The multi-family sector is hot right now. Savvy real estate investors are hungry for the returns, cash flow and efficiency that apartment buildings can provide. Meanwhile, more private single-family investors are recognizing the benefits of this asset class and looking to climb into it. So where do you find the offers?
The desirability of these larger real estate investments means it’s not as easy to find deals today as it was five years ago, but it’s still possible. You just need to know where to look and who to contact, plus be willing to go the extra mile and go the extra mile.
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Multi-family homes on the market
Multi-family properties on the market are properties listed with a real estate agent or real estate agent. This market segment is currently very competitive and brokers feel like the cream of the crop.
There are so many other buyers looking for multi-family homes that it can be time consuming to track them down and search for them yourself. Both domestic and international buyers eager to acquire more U.S. real estate continue to drive prices up. Often this can lead investors to a dead end in the acquisition process.
Brokers can be very valuable here. Let them do all the leg work. Have them find the deals, negotiate the deals, and help guide the closing process. While brokers are sometimes difficult to work with and can be expensive, you still want to be on their radar. Meet them, commission them to find deals for you and follow up on them.
Succession is key. If they email you deals, respond, even if you don’t want what they dug up. Tell them why it didn’t work and what you’re more interested in. That will appeal to them, keep the dialogue going and build the relationship.
As in any business, the 80/20 rule certainly applies here. Often 20% of brokers are responsible for doing 80% of the deals in each market. However, it’s still beneficial to target the other 80% of brokers who do 20% percent of the deals because they can still get pocket listings or make valuable connections. If you give them a chance, they will come to you first when they have something.
Multi-family homes outside the market
Finding off-market properties is a way to take fate into your own hands. Be proactive and find your own deals instead of waiting for a broker. The key here is to get in touch directly with property owners.
If you see potential properties that meet your criteria, you can find owner information through public records. If it is owned by an LLC, google that LLC or check Manta, the Better Business Bureau, and Bizapedia to find the names and contact information of individual owners. Find them by being creative. Ask your network, check Facebook and LinkedIn, or pay a personal visit to the building. Personal contact is by far the best, if you can do it.
If they aren’t interested or motivated to sell yet, keep their details. Follow up later as circumstances can and will change.
Finding the gems is a numbers game. You might analyze 100 properties, bid on 10 and close on one, but it’s still worth it.
Complete these five steps first
When looking for a multi-family home to invest in, there are some things to consider to ensure you make a smart addition to your real estate portfolio. There are also some potential missteps that should be avoided if possible. Here are five tips for best results.
1. Choose your multi-family home type and investment strategy
There are several types of multi-family investment properties to choose from. Some investors like to keep it simple and choose a duplex as their first investment. This can be a good option if you want to manage two properties that coexist and share much of the same infrastructure. Tenants on both sides of the property usually pay the same amount in this case.
There is also the option to invest in an apartment complex with a handful or even dozens of apartments. The rental price in this case may vary based on square footage, number of bedrooms, amenities and other factors.
The type of multi-family home you should invest in really depends on your personal choice and your long-term goals. You can fix the property and turn it around or hire a property manager to handle the landlord duties. Weigh all the possibilities and decide what works best for you before buying the property.
2. Do your research and find quality leads
You may already know what kind of property you want to invest in, including what it looks like and where it should be located. However, you may not be sure how to find your perfect investment property. MLS property listings are one of the most popular places to search. However, the problem with using the MLS is that every other investor has access to the same information.
You can often get a head start by browsing listings for available rental units in the city or neighborhoods you target. Look for offers that are lower than expected per month or that have photos that look shabby. These could be signs that a landlord simply doesn’t have the time or resources to refurbish a rental home and charge the maximum rent. Further, it may mean that a landlord or owner of a property is ready to sell and unload the responsibility.
You can also take advantage of a digital service that displays lists of available multi-family homes without having to search through single-family homes. Online platforms such as LoopNet and Crexi are popular options for commercial multi-family homes.
Plus, mainstream platforms like Trulia, Zillow, and Pyjama People all offer apps that essentially send available deals straight to your phone in real time for more traditional duplex, triplex, and quadplex homes.
3. Work with a broker
Real estate professionals have a grip on the market. Consider partnering with a local real estate agent who manages multi-family properties. This can help you be one of the first to get a glimpse of when a multi-unit property hits the market as real estate agents have developed networks.
Another advantage of working with a broker is that you get a great opportunity and an open door to their contacts. This partnership can help you build the portfolio you’re aiming for and potentially open off-market deals that have less competition to buy. (And it helps with our next point.)
It’s also worth joining a landlord association in your area and attending meetings if you already own or manage a rental property. These gatherings can serve as great networking tools and give you access to other property owners, some of whom eventually want to sell their properties.
Another smart way to network is by using social media. Join Facebook groups, ask your followers if they have any leads, find other expert real estate investors to match, and do your due diligence on the community around you.
5. Get the financing
Things move pretty quickly in the world of multi-family deals. That means it can feel like you need to get financing in half the time when a golden opportunity presents itself. And it’s pretty devastating when you find the perfect investment property, but it fails because you don’t already have the financing lined up.
There are many ways to get financing for a home, whether that be through a hard money loan or a rental loan, a family member or a bank. Make sure this part of your investment strategy is in the making from the get-go.
Driving for dollars
Driving through local neighborhoods will give you great insight into potential real estate deals. Look for “for rent” or “for sale” signs. Also keep an eye out for properties that seem out of place in the neighborhood or that are not properly maintained. With some minor rehabilitation, you can increase occupancy and reduce vacancy to create the multi-family homes of your dreams.
Note the addresses as you drive around to check your home’s ownership records and you might find a deal.
Try direct mail
Another tip you can try is to email information directly to owners. You can purchase lists of owners and their contact information or look up the information yourself. With direct mail campaigns you can expect that you will receive few responses. Research what works best for you and which marketing campaigns are more successful than others.
Search through old ads
It’s frustrating for landlords to have a vacant property or to constantly look for new tenants. By calling old “for rent” listings, you may find an owner ready to sell.
Likewise, old FSBO ads, or “for sale by owner” ads, can lead to a deal with an owner desperate to sell.
Talk to lenders and agents
As mentioned before, networking is the key to real estate. Connecting and building relationships with lenders and agents will give you an edge in receiving referrals that you might not otherwise be aware of. Let everyone know that you are looking for a multi-family home.
There is a lot of competition for multi-family homes these days. But there are still deals to be found, if you know how.
Real estate agents can be one channel, even the brokers who are not at the top of the food chain.
Or you can get creative and go out and pop up your own deals by boosting your market and using the internet. Continue. The deals are here.
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