Five Ways To Find Your First Off-Market Apartment Deal
Previously Published in Forbes Here
In a previous blog post, I outlined the benefits for both a seller and buyer of completing an apartment transaction off-market, as opposed to on-market through a broker. Although off-market deals are highly attractive on both sides of the transaction, when it comes to ease, they lose the edge.
Finding on-market deals is a fairly passive approach: All that’s required is sending a broker your investment criteria and asking them to subscribe you to the “for sale” apartment lists. Then, any current or future listing that meets your criteria will be automatically sent to your email inbox. However, you won’t have control over the number of opportunities you receive. Since it’s solely based on the number of owners who happen to list their property with a broker, you could see a bunch of opportunities one week and then go a few months without seeing any.
The more active and beneficial approach is to pursue off-market apartment opportunities. Generally, there are two ways to find these deals: by either speaking directly to the owner or to someone who knows the owner. Your prospecting tactics should only target these two groups.
Here are five methods apartment investors use to successfully find and close on off-market deals:
1. Direct Mailing Campaigns
One of the most well-known tactics for acquiring off-market deals is through direct mailing campaigns. A direct mail campaign consists of sending out a batch of letters to a list of apartment owners with the purpose of sparking a conversation that results in the acquisition of their property.
There are two keys to a successful direct mailing campaign. One is your mailing list. A high-quality mailing list will only include owners whose apartment communities meet your investment criteria and who show at least one sign that they’re interested in selling. For example, we only mail to owners who’ve purchased their property five or more years ago. They will have likely built up enough equity to sell their property at below market value while still making a sizable profit and/or they could be coming to the end of their business plan. Another option is only mailing to distressed owners. Indications that an owner is distressed is their inclusion on the eviction court, building code violations or delinquent tax list or living in a state other than the one in which the apartment is located.
The second key is your mailing frequency. Decide what frequency you will mail to your list of owners — monthly, quarterly, every six months, etc. — and commit to the system. Sometimes, you may receive a reply on your first mailer, while other times it won’t be until you’ve been mailing to the same owner for a year that you receive interest.
2. Cold Calling
Rather than sending direct mailers to your list of distressed apartment owners and waiting for the phone to ring, call the owner directly.
With cold calling, compared to direct mail, you’ll have more control over the number of conversations with owners. It is also less expensive, as you are avoiding the costs of letters, envelopes and stamps.
Cold calling can also increase your conversion rate. With direct mail, if an owner isn’t interested in selling, they won’t reach out. Whereas with cold calling, you can follow-up by sending the owner a letter referencing the conversation, providing your contact information and notifying them that you will call again in X months (2, 4, 6, whatever you decide) to see if they are interested in selling.
3. Thought Leadership Platforms
A thought leadership platform can be a great source for off-market deals. With an interview-based podcast, blog or YouTube channel, you can form relationships with your guests and build a large audience, conveying to both your interest in purchasing apartment communities. With a meet-up group, you can network face to face with attendees and handpicked speakers who are active in real estate investing.
Regardless of the platform you pursue, as a thought leader, you will be reaching and cultivating relationships with both apartment owners and the professionals who know the owners, which are the only two ways to find off-market deals.
4. Call “For Rent” Ads
Calling the apartment owners of rental listings on online services such as Craigslist, Apartment.com, Zillow, etc. or on “for rent” signs scattered across your local market to gauge their interest in selling is a great way to find off-market deals.
If an owner has a unit listed for rent, you’ve automatically identified a pain point. The unit is vacant, which means they are losing money. You might catch them at a moment in time where they are motivated to sell.
5. Apartment Vendors
Electricians, carpet installers, roofers, plumbers, HVAC professionals, pool repairmen, lawn care professionals, etc. — anyone involved in the servicing of apartment communities is on the front lines and will likely have insider information on communities that are being neglected.
First, use their services or refer them to other apartment owners to build rapport. Then, ask them to notify you about potential distressed owners or neglected communities.
Overall, I recommend selecting two methods from this list and focusing on generating leads from those for at least six months. We live in a culture of instant gratification where people expect quick or immediate results. In general, that isn’t the reality, and it’s especially true when you’re dealing with million-dollar properties. It takes time to generate apartment leads. It requires constant action, constant tracking and constant improvement.
During your six-month trial period, log your results for each of the marketing methods. If one or both of the marketing methods have poor results, either tweak it or try another tactic. All of these tactics have worked, but all of them might not work for you because of your market or because of your unique skill set. You’ve got to find a tactic that aligns with what you’re uniquely good at, which may take some trial and error. Ultimately, it’s not about having five lead sources. It’s about finding the few that work best for you.
What is your favorite method for generating apartment or other real estate deals?
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