JF2433: Three Strategies to Find Off-Market Apartment Deals | Best of the Best Ever Show with Theo Hicks

May 01, 2021 | Joe Fairless | 00:22:45

JF2433: Three Strategies to Find Off-Market Apartment Deals | Best of the Best Ever Show with Theo Hicks

James shares a strategy to get in touch with sellers, to work directly with them, and get at a good price per door. Dylan explains where he buys his list, how he finds owner contact information, and how the conversation goes. Lastly, Cory goes into detail on the importance of creating the right marketing piece that addresses the owner’s pain point. He talks about tactics and provides a very unique twist on the direct mailer.

James Kandasamy Real Estate Background:

  • Found two at the time of the interview off-market, apartment opportunities, one, 45 units, another 174 units.

Dylan Borland Real Estate Background:

  • He does things differently that allows him to generate more off-market apartment leads. 
  • Their firm does 106 and flips a year on the single-family side. 

Cory Boatright Real Estate Background:

  • Real estate investing coach and investor
  • Has completed over 1000 real estate transactions, owns/manages over 422 apartment units via syndication, and sold over 100 million in real estate transactions

 

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Best Ever Tweet:

“Once you do enough marketing, you build a relationship with them and they are able to trust you.”- James Condasami


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to The Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today we’ll be talking about three strategies to find more off-market apartment deals. It’s going to be a little bit different today. Instead of me going over these three strategies, I’m going to let the experts, the people who are actually implementing these strategies, tell you. We’re going to be doing clips from three previous Best Ever guests, starting with James Kandasamy. James Kandasamy found two, at the time of the interview, off-market apartment opportunities. One 45 units, another 174 units. He found these by sending a text message to owners. Here is how James was able to accomplish this.

James Kandasamy: Both of my first two properties were bought directly from the seller. We used our own strategy to get in touch with the sellers and work directly with them. That’s the primary point on why we were able to get it at a good price/door.

Joe Fairless: Oh, wow. How do you do that?

James Kandasamy: The way we do it is, basically, we look at the rent roll of all the property owners, from websites like the BCad, which is the county tax website, and also there’s another website called List Source, where you can basically go and download all the property information and then you have to do a skip-tracing to find the owners. Once you do a skip-tracing, you basically try to contact them using mailing, using cold-calling, using texting. It’s a lot of work, but the amount of work gives you some of the best deals.

I think in this hot market it’s just so hard to hope on brokers to bring you deals, because brokers do have a fiduciary responsibility to make sure that they get the highest price for the sellers as well. There’s a lot of sellers out there who have other problems that they don’t want to bring it to market. In these two deals, the sellers didn’t want to go to brokers. They were able to trust me, because I built a relationship with them. Once you do enough marketing, you build relationships with them, and they’re able to trust you, and they’re able to allow you to buy it at a good price.

Joe Fairless: As far as the owner goes in this situation, you walked us through the process for how you track them down, but then do you remember if there was a phone call or a text? It was a text?

James Kandasamy: Yes, correct.

Joe Fairless: What did your text say?

James Kandasamy: The text said basically, “Hi, I’m an apartment investor in this region, in Central Texas. I saw your property at XYZ, and I’m interested in buying it. You can sell it directly to me without any broker’s commission. Would you like to talk further?” That’s a very expensive text, because you get really good deals with that text.

Joe Fairless: [laughs] What did they text back?

James Kandasamy: They would say “Why don’t you talk to this guy?” So you would have sent maybe 500 texts and you might get less than 1% response. But within that 1%, you might have a 0.1% acceptance ratio, and you’re able to basically work on that deal from that point on.

But apart from an immediate response, you also build relationships with these people. Sometimes they do come and ask you some more details about you. They may say they are not selling right now, or they may say they are not selling, but at least you know you have the contact of that seller and you’re able to follow up from time to time.

