Investing in apartments locally is ideally the best approach any multifamily apartment investor can take. However, what if the market you live in is not supportive towards apartment investing. Successfully investing in markets outside your market is an option that can be done. In this series I’ll cover six steps for successfully buying apartments outside your market.
Picking The Right Market
The market(s) you select should correlate with your investing goals. What kind of returns are you looking for? Which area of the country do you prefer? How far from your market are you comfortable with investing in? You also want to consider the strength of each of the following metrics, which are known contributors to successful investing; population growth, income growth, diversified job growth, crime reduction, and home price growth. If you discover these city level metrics exceed the national average, there’s a great chance the apartment market is investor friendly. Additionally, when researching, it is also wise to contact the economic development office in your chosen areas and request their annual report and outlook. Lastly, there’s a ton of quantitative and qualitative data available online, Googling, multifamily real estate [City Name]: data and analysis, is a great start.
Finding Apartment Brokers
Once you’ve narrowed down a market, the next step is to start calling brokers. The best way to find them is by Googling, top commercial real estate brokers in [City Name] and start compiling a call list. You can also Google, top national commercial real estate brokers, and from there compile a list of the local branch contacts within your chosen market. The goal here is to qualify the broker and find out what kind of deals are available. Hopefully, what you discover matches your investment criteria in terms of cap rate, cash on cash returns, price per unit, etc.. Request that you be added to their buyers list so you can start receiving and analyzing opportunities. Note: I highly recommend you provide feedback regardless if you don’t like the deal. This will help you stand out and keep you top of mind with brokers. Most investors don’t, so doing so will give you a competitive edge, add credibility and improve your relationship. Lastly, keep in contact with them. Routinely check in to see if there are any upcoming opportunities you should know about or any new or changing developments in the market.
You’ve found a market, started meaningful conversations with commercial real estate brokers, now it’s time to create the rest of your dream team. This core team of professionals normally consists of a broker, a local property management company, accountant/tax strategist, attorneys, (real estate & SEC), and your MVP…the lender. The process of finding these professionals can be easy or complex depending on you. Typically, once you find a broker and a local property management company to work with the other professionals can come by referral from you two current team players. Asking industry colleagues and counterparts is a great way to discover great potential teammates. The important part is to know what you are looking for in a teammate, having prepared questions to ask of them that align with your goals, and being able to make a proper decision to move forward with them or not. To keep track of conversations I keep a Google doc filled with all the pertinent information of each candidate and the major discussions points.
Unless you have plenty of time and money to waste, I would not suggest you jump on a plane to go see every property you are considering buying in person. It’s just not a good use of your time and resources. Instead, leverage technology and other people in order to get the best picture of the asset as you possibly can. With tools like Google Maps, Google Earth, Skype, Zoom, Apartments.com, your phone, Craigslist, ect., you can confirm market amenities, property exteriors, property interiors, tenant demographics, area demographics and more. The point is, there is no need to visit a property outside of your market until you have it locked up and ready to move towards a close, which is tomorrow’s step.
The Property Visit
When should you visit the property and what should you do while there? You submitted a LOI (Letter of Intent) which has been accepted by the seller. You are confident that soon you will have a fully executed PSA (Purchase Sale Agreement) a.k.a. Contract, between you and the seller. Ideally, this is the time when you should plan to actually visit the property. This is also the time you should plan in-person meetings with each of your teammates. Maximize your time spent by scheduling a property tour, area tour, and competition tour. Meet with your property management company or conduct interviews. Same goes for your attorneys, property inspector, appraiser, lender and whoever else is located in the market that you can personally meet with. Ultimately, the goals of the trip are to see the property in person, finalize your roster, and learn more about the market while on the ground.
Once you have your dream team in place and ready to do deal you are halfway home. Being ready to do a deal and actually finding a deal to do are not always complimentary. Speaking from experience, I can tell you, especially in today’s environment, it’s not easy to find deals that work. However, that statement is based on our investment philosophy, not yours. Nevertheless, it may take a while to find a deal that make sense from an investment standing point. However, if you and your team are ready, and you find a deal in your chosen market that pencils well, do the deal. Don’t get stuck or freeze up ultimately talking yourself out of doing the deal. Move forward in confidence that you’ve done all your homework, you have an All-Star team and the resources to close. Once you’ve closed spend the necessary time needed to hit the ground running. Be on-site and hold everyone involved regularly accountable, especially your property manager, who is now your new post-closing MVP.
Are you interested in learning more about creating turnkey passive income and generational wealth through multifamily apartment investing? Visit syndicationcapital.net for free information, guides and resources that will help you get started.