No Multi-Family Locations For Sale In My Area: Creative Ideas?

Question

There are currently not any (and extremely seldom is there any) multi-family homes for sale in my area. I live in a medium sized town of around 120k people. I was just wondering if there were any creative ideas on how to solve this problem.

Matt Bertsch · Answer

@Ben Hudman, I live in a pretty hot and saturated market myself. To overcome this I am utilizing a few different methods. The first is direct mail to multi family property owners. In December I sent 400 mailers to property owners making them aware that I want to buy their property. The second method is expanding my network to improve my chances of landing an off market deal. I make it a point to talk real estate with at least 1 new person everyday (in person or online) and attend at least 1 meet-up a month but I just started attending a 2nd. This way I am in the company of other investors, real estate agents and wholesalers and I am developing those relationships. The more people who know what you're looking to do the more likely you are to have an actual deal brought to you. Lastly, I have changed my model a little...In my market there is good potential for flipping single family homes so I've decided to work on a few until the right multi comes along. This allows me to build up my capital, develop a bigger network and portfolio book and build a better reputation so when the time comes for a good multifamily deal I am in good position possible to land it. I hope this helps. Best of luck!

Theo Hicks · Answer

I'd draw a circle with a radius that is a few hours drive from where you live and start investigating those areas. Unless you are in the middle of nowhere or in a massive state, there should be a major city within a few hours drive.

Ali Boone · Answer

Switch to SFRs, or buy in a different location.

Alina Trigub · Answer

@Ben Hudman

Why only look at your own town?! Look at the surrounding areas as well. See which one(s) are on the path to progress. And then you can start implementing some of the creative strategies noted by @Matt Bertsch

Corey Mason · Answer

@Ben Hudman

Find the closest city you are willing to drive to with a min population of 200k300k (MSA will usually be large if the city is this size). From there call the brokers in town and ask three questions.

1.Inventory in the Market (# of owners and units)

2.Sales Volume per year

3.Transactions per year

From there you should be able to see if it's a viable market to go in. Most deals will be off market so you will need to pick up the phone and set a goal to call 10 owners a day OR go to craigslist and see if the owners who have listings to rent are willing to sell. That's where I would start.

Thanks!

Don Konipol · Answer

@Ben Hudman

I’ve determined that with current cap rates, it would take a high rate of price appreciation to reach my minimum acceptable return on investment.

As a result i have purchased some office - warehouse properties with a cap rate about 2 1/2 points higher than a similarly attractive residential property.

I have also placed additional capital earmarked for multi family equity into commercial mortgage notes I’ve purchased from lending institutions.

I should mention that I buy properties that need little or no improvements and have little or no deferred maintenance.  Years ago I had all the fun with contractors I could have possibly wished for in an entire lifetime.  I also engage property management companies to deal with day to day management.

A few years ago I purchased a failing motel in a good location with a partner, changed pricing to attract long term tenants, and now have an 75/25 mix of long term tenants using the rooms as a primary residence vs. motel short stay guests.  Although the property is low overhead low end, our management company keeps the property spotless, handles all day to day issues, and provides of with detailed reports monthly.  Furthermore we’ve consistently exceeded our threshold ROI.

Scott Morongell · Answer

@Ben Hudman look to a larger market within driving distance. Also helpful if you know someone in that market to save you some time upfront.

Vincent Popovski · Answer

I'm in the same boat as you, this is what I do:

-Drive and find specific deals that look attractive to me (deferred maintenance, can tell owner isn't present etc). You can also hop on Apartments.com or just Google 'Apartments in whatever city' and find ones with bad reviews or ones that just look bad.

-You can find the tax information online and see who the owner is. If it's under an LLC you can also find the LLC owner.

-I send them a hand written letter first. I know this isn't efficient but, again, I'm sending these letters to specific owners so it isn't like I am sending 300 a week. People seem to really like the hand written letter. It basically just says who I am, I like the property, and would be interested in chatting about purchasing.

-I had professional post cards made that pretty much sum up what I said in the letter. I added a nice apartment picture to it and of course my face is on there (and a stack of cash, enticing, I know!!)

After about two weeks of the original letter sent, I'll send them the post card. Then they will get the same post card again 2 weeks later. Now at this point they know who I am, so the postcard I'm creating now is a little more personable.

Have already had some responses with this process. Just need to keep yourself top of mind to them, that is why I am hitting them twice a month.

Best of luck!!

Nick Marrs · Answer

You could always develop your own multi-family if there's a market for it in your area. I'm a structural engineer in Los Angeles and have designed many multi-familes. Out here you can expect to pay $200-$250/SF to build it and sell it for  $400/SF + for a medium size, medium furnished development.(say 10,000 SF  10 unit development, which might cost ($2 - $2.5 Million to build and sell for $4 million).  In general the bigger you build it, the higher your return on investment. I think the main thing holding investors back who've never developed a multi-family is finding the financing and having someone knowledgeable on your team to take you from conceptual stage to completed construction.

Mike Taravella · Answer

Hello @Ben Hudman

You can drive around neighborhoods and find off market multi-family homes and create a direct mail campaign.

You can reach out to title companies and help generate lists of these properties and create the mail campaign or even hold a meetup to host these owners so you can pick their brain while helping their business plan.

You can also investigate other areas that meet your criteria for investing.

If you need help with this feel free to reach out and I can walk you through how I research cities.

No Multi-Family Locations For Sale In My Area: Creative Ideas?

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