The key to this off-market strategy is basically persistence in following up, and consistency in contacting them. A lot of people try to do this on their own, and they do it once and they forget about it. However, the market is getting hard. A lot of sellers who want to sell off-market are also having trouble buying a replacement property, even though they want to sell it to people like me at a good price. They’re having difficulty in buying the next property. That’s a problem right now, but I think if you hustle and you’re persistent in your approach, you should be able to find a ton of good deals out there.

Theo Hicks: As James said, he found a list, he skip-traced the list to find the phone numbers of the actual owners, and he sent them a text message. He talked about what he included in this text message and then that the key to the strategy for him is the consistent follow-up. If you want to learn more about James Kandasamy and hear his Best Ever advice, you can listen to him on episode JF1273, Deep Value Add Apartment Syndications with James Kandasamy.

The next strategy comes from Dylan Borland. Dylan is going to tell you about the one thing that he does differently, and that he believes allows him to generate more off-market apartment leads. Listen to what he has to say.

Dylan Borland: I think the best advice I can give to people as it relates to single-family –I know we’ve just talked about multifamily, but we’re doing both, and naturally I got my roots in single-family– is to prospect. I think that’s the difference. Our firm does 100 fix and flips a year on the single-family side, and I swear the sole difference for that is we get on the phones, myself included, and we spend our days prospecting. Instead of buying the list and mailing to it as everybody does, we buy the list, run the phone numbers, and make the calls.

In addition to that, it’s tracking your numbers. Because what we track, we can improve. And if we track our numbers, we can build a predictable and duplicatable business. I know exactly what I need to do for my next deal and where I need to go. That’s a key element that a lot of people probably don’t hear and they probably don’t teach out there, but I think that’s been the biggest accelerator to our growth and continues to be.

Instead of marketing and waiting for the business to come to you, you just ask me where are all the good multifamily deals, we download the list, and we call.

Joe Fairless: Where do you buy it from or download it from?

Dylan Borland: We use CoStar, which I think is national. Have you heard of CoStar?

Joe Fairless: Of course, yeah.

Dylan Borland: We build that list through CoStar for multifamily. For single-family you just buy your traditional list – your absentees, your probates, your foreclosures. Instead of mailing to them, you just get the phone numbers and call.

Break: [00:00:07]:07] – [00:09:09]

Joe Fairless: With CoStar you do a search for your area and the type of property you’re looking for. Does that give you the phone numbers or do you have to take an extra step for that?

Dylan Borland: CoStar does give us the owner’s name, address, the true owner, and then their phone numbers. I think there are rare occasions where the phone numbers are not attached, and then those are pretty easily found. But generally speaking, when you export it, the phone numbers are there as well.

Joe Fairless: How do you find them easily?

Dylan Borland: We use two companies – either White Pages Premium… Most of these properties are owned by corporations or companies that have some sort of an internet presence. Number two, or number three –if we go deeper than that– we use a service called Vulcan7, which really gets deep into scrubbing the data and getting us accurate contact information for the property owner.

Joe Fairless: The big differentiator for you is you’re picking up the phone and calling, versus doing the direct mail thing for apartments.

Dylan Borland: We spend less than $1,000 a month on our marketing for both residential and multifamily. The big differentiator is picking up the phone.

Joe Fairless: You just found my number, I’m an apartment owner, you just called me… What do you say?

Dylan Borland: “We’re just reaching out to you. Hey, Joe. I just want to introduce myself, my name is Dylan over at the Borland Group. We’re looking at buying properties in your particular area, and that’s how we found out about yours. We wanted to see if you have any interest in selling.”

Joe Fairless: Just like that. What do you need from the conversation in order to get what you want out of it?

Dylan Borland: It’s a numbers game. The vast majority of people aren’t interested in selling but we’re looking for the one that does. All that person has to say is “Yeah, I have a slight interest,” or “What would you offer me? If there’s any inclination that they would like an offer, then we start the process from there. That’s collecting the data, getting the rent rolls, the occupancies, and then make them an offer to see if it makes sense for them.

Joe Fairless: Easy enough.

