Sourcing Deals: Direct to Seller or Broker Relationships?

One of the most common sayings you will hear in Multifamily investing as well as real estate in general is “buy right”. So how do you do that? How do you find the right deal in the right location that will make yourself and your investors the returns you are aiming for? With single family investing often times you can find a deal just sitting on the MLS and making the right offer. I would say with apartments it is much more difficult than that. It is rare that a community that has been sitting on-market is going to make since as a deal. So what are the alternatives? The main deal funnels created in multifamily investing is through direct to seller and broker relationships. The best deals rarely make it to the market, because either the investor reaches the owner as they are ready to sell, or a broker gets a deal with an owner and brings it directly to their list of buyers that they believe will be able to purchase the property. So with that being said where should you focus your attentions? Reaching out to owners or reaching out to brokers. As you become successful in this business you should have a funnel of leads coming from both of these but if you are starting out and want to direct your attention in one direction vs another here are some points to consider.

Direct to Seller:

There are plenty of ways to reach out to apartment owners with some being free and some needing a slightly higher marketing campaign. Starting with free, but possibly the “scariest”, cold calling. One of the most effective and highly used strategies in all of sales is getting on the phone and calling. There are free resourcesto find the owners and phone numbers to make this happen. If you absolutely don’t see yourself cold calling, there are mailing campaigns and now even texting and automatic voicemail campaigns that have become more and more successful. But the key to any and all of these campaigns are follow up. Even if you get in touch with the owner of the property on your first try, on average it takes up to 6 months of following up with them until they may be in the position to sell. In which case, this is when you want to be top of mind. When following up with the owner make sure to mix it up, use all of these strategies, because otherwise you will just become another nuisance to the owner and when they do decide to sell they will most likely not choose you. The key here is definitely the follow up and being personable, don’t just be a boring sales call. If you don’t feel you have the time to put together a strong marketing campaign, then maybe your best bet is a broker relationship.

Letting the broker do the hard work:

What I described above is something that commercial brokers have become absolute professionals at. The same owners you are reaching out to, the brokers are also reaching out to. When reaching out to brokers, you are still selling yourself. They key here is to convince the broker that you truly are ready and able to execute the purchase of a property if they bring you the deal. Just like the owners have multiple people reaching out to purchase the property, brokers have even more buyers looking to purchase the next great deal. The broker is going to go with the investor they believe will be able to purchase the deal when given the chance. When creating a relationship with brokers, make sure to give solid feedback and be responsive. When they do bring you a deal, make sure to respond within 24 hours with why or why not you want to move forward on a deal. If they price point doesn’t work for you, explain why with actual numbers and backing for that. You don’t have to like every deal and they understand that every one isn’t a great deal for you, but when you respect their time and don’t lead on every opportunity as if you want to pursue it when you actually don’t will be the easiest way for you not to receive deals from that broker in the future.

Whether you attack sourcing deals from one of these strategies or both, another key is to be committed. Sourcing deals is a long tedious task that takes commitment and dedication. The goal is to set up lead funnels that will bring you in leads on a continuous basis that will eventually bring you your next deal. But they are far and few between, as our company goes through roughly 100+ leads at a high level review, underwrite roughly 30+ of those, 10 of those will usually receive an offer, and 1 deal will go under contract. So again stay committed and the more leads you can get brought to you the sooner that one will show up.

How do you source your deals? What have you found most successful?

Questions? Comments? Concerns? Introductions? What makes you happy?

Everything is welcome here and I am happy to help in any way I can!

Thanks,

Tyler Lynn