Is paid Loopnet membership worth it?

Question

Hi all,

I'm a newbie in investing multi-family properties. I know Loopnet is one of the great places to start off, but all free info of property on Loopnet is ones that nobody wants. My questions are:

Why are they bad properties? Should I still dig into those properties to find the good one?

Is paid Loopnet membership worth it? Will it give me valuable information like new-on-market properties?

Thanks

Daniel Chang · Answer

This is how Loopnet works.

You can sign up for both Premium Lister or Premium Searcher (I'm going to ignore the newer "Platinum" at this time).  If you are a Premium Lister, then all the "free" users can see your listings.  If you are not a Premium Lister, than only the Premium Searchers can see your listings.  Furthermore, without a Premium account, the most frequent you can get notified of a new listing is weekly.

Therefore, it's not that the "free" listings are what no one wants.  It's that the "free" listings that are left by the time you get to it are the ones no one wants.  There's been several times that I've seen a listing come on market and think to myself "this one will go quick".  And sure enough, within a few days, it's in escrow.

By signing up for a Premium Searcher, you would get access to all the listings that the cheap agents who don't pay for a Premium Lister put up, and of course that gives you a leg up on the competition.  Furthermore, you can set daily notices for properties that meet your criteria.  That being said, it is expensive.

To answer your other question, the general answer is the ones that are left on Loopnet are overpriced.  It may be interesting to try and locate properties that have been sitting >1 yr as the seller is likely much more motivated than they were 1 yr ago.

Joel Owens · Answer

"So what is your suggestion to new guys that want to get into the commercial RE game?"

First thing is DO YOU HAVE ANY MONEY as a direct buyer?

I am commercial principal broker. Money talks and BS walks. There are a lot of buyers simply trying to do too large a deal for where they are at.

If someone contacts me and has money as a direct buyer I will try to help them. They just do not have the experience and need the help. If someone has no money and wants a free education do not depend on brokers for that. There are deals in the market but you can't mess around.

To give you an idea I have clients that are individual people with net worth up to 70 million for one person. I have others of course throughout the range downward. My point is these people have money and just need the help and knowledge and that is where I come in. If you can show you have direct cash then a broker might let you in their private circle of who they present opportunities to first. If you are trying all kinds of wacky buying techniques they use in residential it will not get you anywhere. Too many serious buyers with cash to play.

If someone wants to buy say a 4 million strip center I am looking at 1 million down and then at least 10% liquidity on the loan balance of 3 million so 300k. This is why I want to review a PFS statement I send to them to see capabilities as a buyer. I use a grading system I developed on the percentages of a successful outcome working with certain types of buyers.

Statistically a certain type will be the highest quality and probability followed by the next type and so on. I run a profitable business and investors (clients) respect that I value my knowledge and time. You can't run a highly profitable and efficient business working on longshots all of the time.

I have used LoopNet for a long time. Costar merged with them and the rates went way up. It is true that other brokers send me listings a few weeks before Loopnet. They know I vet my buyers ahead of time so like working with me. If nobody bites at all then they stick it on LoopNet. Occasionally you will have a great deal hit LoopNet from someone that just fell into that listing and their only marketing avenue is LoopNet. They do not have the network that full time commercial brokers do. I have owners right now that do not have properties on the market but I know if I bring them a buyer at a decent cap they would sell. Some owners just do not want to go through that whole process but will sell to one serious buyer.

Account Closed · Answer

Yinan,

As Joel mentioned, you need to have money to play in the commercial arena. 10% reserve is normal. You can get away with 5% reserve if you have a proven track record or high liquidity.

In MY market, 90%-95% of the multi-family deals are double-ended by the listing agent. It's the norm. These agents have buyers/investors in the back of their pocket. Even their investors are graded based on criteria and performance track record. There's literally no room for a buyer's agent. I have seen a couple of deals where they buyer had a buyer's agent. The buyer paid a hefty premium to get the deal. Ouch! Not a good way to invest IMO.

Agents are always looking for willing and ready buyers/investors. If you're serious, get your financial in order including your PFS and pre-approval letter if need be.  Call up all dominating listing agents in your interested market and talk to them.  Tell them what you're looking for. Follow up with them once a month.  Be realistic. Don't expect them to deliver you a 10 cap deal in a 4 cap market. Some of them will even help you with the pre-approval process through their preferred lender.

If you want to be their first go to guy, don't be a pain in the rear to deal with. Do what you say you're going to do. If they sold you a deal, they expect to own the listing for life. Of course you can do whatever you want to do. Just understand that once you burnt that bridge, the relationship likely has ended. These agents are cold-calling on a daily basis. They know who owns what and where. If there's a transfer in ownership, they would know.