Dylan Borland: Yeah, it’s pretty easy. Just pick up the phone and say “Are you interested in selling?” I think where people get frustrated is because you make 100 calls and 99 people are going to say “I’m not interested in selling.”. But you’re only looking for the one that is. The one that is, like Southfield for example – that’s how we got the Southfield deal. We got it off-market a month before he was going to list it with a broker. We bought it $10,000 to $15,000 under market value. We got it for $43,000 a unit, I think it was, and they’re trading for 53 to 56 in that area in their current condition.

Joe Fairless: Good for you. I love hearing that. You said $1,000/month – does that include your CoStar subscription?

Dylan Borland: Good question. No, that does not include the CoStar subscription. We have a brokerage, it’s like $320 or $350 a month, I think… You get a discount, I guess, if you’re a broker. I think that’s how it works.

Theo Hicks: Dylan says that the one thing that allows him to do more off-market deals is picking up the phone, rather than focusing on direct mailers alone. He also mentioned that it’s also important to track the numbers to make sure you know what works and what doesn’t work, so you can do more of the former and less of the latter. Dylan also talked about where he buys his list, how he finds the contact information of the owner, as well as how the conversation goes once he has a potential owner on the phone. To learn more about Dylan Borland and to hear his Best Ever advice, check out his episode JF1170, Multifamily Syndication 201: Finding Off Market Properties & Structuring The Deal with Dylan Borland.

The third and final strategy comes from Corey Boatright. Corey, during his clip, goes into detail on the importance of creating the right marketing piece that addresses the owner’s pain points. He talks about tactics to do that and then he also provides a very unique twist on the direct mailer that’s allowed him to maximize his open rate.

Cory Boatright: One is, I’ve done mailers on finding deals on apartment complexes. What I’ve found in the Greater OKC area, in a source called List Source –your listeners are probably familiar with it; if not, you can go to listsource.com; you can pull data and you can look at apartments that are ten units and above. What’s really interesting that I’ve found, after doing a small mailer, was some people that contacted didn’t even know what their NOI was, didn’t know what a P&L sheet was, Joe. Couldn’t tell you how many exact units there are, couldn’t tell you what the vacancy rate was, couldn’t tell you how much work is needed.

This really blew my mind, because there is this assumption and there’s this perception that because someone owns a five million or 10 million dollar asset, that they’re smarter than you or whatever it is, that they know more about that unit, that they’re going to be less motivated to work with you because they have options. They do have options, but as understanding the pain points from motivated sellers, in the wholesaling business, which is what we deal with on a day-to-day basis, it is a different animal on multifamily, because it takes a longer time, but the pain points are really interesting. On multifamily, it is “My partners and I have a legal dispute.” “I’m going through a  divorce right now.” “I’m embarrassed, because I don’t know how to run this thing. I don’t want anybody out there telling me ‘Oh, your 150-unit now is being bought up because you don’t know how to do it.” There’s embarrassment and there’s shame involved. They’ve got properties inherited, their kids are on drugs, so they’re doing stuff they shouldn’t be, and they’re running the asset into the ground. They don’t have any idea about their accounting. Or maybe, some of the things, they just need to do a 1031.

There’s a lot of other reasons, but some of the ones that weren’t so obvious that was very learning for me, was these people are still motivated, too. So no one is hitting someone right between the eyes, which is what great marketing does, and speaks to one person. I’m not talking about speaking to this economy of multifamily owners that are all assuming just because they have 100 units or whatever, that they’re happy, and everything’s great, and they’re bigger than everyone else. I’m talking about a message that speaks to your pain. Because once you speak to that person’s pain, then you’ll get a response.

That’s really what I’m talking about, is finding that marketing piece that says “If you have a challenge right now, you need to sell the property quickly but you don’t know what it’s worth, you really don’t know if you’ve been fixing the property up the way it should be – hey, I’m local. I’m here in Oklahoma City, I’ve lived here for years and years; let’s go have coffee. This is a completely confidential conversation.” By the way, anything that has private, confidential, your email address, your personal phone numbers saying “This is real”, stuff like that, it stands out from all of the noise that they get all the time, that says “I want you to call me because of your interest to sell your multifamily.”

