How to Find Off-Market Apartment Deals

[Michael Ealy]

Most of my off-market deals come from real estate brokers. Because of my track record and reputation,brokers come to me before they list their buildings. I follow through and close on every deal I put my EMD on so I never run out of deals.

But, in preparing to give a seminar on how to succeed with apartment investing, when I look back over the 20 years I've been doing it, I realize I have used many ways to find good OFF-deals. Here's one:

TALK TO PROPERTY MANAGERS

Why You can Get Good Off-Market Deals from Property Managers - PMs and property management companies know the different buildings in town and some are hired as "receivers" in a foreclosure situation for example. A few PMs will know of owners who are running out of cash (maybe because of a critical illness or personal problems not related to the building) or they just took over a building that has been mismanaged by a previous PM.

If you can talk to enough PMs and show them you have the experience and financial capability to take down apartment deals, then a few of those PMs will call you if they have owners who are thinking of selling (of course, they will not share info with you until they get the owners' permission first). 

An Actual Deal Brought by a PM

One of my earlier deals in my career is a 30-unit building in Over the Rhine area of Cincinnati. The owner was quite motivated and the Property Manager of the building brought it to my attention. I struck a deal with the owner to buy the building via land contract and I just take over the management. $0 down deal.

Here are the Numbers:

"All in" Purchase Price and Rehab: $170,000

Re-sale Price: $285,000

Profit (not including cashflow): $100,000+

Time frame: about 2-3 years (I don't even remember exactly by now)

So what about the experienced apartment syndicators out there? What ways other than real estate brokers referring you deals have worked for you? Please share it here so other apartment investors can benefit. Calling on @Ben Leybovich, @Alina Trigub, @Brian Burke, @Greg Dickerson, @Tj Hines, @John Casmon, @Ola Dantis

[Brian Burke]

Speaking as an owner of thousands of units I can tell you that I get calls and letters and postcards all the time from people wanting to buy my properties.  The letters and postcards go straight to the trash before I even see them.  My staff is trained to do exactly that.  Most phone calls end up stuck in our phone tree or voice mail and go unreturned.  Every once in a while an email or phone call actually gets to me.  It either gets deleted, or I politely tell the person that we aren't interested in selling, even if we actually are.  So any advice to send mail, email, or cold-call is futile if all owners do the same thing I do.  Of course, not all do so the law of averages says that after thousands of calls or letters or whatever you might find one person willing to engage.  Chances are, that is also the same person that simply sees a sucker on the other end of the phone hungry to purchase their overpriced or challenged property that no one else wants.

Here is why I won't sell to the caller or letter writer:  I am sitting on gold.  I'm not talking about the value of the property.  I'm talking about the value of the deal.  Here's what I mean:  It is a seller's market.  Buyers want my property, and brokers want my commissions.  But I'm also a buyer, looking for off-market deals.  I need one to get the other.

Let's say I have a property I'm ready to sell.  I can sell it to the letter-writer and get my price, then I have to go out and pound the pavement like everyone else and try to find my next deal.  What a waste.  Or, I can call my favorite brokers.  Not to ask them to bring me a buyer, but to tell them that if they want my listing they have to bring me two "true" off-market deals.  

You can say that your relationship with the broker will have them bringing you deals, and that may be true.  You can say that your reputation as a closer will have them bringing you deals, and that's probably also true.  But nothing is stronger motivation than holding the broker's next paycheck in your hand.  That will have them bringing you deals.

Getting real off market deals is like climbing a ladder.  Newbies get "off market" deals that everyone else has already seen--the ones that are priced too high or are garbage.  The senior class gets "off market" deals that that broker is showing to everyone else too, and there might even be other brokers also showing that deal to their clients.  But the post-graduates...they get the real off-market deals.  The ones that no one has seen and they can just make a deal with the seller without all of the other external noise.  Getting those takes relationships, reputation, AND leverage!