by Theresa Bradley-Banta
Some of my clients who decide to invest in multifamily real estate complain, “Multifamily brokers won’t take me seriously.” It’s a common dilemma faced by many new multifamily real estate investors. Brokers are frequently reluctant to work with new investors and often with good reason.
Many feel that newbie investors—even those with significant experience in single-family real estate investing—approach multifamily investing with a “tire kicker” mentality.
So, what’s a tire kicker?
They are potential investors who:
- Are just “feeling out the market”
- Don’t have the education or knowledge to make a decision to buy
- Will never make an offer to buy or will pull out of a contract before the deal closes due to fear and uncertainty
- Haven’t arranged the necessary resources to complete a deal such as: capital to fund a down payment, closing costs and other acquisition fees; experienced team members who are on the ground and ready to go the day the deal closes; a clear investment strategy; and a realization that multifamily real estate investing is a business.
However, unless you are sourcing multifamily property listings on your own, chances are pretty good that you’ll be working with a multifamily broker to find and broker potential acquisitions.
So what do you do if you are new to multifamily investments? How do you avoid coming across as a tire kicking newbie real estate investor?
Here are some thoughts to remember for getting the best of your relationship:
Always Remember: Your Broker Works for You
Your attitude goes a long way in establishing the kind of working relationship you can expect to have with your broker.
If you approach a broker with anything short of 100% confidence in your decision to invest, then it’s hard to grasp the idea that the commercial broker actually works for you and not the other way around.
You become a supplicant rather than a leader.
Your confidence comes from your:
- Level of education
- Commitment to purchasing a multifamily property
- Team and mentors
- Clear vision and intention to own multifamily investment real estate
- Ability to lead
A great opening line for approaching a new broker is, “I will be buying an apartment community in your area and I’m looking for the best broker in that submarket.” This approach shows that you are committed to doing the deal. You aren’t telling the broker, “I’m thinking about investing” you are saying straight out, “I will be buying a property.”
(Don’t worry if you haven’t completely narrowed down a submarket. Part of your broker’s job is to provide guidance, resources and data on their core markets.)
Lead Your Team
Don’t approach a potential broker with hat in in hand and an attitude of, “Gosh, I’m not sure of my plan, or really how to go about buying a multifamily property. What do you think my strategy should be?” In the broker’s mind that opens the door to: doubts about your qualifications; doubts in your ability to close; and questions about how committed you are to acquiring a property.
If you’re not fully committed, and with the necessary resources at hand, why should a broker be committed to working for you?
A Broker is Well Paid (for a lot of hard work)
The services a broker provides during the acquisition process are often priceless. A good broker will provide you with:
- Invaluable market research, rental and sales comps
- Knowledge of historical market data (often critical to your decision making)
- Access to off-market listings
- Ideas for successful investment strategies
A broker will also act as your diplomat and intermediary with the seller. In many cases this can eliminate potential problems or misunderstandings during the negotiation process.
Another good thing to keep in mind is that at some point after you own a property, you will most likely be listing the property for sale. A broker who has served you well can be rewarded with the listing.
Don’t forget, your broker works for you.
How Do You Find a Broker?
A great way to find active brokers in your area is to take a quick look at Internet listing services (ILS) like LoopNet.com. In fact, an ILS offers many resources for your property and market research. You can read more at: Using Apartment Building and Multifamily Property Listing Services to Your Advantage.
And of course networking with other local and successful multifamily investors is always a good idea and a great source for referrals.
A Final Word on Confidence
Be educated, be able to talk the language, be willing to walk away if the broker is not a good fit for you, and be able to visualize the outcome of the meeting before you get there.
Before you contact a broker it’s a good idea to have:
- Your funds or partners lined up
- Clear investment strategies (market, property type and class, turnkey or value add, holding periods, investment goals, etc.)
- Education in multifamily investments
- Experienced mentors
- Team members who are ready to treat your investment like a business
You can show respect for a broker’s hard earned knowledge and skills while at the same time demonstrate your own ability to lead your business and close on a deal.