Multifamily real estate investing is at the top of many investors’ lists. If you’re here, you may already know the benefits of multifamily real estate investing.
But the real question is, have you found a great deal for your investment? Is the supply of lucrative deals limited?
Finding the best property for your investment criteria can be a challenge. Especially in today’s competitive market.
There are valuable properties all around us, but how do they change hands without going on the market? For exclusive buyers, these are traded as off-market properties.
Here’s a basic guide on how you can find off-market multifamily real estate properties that will elevate your portfolio and bring you and your investors the best returns!
What Are Off-Market Properties?
As the name suggests, off-market properties are sold off the market. They are not publicly listed on any listing service but are sold off between buyers. This means that off-market properties are traded only to investors that have access to sources other than market listings.
Why Would A Property Sell Off-Market?
If you’re looking for an off-market property, you should also know why a property is selling off-market. After all, why would the seller not market their property if it’s so valuable? Off-market properties have several characteristics that make it a great deal outside of the public approach. Here are some of those characteristics:
Lower Cost Of Sale
For sellers, trading their property off-market can be more profitable than listing it on the market. This is mainly due to the removal of listing fees and other costs associated with marketing the asset. If a property is on sale publicly, the broker charges, and the commission fee also increase exponentially. That is not the case with off-market properties. Costs can be significantly reduced.
Lower Risks for Sellers
Multifamily properties and other varieties in real estate will typically have tenants residing on the property. If the owner goes public on the sale of the asset, it is a possibility that this would cause a disturbance among tenants and tenants, and leasing. Therefore, some sellers may prefer to sell their property off-market for their asset’s stability.
Attracts Serious Buyers
Sellers trade their property off-market for many reasons. However, one of the main reasons is that it saves time and attracts serious buyers. In most cases, buyers that unveil off-market opportunities have built the relationships, network, and track record to prove themselves as a viable candidate for buying the asset. This saves time for both parties involved in the transaction. The sellers know that if they sell off-market properties, they will get quality and serious buyers that would be willing to put their money where their mouth is.
Protection From Unwanted Attention
Most properties that are listed publicly receive a lot of unwanted attention. This may be from competitors or simply from people who have no intention of purchasing the property. Off-market properties help avoid this intrusion.
Benefits Of Off-Market Properties
The way sellers benefit from off-market properties has already been discussed in the previous section. But how do investors benefit from off-market properties? Here are the benefits of off-market properties from an investor’s perspective.
Limited Buyers, Limited Bidding
The public is never aware of any property listing if it is off-market. Hence, if an off-market property is available, there are chances that the number of buyers for the property would be low. This lack of buyers puts many investors in a good position with the seller. How? It’s simple.
As the number of buyers is restricted only to a known few, the bidding amounts might be lower. In case of open-market listings, the large quantity of buyers bids up the price of the property and can make the deal no longer attractive for your investment.
Negotiation Leverage & Better Terms
The off-market property market provides for a limited number of buyers. Hence, if you’re one of the few potential buyers who know that the property was on sale, you have negotiating leverage. You naturally have better-negotiating power as you have little competition. The case is opposite in the case of on-market real estate as there are a large number of buyers which makes it the seller’s market instead of the buyer’s market.
Once you work closely with the seller of the off-market property, it’s possible the seller will be more accommodating as the aim would be to reach a compromise. This often leads to the terms of your deal being more flexible.
Finding Off-Market Properties
Finding off-market properties in a very difficult task. After all, how are you supposed to find real estate worth investing in if the information isn’t even available?
However, that’s exactly what makes the entire process more interesting. The more difficult it is to find the property, the more beneficial it would be for you. You would have fewer bidders and the seller would be more than willing to accommodate your requests.
Now, if you’re looking for off-market multifamily properties, here are a few tips on how to unveil these investment opportunities. Let’s begin with a few fool-proof ways:
Network, Network, And Network
Networking is the key to success in multifamily real estate. You will need to build strong relationships if you want to survive and stand out in the cut-throat competition. Because off-market properties aren’t going to be publicly listed, you will need to hear about them from a private contact. From where and how do you get these private contacts? From your own conversations.
Online webinars, social media, networking groups, and in-person events are some of the best ways to meet contacts and build your network. When networking, it is important you make sure you are clear about your goals, and your acquisition criteria as an investor. This helps industry players understand the opportunities they could be a part of in the future.
Building your network of brokers, owners, and investors can help you get your hands on lucrative off-market properties.
Enter The Buyers’ List
What is the buyers’ list? It’s simply a list of selective buyers in the real estate market. For off-market properties, only a few are contacted depending on a number of factors. These factors could be the level of interest or the amount of money you would be willing to spend on the property.
How do you enter the buyers’ list? The answer to this was explained above. Network your way in. Let the people know what you’re looking for. Sometimes, an entry into these lists also gets you exclusive access to other pocket listings.
There are a number of sellers in the market who do not want to create a buzz with their intent to sell. This is why they try their best that their property is negotiated for in a very confidential manner. Here is where you come in. If you’re on the buyers’ list, you’ll be among the few who will find that property and have the chance to invest in it.
Observe Everything And Everyone
Observation is key in finding off-market multifamily properties. When you enter the real estate market, you will find it is not as simple as buying and selling alone. You need to do your research and stay on top of all the updates. This research involves knowing what property is already on sale and what might be prospectively on sale.
Some properties do not go on sale, but with a little convincing the owner might just be convinced to give it up for your purchase. Some key factors to look for in such properties are poor maintenance or disheveled management. When multifamily properties aren’t well managed, they tend to fall apart. The good part is the cost for renovation and reinstallation is low. Overall, buying a property you can add value to and force appreciation can be very lucrative for you.
On the other hand, the owner of such properties are also looking to get rid of the extra weight. If you introduce yourselves with an intriguing offer, they may be interested to discuss a potential transaction with you. The same goes for owners who have had a multifamily property on their portfolio for years.
Finding out how you can add value, and make a great offer may be what it takes to secure an off-market property. This way, the property will not be rushed with interested investors and you won’t have any bidding competition. It’s the perfect strategy.
Now that you have the access to the complete guide on buying off-market multifamily properties, time to get in the game. You will observe in time the value finding the right real estate investment opportunities brings to your wealth as an investor.
We hope this guide has expanded your knowledge and leads you to more research, connections, and off-market opportunities for you in the future.
At Disrupt Equity, a multifamily real estate syndication firm, we provide our passive investors with access to lucrative multifamily investment opportunities by actively leveraging our network in the industry. If you are interested in learning more about our multifamily investment opportunities please fill out our Investment Form and a member of our team will reach out to you with more information.