that you can add to your list of things to do to get "ready" and I'll let everyone else jump in and give you their advice. But just keep moving forward and be prepared to pull the trigger even if you don't "feel" ready.

Happy investing!

[James Kojo]

@Tony S. : Great question!

Firstly, the most important thing for you to do: keep moving forward! You have a list of things to do. Make sure you're doing something on that list every day. On days you're not doing something on the list, spend some time reflecting on what's working and refining your list.

You correctly identified that the market is hot. That being the case, the most important thing to spend time on is deal-flow. Where are you sourcing your deals? Brokers or direct marketing? Either way, concentrate on activities that get deals on your desk. If it's brokers, make sure you're contacting them on a regular basis. If it's direct marketing, make sure your methods align with your goals, and you're doing activities which make your phone ring.

Don't wait to start vetting your team. The most important is your PM. Have a PM ready to go that fits your strategy. That will also help you source deals in that Brokers will take you more seriously if you're working with a PM that they've heard of, and hopefully so will lenders. second, start making contact with lenders to see what type of deals they like to do, and why terms they offer. They are all different, so you should know who to call for each kind of deal you may encounter.

Finally, have a general outline of what you will do when you land a deal. You don't need to know everything in advanced, but have a plan, and run it by us! If you don't have a plan, I can share one with you.

Hope that helps, and go get'em!

James

[Todd Dexheimer]

I agree with others. Get the money lined up first

[Tony S.]

The main takeaway I'm getting here is to prioritize having the money lined up ahead of time.  

James, I'm sourcing my deals with direct marketing, driving for dollars, contacting owners directly by driving to the listed address on public records, networking with existing landlords/resident managers to get the word on the street. I've contacted a few brokers but am getting bad deals from them, or they're just not taking me seriously (probably because I don't own a MF property, yet).  

I'll keep everyone here posted on my progress with the capital raise and the deal flow.