Where Can I Find A Multi-Family Deal That Is Not Advertised?
Avoiding competition is a key part of finding a deal that is really a deal, so what are other sources of apartment deals that are not advertised? There are four main sources.
1) Direct Mail: Obtain a list of every apartment building and it’s owner from the Assessor in the County you are buying in. Then segment the list into out of town owners and local owners. Also, some owners have multiple properties and show up once for each property they own, so delete duplications. Mail a letter to the out of town owners first, as they by their circumstances are most motivated, then mail to the local owners. The list may contain a few thousand owners, so if you have limited funds starting out just mail 100 letters at a time.
This will give you a steady flow of motivated apartment property owners calling you to talk to about buying their property. As it is you that has contacted them, odds are you are the only person talking to them about buying their property. There may be other investors mailing to them, however if your letter is non-hype and to the point, you will find motivated sellers calling you when they haven’t responded to others.
2) Your Network: The longer you are in the realm of commercial real estate, which encompasses multi-family, the more you will see that most things you need for deals to come together arrive via your network. The power of your network is the personal referral, and that it is people helping other people get what they need to do business. When you are connected to many people and your personal relationships are strong, your reach extends into areas unobtainable any other way.
An apartment owner may know he is in trouble and needs to sell; maybe the partnership isn’t working out, but he doesn’t trust the investors advertising in the paper, doesn’t want to list with a broker, and is going into denial about his situation. However, when visiting his accountant next he mentions the partnership problem. His accountant says, “I think I may know someone who can help.” You now get this referral, an apartment property owner highly motivated to sell, because you dug your well before you were thirsty and networked with the apartment owner’s accountant. Your network will take a while to set up, though over time it will become the source of most of your deals.
3) Banks: Calling banks directly is greatly under utilized, and avoided by most apartment entrepreneurs because it comes under the category of cold calling, and when the call is made you don’t know who to talk to and waste time getting the run around.
The truth is, small local banks need your help. Commercial mortgages that are currently non performing, or headed in that direction are a huge problem for local and regional banks. These tend to be portfolio loans the bank is carrying on its books and often the loan officer who originated the loan is stuck with sorting out the problem he created for his employer. When you call, and ask if they have any non-performing loans they need help with the result can be a spreadsheet with property addresses, loan amounts and owners names and phone numbers. These are prime prospects for owner finance deals, master lease options, and if a loan modification is what is needed, you know the lender is motivated and open to working with you. These are deals that no-one else knows about and yours for the taking if you are willing to pick up the phone.
4) Door Knocking: You may be thinking, “no way”, however there is no more direct way to a face to face meeting with a motivated seller than going to the property, walking into the leasing office and saying to the person behind the desk, “may I talk to the owner?” It takes courage, and you may have to work up to this approach, but when you get sick of spending money on ads and other advertising and all the various things you are doing not working, approaching the owners directly will start to have a lot of appeal. You can simply get a map and work sections of the city, quad by quad. Use your mailing list from the Assessor’s Office for the property addresses. You will be amazed at the situations you come across. If the seller is not motivated, let them know you come across great deals all the time and add them to your Buyers List. Remember networking? You make priceless contacts walking into the leasing office and asking to see the owner.
You can rest assured no-one else is doing this, bar the one or two who may have taken action after reading about it here, so the deals you come across using this approach are untouched by others and your alone.
Multi-family deals that are not advertised are usually the most profitable as well, as you are not hampered by competition. I hope you also notice the only one of these four methods that costs any money is the first, direct mail. From a standing start, you can create a steady flow of highly profitable apartment deals coming across your desk every day, spending very little money.
Don’t wait, get started now.