With respect to syndications, you can ask them. You must either be accredited or sophisticated to be able to invest with them. However, how do you trust a complete stranger with your money?  :-)

Good luck.

Daniel Chang · Answer

@Vy Trieu

To answer you question...yes I have.  However I have not successfully closed a deal yet from this strategy.  Usually the properties sit on the market because the owner is unwilling to recognize their property isn't worth what they are asking. Most of these owners are usually not in dire financial straits.  Furthermore, most of the properties I go for are also leased investments, and they are usually cash flowing.  Hence it's more of a desire to sell rather than a need to sell.

As an example:

Last year, I made an offer on a property listed at $1.2MM.  It just came on the market.  Seller wasn't motivated.  So I watched it for 1 year, sitting on the market.  The asking dropped to $1.03MM.  I felt it was worth about $900K.  I went back and reattempted.  Instead of starting at $1.03MM, they reinitiated the offer from last year and raised their ask to $1.07MM.  Obviously it did not work out. Shortly after, seller took it off market, unsold.  It was a cash flowing property.  They wanted to sell "for the right price", as it was owned by a family trust with 7 members, and they all wanted to split.  But I guess they didn't want to split that bad.  I heard from the listing agent that there was one member that was the holdout.

So now I'm trying a new strategy.  I'm following about 8 properties that I have not made an offer on, but know they are overpriced.  So far, after about 3-4 months, all 8 are still sitting on the market as expected.  I figure I'd give more time to "marinate" before I make my 1st offer.  All of them are decent properties...if it can be bought for the right price.

Account Closed · Answer

@Vy Trieu,

Welcome to BiggerPockets. Beautiful name by the way.

To me, it doesn't worth a nickel. I signed up for a free membership back in the days. Then my loan officer gave me access to a Premium Membership for free. Yes, you see more listings, but it hasn't done anything for me, and I look at it almost everyday.

A BP friend who subscribes to it and pays $200/month. This individual said one good deal will pay the Premium Membership many times over. He has a point, but you can't ignore that "Loopnet is where deals go to die."

Based on my experience, Brokers/Agents shop all of their deals through their own network way before they hit the market. The deals will be presented to their favorite investors, then their next favorite, then least favorite.  Some brokers are investors/flippers themselves. Sometime they buy the deals themselves. Sometime they syndicate their own deals. Deals that no one wants will hit Loopnet thus the saying.

Occasionally, you have an agent who happens to get the listing because s/he knows the owner. This agent is clueless so the listing price is off. You will have brokers/agents, who are investors themselves, jump all over these mis-priced deals in addition to savvy investors. Our market is so competitive that the chance for an average Joe/Jane to get a deal on Loopnet is very low IMHO. Good deals rarely make it to Loopnet.  Of course this is only one man's experience with respect to the Bay Area market so please take it with a grain of salt.

Best of luck.

CJ Lee · Answer

What a great thread!  Thanks @Minh Le, @Joel Owens and @Yinan Q.

I've been working with a top commercial broker in LA and he has said the same thing about his personal client ratings and how he goes about calling investors with potential deals.  Of course, money talks and the investors who are willing to check out the property ASAP and have a proven track record of being easy to work with are qualities he seeks in his clients which are all understandable since they work on 100% commission and their time is valuable just as ours.

My only caveat that I'd like to share per my broker is that listing agents tend to underestimate operating expenses so if you're planning to conduct a transaction without buyer representation, make sure you know how to properly analyze the property on your own.  I've been taking an investment analysis class as well as getting as much information through the BP resources.  Do your due diligence and good luck!

Bob L. · Answer

Account Closed how do you look for the dominating multifamily brokers in the Bay Area?  For SFR agents, you can tell by how much they spend on marketing mailers and number of homes sold in a neighborhood.  Is there an equivalent for multifamily brokers or just start with some of the larger brokers such as CBRE and Marcus & Millichap?

Do you know of anyone getting deals from the larger property managers?  Since in CA you need a real estate license to manage properties, I do notice some multifamily properties being listed by property management firms or agents.

Jose G. · Answer

I know this post is old, but great information to digest!

Yinan Q. · Answer

@Joel Owens and Account Closed, thank you so much for your replies. It's great to hear from a successful CRE broker and a seasoned investor. What you shared is valuable information probably couldn't be found in any books, at least not in the RE books I've read so far. I really appreciate you taking the time to answer my questions.

Right now those multiple million dollar deals are beyond my capacity. But I am working my way to get there. It will take some time, but I know I will get there.

Yinan Q. · Answer

Thank you Account Closed for sharing your experience. What you said makes a lot of sense.

So what is your suggestion to new guys that want to get into the commercial RE game? Be friend with brokers and maybe doing some syndication deals with them, then gradually becomes one of their favorite investors?

Is paid Loopnet membership worth it?

Most Popular Reply