As a commercial real estate broker with a focus in apartment investment sales based in Southern California, one of the markets with some of the highest barriers to entry in the nation, multifamily investors have to be more savvy in implementing strategies to increase cashflow when investing in apartments more now than ever. While demand to buy apartment buildings has increased in spite of being in a COVID environment, inventory has not, which means prices have not fallen as many investors may have hoped. Despite this, there are still opportunities for investors find properties below market cost-they just require a little bit more work to find.
GOOGLE SEARCH NOTIFICATIONS/COMMERCIAL REAL ESTATE TRADE PUBLICATIONS: The first place to identify properties or real estate investment firms that may be in some level of distress is following real estate activity of note in the news: setting up Google searches, or subscribing to the newsletters for commercial real estate publications such as Crain’s, Bisnow, The Real Deal, Globe Street, Commercial Property Executive, etc.
CITY BUILDING RECORDS: The second place to identify properties that may be in distress is municipal building record department; many municipalities have digitized their records, meaning that you can search for properties that have building code violations. This allows you to focus in on properties that have deferred maintenance who have owners that may have more motivation to sell vs. ending up on the cities troubled building list.
DRIVING THE NEIGHBORHOOD WHERE YOUR DESIRED ACQUISITION EXISTS (driving for dollars): If you live in the market where you want to invest in, spend time driving the neighborhood where you want to invest: relying solely on public data records can be misleading as many property owners do not always provide accurate or up to date information on the status of their property.
COMMERCIAL REAL ESTATE LENDERS: Increasingly lenders are seeking to sell off their non performing notes-if you have the capital invest in portfolio loans there can be some lucrative opportunities to pick up properties at less than market rate if you are able to buy the notes in bulk.
PRIVATE LENDERS: Private (Hard Money and Bridge Lenders) who provide capital for investors who cannot receive financing through traditional lending, or need capital to renovate and stabilize a property have the right to foreclose on a borrower if they are not able to repay the loan:-that being said, their intent is to be repaid their investment. Reaching out to private lenders to see if they have any non performing notes is an easier way to obtain a property at a discount.
BAD PROPERTY MANAGEMENT COMPANIES: A simple Google search can pull up some the worst rated property management companies who manage buildings in your desired market. While many property management companies provide their landlord clients as well as their tenants with the highest level of service, there are many whose sole objective is making money while providing their clients and tenants with a minimal level of service; this is where opportunity lies for us as an investor-the properties are listed on the property management website, whose owners can be identified relatively easily by a public records search. These owners will have more motivation to sell if they are not operating well due to vacancies or non-performing tenants, which are the end results of using minimal service property management companies.
SMALLER OUT OF STATE INVESTORS : Some commercial real estate data providers (Costar, Reonomy) can separate of owners who are out of market-depending on the market where you desire to invest in, out of market investors, especially the smaller (one to two principal corporations) owners may be more inclined to sell versus local owners who have been in the market longer and are skilled in dealing with the challenges that exist in their area.
PUBLIC RECORDS SEARCH/TITLE SEARCH: this is the first step to identifying the owner of a particular property after you have identified a desired property (or multiple prospects ideally) if you do not have access to commercial real estate data websites.
FORECLOSURE WEBSITES: An owner facing foreclosure will be more amenable to discuss selling versus one who isn’t. Websites such as http://www.propertyradar.com, which connects with public records data nationwide, allows you to search properties that have had a Notice of Default (N.O.D) filed. When pursuing these properties, there are a few things to consider: one, there will be plenty of other people reaching out to these owners as well, so it may be difficult to get them on the phone. Two, the owner on paper, may not be the person in charge of the asset (due to advanced age, death or disability) and three, make sure that the auction date has not arrived-it may be too late for you to intercede.