Break: [00:16:31][00:17:13]

Joe Fairless: When you say speak to one person and find that pain point, how do you create something that speaks to one person when, as you mentioned earlier, there are varying pain points on the spectrum? If I’m going through a divorce, my pain point is going to be different from if I have inherited a property and I don’t know what I’m doing.

Cory Boatright: Sure. One thing that I know that hasn’t worked is a postcard. If you’re approaching this marketing for multifamily and you’re using a postcard, stop doing it. Because the postcard is really designed for single-family. There’s a reason why, but I don’t want to get into it necessarily right now. I’ll tell you that a letter is going to be more effective. Not only a letter, but a FedEx package that you can get a signature, because how many FedEx packages do you send and you don’t open?

Joe Fairless: Right. You open it. You always open it.

Cory Boatright: You’re going to open it. Or if you have an envelope with a window that shows their name and at the top of it “Open immediately” or “Urgent”, something that shows urgency. We can get into the particulars of split testing. But the answer to your question is you are going to have to split-test it. I’d love to, right now, show you all the data, but I’m still working on this myself, so maybe at the end of the year another one.

Joe Fairless: Follow up.

Cory Boatright: That’d be awesome to follow up. You’re going to have to split-test. The cool thing about multifamily when you do these lists, Joe, is that they’re not that big. I send out between 50k and 60k mail pieces for single-family motivated homeowners every single month. I’ve done it for years. I don’t have to do even 10% of that, because there’s not 10% of 75 to 150 apartment complexes in the Greater OKC area. It doesn’t exist. So because you have a smaller list, now you have to change your mindset. This is hard for marketers, because we think “What’s the best ROI for our marketing piece?” You have to change that and you have to think about “What is the best way that I can get in touch with an apartment owner?” If I did get a deal and it’s direct to the owner, I’m not having to worry about a broker, so what’s that saving on a 3-5 million dollar deal? It’s saving at least 100k or more.

If I didn’t have to do that, what could I spend on the marketing piece? Well for me, I’m spending between 31 and 34 cents on a little postcard with an API that goes to Google for a Google image that says “Is this your house?” That one’s really effective. But on this, for a letter, you’re going to spend 50-70 cents just on the regular marketing to a single-family. You have to stop thinking about that, because your list is only five or six thousand people, Joe. Now you can spend $15, $20, and if you wanted to, you could probably spend $30 or $40, depending on where you are and what your marketing is, to get in touch with this person. That’s the way that you have to think about it. It’s really hard because usually, you want to go the cheapest route. But on multifamily, you’re going to have to spend a little bit more money, but it’s going to be worth it if you find even one really solid deal.

Theo Hicks: I really like how Corey goes into the mindset behind creating the right marketing piece. He also talked about how to find the list of owners. Then rather than sending a postcard or your traditional direct mailer, instead use a FedEx package that requires a signature, or an envelope that says “Urgent,” or “Open immediately.” Because as he says, who doesn’t open those? No one leaves a FedEx package unopened. In the end, he mentioned that this strategy does cost a little bit more money, but the ROI is still going to be a lot higher, since you’re dealing with large apartment communities rather than these smaller single-family homes. So to hear more from Cory and learn his Best Ever advice, check out Episode JF1874, Veteran Real Estate Investor Shares Story Of Scaling The Real Estate Ranks, with Cory Boatright.

To conclude, the three strategies that we went over today, the first one came from James Kandasamy. He finds off-market apartment deals by sending text messages to the owner. Next is Dylan Borland, who focuses on cold calling, actually picking up the phone and contacting these owners. Then Cory Boatright still uses the direct mailing, but rather than using the traditional direct mailing piece, he pays a little bit more money for FedEx packages and letters and envelopes with “Open immediately” and “Urgent,” in order to increase conversion rates and open rates. For all these episodes, of course, they went into specific details on finding these lists and then what they say when they’re texting on the phone or writing the message to a potential seller. Thank you for tuning in today. Have a Best Ever day and we’ll talk to you tomorrow.

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