We couldn't be more pleased; we just locked up our first 96 Unit apartment complex just outside of Columbus, Ohio!!! There are countless ways to find apartment investment opportunities, from common methods like building relationships with commercial real estate brokers to attending meetup groups. We like to find off market deals by texting or calling the owners. If we're not able to reach the owner by phone, we send out hand addressed letters expressing our interest in their property.
This process can be used to find any type of deal, whether you're looking for value add, turnkey, wholesale deals or even large apartment communities. For the purpose of this post, we're going to focus on finding and investing in apartment buildings.
Identify a Target Market
First, select a target market. We like to focus our attention on markets that are within an hours commute of desirable major metro areas. If you haven’t already, check out How to Spot Up and Coming Real Estate Markets.
Identify a Property Class
We are interested in multifamily value add opportunities, typically B- and C properties in B class neighborhoods. If you are a busy turnkey investor, you might be looking for A and B+ properties in B and A class neighborhoods.
Articulate Your Investment Criteria
We look for properties that are 4 - 100 units, that were built in 1960 or later. We focus on owners/operators with at least 35% equity with signs of duress (high vacancy, property liens, poor tenant reviews and managerial problems). We also like to reach out to owners who've owned properties for 15+ years who are running out of depreciation and may be interested in moving their money into a new purchase with more aggressive depreciation.
Obtain a List of Properties
Using online resources like Propstream and ListSource, create a list of properties that meet your investment criteria.
Find the Owner’s Contact Information
In the rare event a property is purchased in the name of an individual, you should have no problem coming into contact with the owner. Most often, we find properties purchased in the name of an LLC, a Trust or a Corporation. For these entities, we start with the Secretary of the State website to identify any relevant information regarding the owner or their registered agent. While this information may be publicly available, more often then not, the best way to get in contact with the owner will be to obtain the owners name and location from the property management company. A smile goes a long way in obtaining this information. While many property management companies will not disclose the contact information of the owner directly, you'll be pleased at how many will reveal the name of the owner. After a friendly conversation, you can ask if they know where the owner might be located so you don't reach them at an inappropriate time. Armed with this information, you can skip trace the owner with a high level of success.
Conduct a Marketing Campaign
Send marketing information to the list of property owners, either via direct mail, phone call, or by sms text message. Depending on your marketing budget, you may blanket your entire list or niche down on properties that show signs of distress. We use google street view and propstream to identify signs of duress and liens and focus our attention on properties that need a little TLC.
Once you find an owner / organization interested in selling you can obtain the rent roll and the trailing 12-month Profit & Loss statement to determine an offer price. We submit a Letter of Intent (LOI) via Docusign to share our interest in the property. After an LOI is returned, we arrange a time to view the property to get a better idea of the overall condition of the property, taking note of any differed maintenance that can help us negotiate our price. With this information you can arrive at your offer and execute a purchase and sale agreement with the owner.
For owners who may not be interested in selling immediately, its a great idea to follow up with them (via mail, phone call, or text message) every 6 - 9 months to gauge their interest in selling and build rapport. Our goal is to be top-of-mind when the owner is ready to sell.
For marketing directed at large multifamily property owners, you might expect 1% response rate. Of the 1%, you might close on 0.1% of the deals. We find we can greatly increase these odds by focusing our attention on properties that show signs of distress. With your persistence and inimitable construction, who could deny you?
