Are you curious about the process of finding a multifamily real estate deal? How long does it take, and what are the key factors to consider? Join us as we take you behind-the-scenes of our 30-day challenge to find a multifamily deal, and share our insights and experiences along the way.
(Click the image below to watch our Youtube video on the same topic!)
Refining Our Investment Criteria
Before diving into the search for a multifamily deal, we first refined our investment criteria. We considered factors such as the market conditions, property age, price and size, and condition. We wanted to ensure that the deal aligns with our long-term investment goals and provides potential for passive income over time.
For the purposes of this challenge, we decided to look for medium sized multifamily properties in North Carolina built after 1980 that aren’t completely distressed but have value-add potential.
Identifying the Market
Next, we had to decide which markets to focus on. After careful consideration, we decided to look for deals in our home state - The Tar Heel State, North Carolina. North Carolina, specifically the Raleigh-Durham and Triad areas, are hot markets. However, we quickly realized that NC is a competitive market, and finding a deal wouldn't be easy. We needed to strategize and be prepared for the competition.
Reaching Out to Brokers and Apartment Owners
To source deals, we started reaching out to brokers and apartment owners in our target market. This involved a lot of cold calling and sending emails. It wasn't always easy, and our brother and partner Jeff got a lot of practice saying "hello" and "goodbye." However, we made sure to tailor our outreach to each individual broker or lead, highlighting our specific investment criteria. We also focused on building relationships with these contacts, hoping that they would remember us and be more likely to reach out with future deals.
We like to say that commercial brokers are the “gatekeepers” to opportunities in the multifamily space. Or like a bouncer at a club (if that’s a better point of reference for you), they determine who has a real shot at winning these opportunities and who doesn’t, especially off-market deals.
Underwriting the Deals
Once we had a good lead, it was time to get down to business and start underwriting. This involved evaluating financial statements and using tools like Think Multifamily Analyzer to determine the value of the property. We paid close attention to factors such as the property's income and expenses, the condition of the units and common areas, and any potential capital expenditures that might be needed in the near future. It was a lot of work, but Kenneth, our team member, loves spreadsheets and took the lead in this process.
Negotiating with Brokers
After underwriting the deals, we were ready to start negotiating with brokers. Commercial brokers tend to handle bigger multifamily properties, so building a good relationship with them was crucial. We communicated and negotiated with brokers to ensure that the deal aligns with our investment criteria and goals.
Touring the Property
Once we had a potential deal that met our criteria and passed underwriting, it was time to tour the property. This step was crucial, as it allowed us to see the condition of the property in person and get a better understanding of its potential. We were able to identify any potential issues or opportunities during the property tour, and it helped us make informed decisions moving forward.
We also look around in the nearby area to determine the kind of residents that might live at the property and if there is a strong local economy.
Challenges and Insights
Throughout the 30-day challenge, we faced various challenges, including the competitiveness of the market, the difficulties of cold calling and reaching out to brokers, and the time-consuming process of underwriting. However, we also gained valuable insights into the multifamily investing process. Some of the key takeaways include:
Building relationships with brokers and apartment owners is crucial in finding good deals.
Underwriting is a meticulous process that requires attention to detail and financial analysis skills.
Touring the property in person is essential to assess its condition and potential.
Market conditions, property age, price and size, and condition are critical factors to consider when evaluating multifamily deals.
Staying motivated and consistent in the search for deals is key to success in the real estate investing industry.
Looking for a multifamily real estate deal in just 30 days was a challenging but eye-opening experience. It required us to be proactive, persistent, and strategic in our approach. We learned the importance of building relationships with brokers and apartment owners, the meticulous process of underwriting, and the need to tour properties in person to make informed decisions.
While we didn't find a deal that made sense during the 30-day challenge, we gained valuable insights and expanded our network of contacts in the real estate industry.
We continue to actively search for multifamily deals and apply the lessons we learned during this challenge to our ongoing efforts. We remain committed to finding a multifamily deal that aligns with our investment criteria and long-term goals.
If you're considering investing in multifamily real estate, we hope our behind-the-scenes insights have given you a better understanding of the challenges and intricacies involved in the process. It's not always easy, but with determination, persistence, and a strategic approach, it's possible to find lucrative multifamily deals that can generate passive income and build long-term wealth.