How to approach Commercial Brokers to Purchase Large Multifamily

Question

Hi all,

My family owns 2 properties (1 triplex and 1 mixed-use commercial property) in the Bay Area that we're wanting to sell in order to invest in multifamily commercial property (mostly thinking a large apartment complex, or several smaller ones) elsewhere. We're currently thinking Dallas, Austin, Atlanta, and/or Phoenix.

I'm not familiar with these markets, but I know that we want to get out of California as the laws are becoming so strict on landlords and I don't see it getting any better. In addition, we're wanting to focus on more cash flow markets and based on my research and what I've been hearing over the past few years, these cities seem to be solid bets. I'm wanting to follow David Green's suggestion of approaching brokers, interviewing them, narrowing it down to one broker per city, and then have them introduce me to their markets. Of course, I'm going to continue doing my own research and much more in depth, but I want to visit these cities and get on the ground information as well.

I'm trying to figure out what the best way to go about this would be. I understand that commercial brokers are tougher to approach and they don't take you seriously unless you have proof of funds. I obviously would prefer to do the research, meet the brokers, and see what kinds of properties they can provide me before we go ahead and sell. Ultimately, we're looking to make big purchases. The properties we own are fully paid off and are currently worth $5.5-$6 million. We're looking to use those funds as a 50% down payment(s). My intention isn't to brag, but these figures should mean something to a potential broker, enough to warrant them to work with us even though we haven't sold yet.

My questions are: 1. How do I best approach the best and most connected commercial brokers? 2. Should we sell before seriously beginning the buying search? Capital gains tax is not a real issue as these properties belonged to my father who passed away a year and a half ago, so we got a step up in basis.

Any thoughts would be helpful.

Jordan Moorhead · Answer

@Kal Seirafi I would reach out to as many brokers as you can. They aren't the same as residential agents where you get a buyers agent, you really need to talk to a lot of them. Make a list off the people who have properties listed on loopnet and start calling!

Todd Dexheimer · Answer

First, if capital gains isn't an issue, sell today! Not sure why you would wait during uncertain times. Pricing is high today, don't wait to sell when it's low.

Next, pick 1 market. This allows you to actually build relationships and get to know the market. Use my guide to help you chose: https://www.biggerpockets.com/member-blogs/10145/83188-finding-emerging-markets

For broker relationships in commercial RE, you need to form relationships with the listing brokers. You can look on Loopnet to see who is active, but that only shows a few brokers that are actually listing there. The other way is to go to major brokers websites to see if they have a branch (Marcus and Millichap, Cushman Wakefield, ARA Newmark, Colliers, CBRE, Berkadia, etc). The next way is to reach out to other investors, property managers, lenders and appraisers to find out what brokers are active in the market.

Here is a guide on working with RE Brokers:https://www.biggerpockets.com/member-blogs/10145/70795-how-to-find-real-estate-brokers

Justin Elliott · Answer

@Kal Seirafi

Hi Kal

When I first started reaching out to brokers outside of my hometown I hired a VA to go on to Loopnet and put all of the info from the Multifamily listing brokers into an excel spreadsheet with email phone and website. I also had the VA research the top 10 or so property management companies in town. It gave me a good list to start cold calling brokers. I let brokers know I had just done a cash out refi and that I had certain specific criteria. But I would recommend reaching out to the property managers first. Let them know what you’re looking for and which brokers you should be talking to. Then call the broker saying you were referred from the property manager. It will help build a bit of credibility with the broker.  Hope that is helpful!

Justin

Khaled Seirafi · Answer

@Jordan Moorhead That's helpful. Thanks.

Zaid Bender · Answer

Kal,

Great question. Its very important to identify deals before you intend to sell. By the time you’re under contract, you will be able to have couple of LOIs accepted. The idea is to plan ahead and work simultaneously.

Ways to get strong broker:

1-Loopnet.com- Call and connect with many brokers who list the type of properties you are looking for.

2-Big companies in the brokerage business- Cushman & Wakefield, CBRE, Murcus and Millichap etc.

3-Have your own pitch and story to tell (your real honest story).

4-Know your terms and what you are talking about so they will take you seriously.

I have a question for you, describe the property you are looking for (What Class, Number of units, location etc).

Best regards,

Dr. Bender

Scott Mac · Answer

Hi Kal,

Just call and start by saying what you wrote above.

By your third or fourth call you should start to have things more hammered out with the broker.

Good Luck!

Greg Dickerson · Answer

The main thing is to make sure you come across as an experienced investor who knows what they're doing. You establish credibility by the questions you ask and by narrowing your focus on exactly what type of property you want and the types of markets your interested in. The best way to start is by visiting the Brokers websites or loopnet, crexi etc. and find listings you're interested in then sign up to receive the package, review it then call them to get more detailed information. You want to make sure you have done your homework on them and the deal before you reach out. This will show you are serious. Once you establish report ask specific and detailed questions abuot the property and market.

Lucia Rushton · Answer

@Kal Seirafi. How many units are you looking to acquire ? Some smaller MF are also listed on the MLS so you can connect with residential agents/investor friendly ones in the areas you are looking at.

Also there are Commercial buyers agents.

Jordan Moorhead · Answer

I would probably sell them if you can and hold most of the cash from the tax man. Having cash speaks way louder than having equity.

How to approach Commercial Brokers to Purchase Large Multifamily

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