As aforementioned, this is the hardest part of investing in multifamily properties. Regardless of what kind of real estate investing your are interested in, you must find properties at a discount. Unfortunately, in the multifamily property world, that aren’t many foreclosures, as most people that buy into multifamily properties are investors. So the trick is to find an investor that needs or wants to dump their multifamily property. I’m going to give you some insider tips to finding those owners who need or want to sell.
Method 1 – Farming markets
This one is very simple to understand, but takes a lot of diligence and work to produce results. You will need to identify target neighborhoods where you want to buy properties. Obviously, you’ll want to be in areas that include multifamily, but I have found that mixed neighborhoods that are nice areas works really well. People like the feeling of being in a “family neighborhood” and not feeling like they are in an apartment complex. The potential tenants that are interested in multifamily properties are looking for that family/neighborhood feeling, otherwise they would just rent an apartment.
Once you have identified several target areas, you will need to drive them, and look for signs. For sale by owner signs are going to be the most promising leads. Usually when realtors are involved, you will likely not get the price you need to make money in the property. I would drive the markets maybe once a week, and look for those signs.
Method 2 – Developing Relationships with Top Realtors
This may sound like I am contradicting myself, but just give me a minute. There is a difference between a realtor, and a realtor who understands investing. Most realtors don’t know squat about creative financing, investing or anything else. All they want to do is sell retail homes for a 6% commission. But, if you can find a realtor who knows a little something, and also works with several investors, now you have a resource.
The best way to make these contacts is the old fashioned way. Talk to a realtor you already know, or look in the paper for the most prominent realtors, and give them a call or show up at their office. Ask them if they work with investors on a regular basis, and offer to take them out to lunch. Build a relationship, and if they see that you are serious, they will call you when one of their investors wants to get out of a deal.
Method 3 – Become a Realtor
This is one of the best methods of all. I got my realtor’s license in February of 2007, and wouldn’t give it back for anything. Access to the MLS as well as working under a broker who understands investing and has put me on to a few clients she doesn’t want to deal with is a gold mine. Also, you can talk to your broker about getting all the necessary forms to conduct business with your clients.
Use the MLS to the max. When you are in the buy mode, checking it every day is a good idea. See what new properties come up on a daily basis. Real estate investing is very competitive, and you want to be the first one to jump on a deal if it comes up.
Just a note – you do not have to push hard or work full time as a realtor. You can get your license and work with a broker on your schedule. I don’t do much retail home sales, mostly I do property management and investing, I don’t even go in to the office most days!
In conclusion, you can always use standard methods like looking at newspaper ads or for sale by owner websites, but the 3 methods mentioned above have a lot more power and will enable you to find properties before others find them through the traditional means.
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