With multifamily housing units being a hot commodity right now, it can be tough to find good real estate deals, as savvy investors have been steadily scooping them up. We’ll discuss some tips on how to find great deals below fair market value.
Off-Market Properties
Finding off-market properties is a great way to score a deal on multifamily housing property. It will require some hard work, but the savings and money you make down the line from the deal will pay for itself in no time. There are several tools that exist to help buyers find off-market properties. A few such are Biproxi, CREXi, Reonomy, and Mashvisor which all offer a way to find off-market properties with estimated valuations on those properties.
Some perks of purchasing and hunting for off-market properties include:
- Avoiding broker fees and other associated fees while still purchasing the property at a price that’s agreeable to both you and the seller.
- Dealing directly with the property owner can give you more access to information than what would typically be advertised in the listing, giving you more freedom and customization in your search and criteria.
- There’s also less competition. You don’t have to deal with other interested buyers eyeing up the same property.
Some downsides include:
- It can take a while to get even a nibble from property owners who may be interested in selling at the time.
- You won’t always find a deal on a property; some owners will demand a price above the fair market value of the property.
Learn More: The Best Way to Find Off-Market Multifamily for Sale
Patience and Persistence with On-Market Properties
While few and far between, there are multifamily properties on the market that are below fair market value. Good things come to those who wait. If you’re persistent and patient enough, you’re bound to come across a great deal. Sometimes sellers need to offload a property quickly and are motivated to sell. You’ll usually be able to scoop up a property for a great price. It’s rare, but these opportunities are out there.
You can also keep an eye out for properties that have been on the market for a long time. There could be a few reasons the property has been listed for so long, such as a seller who is unwilling to sell at a lower price, desirability/demand in the local market, issues with the property itself, the list goes on. So, care should be taken if approaching this route, but if you’re patient and persistent, you can come out with a great real estate deal.
Cash Offers
For most real estate investors, this is likely not an option unless they can get creative with their finances and funding. But, for the few out there with enough cash or those willing to get creative, a cash offer can get property owners seriously thinking. Money talks and the prospect of dealing with a quick and painless transaction can motivate the right multifamily property owner to sell below fair market value.
Related: Buying an Investment Property: Cash or Mortgage?
Market Yourself and Ask Around
The tried and true method of simply putting the word out that you’re a motivated and interested buyer can yield some good leads. Using methods like direct mail campaigns, leveraging your contacts, and other various methods can yield some opportunities. The downside is you’ll also likely get some lemons, or people looking to offload a poor performing or unsafe structure. They might see your offer as an easy escape and leave you with a huge headache to deal with. Be sure to keep a keen eye out and do not get too emotionally attached to any investment property.
Hire a Broker
Brokers are great at what they do, and they will fight to get you a great price. They have access to numerous databases, contacts, partners, you name it. Their vast connections will surely land you a multifamily property at a price you’re comfortable paying.
They get paid when you make a purchase and will work to the bone to find you what you’re looking for. Obviously, they do not come without their price as they take a commission from the sale, but it takes a lot of the leg work out of searching for an investment property.
It’s the most hands-off method that will allow you to kick your feet up and relax while they do the dirty work. And because they are working on your behalf, they will fight to get you a great deal. If they can’t make the sale happen, they don’t get paid.
Pro Tip: Keep an open line of communication flowing between you and your broker. If they send you a property you don’t like, let them know. They will get right back to work to find you exactly what you’re looking for. Establishing a trusting relationship can also help you further down the line.
Foreclosures, Auctions, & Wholesalers
These are also options to purchase properties below market value. Be careful if you pursue this route as these are more likely to have issues and/or complications with the purchase. If you’re willing to take on more risk or have the resources readily and easily available to help you with the transaction and any repairs, this could be a good route to take.
Related: What Is a Foreclosure? How Can You Invest in One?
Precautions
Just because the multifamily property itself might be below market value, does not mean it will turn you a profit. Looking at it from an investment POV, the property should meet your criteria and due diligence should be done on the property, the local market, etc.
If this is your first time purchasing investment property, don’t forget to factor in all of the associated fees and closing costs that can add a significant amount to your purchase price.
A deal too good to be true often is. Don’t get too emotionally attached. While it’s generally advisable to move the sale along quickly, you shouldn’t rush into things too fast because you fell in love with the place. You need to think with a clear head and an objective point of view.
Summary
Finding off-market properties is a great deal of work no matter which way you look at it. It requires patience and persistence to come out on top. And as with many sales, it’s about being in the right place at the right time. So, hang in there, do your research, think logically, and when the time is right, you’ll find yourself a multifamily property at a great price.
This blog has been contributed by Emily B.