Introduction

Deal flow.  It’s the lifeblood of the real estate industry.  As a passive investor, you want to make sure the operators you are investing with have consistent deal flow.

It doesn’t matter what other incredible skills you possess in this industry if you don’t have excellent deal flow to execute on.

Quality deal flow is one of the key aspects that separate truly high-performance multifamily real estate operators from the rest of the herd. It’s no wonder, then, that “How do I build my deal flow?'“ is one of the first questions people ask when they get started in the multifamily real estate business.  

It’s fairly easy to get overwhelmed when you’re trying to extrapolate and build your deal flow. We’ve distilled the most important elements you need to be paying attention to as you embark on this voyage. Hopefully it will allow you to avoid analysis paralysis and sail into discovering new deals with confidence.  

The charted route is relatively simple and once you understand it, it’s all a matter of execution and persistence before you land your first deal.  

1. Define Your Criteria

As discussed a few weeks ago, building clarity around what you’re targeting to buy is the most key element starting out. This gives you an obtainable waypoint to head towards as you get underway.

If you haven’t already, please start by reading this post and get crystal clear on Defining Your Investment Criteria

Once you are clear on this aspect of what deals you will be searching for, let’s move on…

2. Selecting Your Markets.

Needless to say, selecting which markets to invest in is not as easy as spinning the globe and dropping your finger. You need to take special care in disseminating multiple data sources and distilling out the best market by understanding where the employment and economic growth sectors are located. When high-income job growth and economic growth meet with a low cost of living in a tax-advantaged landlord-friendly economy… that’s where you find the sweet spot for investing in multifamily real estate. Please read Market Selection: Is it a “No” or a “Go” by Jayna Yeager to hone in on your target market. We are big fans of DFW, TX, and Atlanta, GA. You will see that we have current deals that are perfectly situated in the path-of-progress in high growth and expansion corridors of those MSAs.

One thing to keep in mind is that if you’re going after the same markets everyone else is, you’re going to be facing some steep competition. Passively investing to build up a portfolio as an LP (Limited Partner) with sponsors who have already executed in these markets is a great way to gain experience and stamp your footprint in those markets.

3. Broker Relationships

If you remember our last post about building out your local team in your target market Have a read here if you are not sure who to gather around on your road to closing your first deal: Build Your Team

You have to forge good working relationships with brokers – lots of them. If you learn how to do this then you have mastered one of the best ways to fast-track yourself into a steady flow of pocket listings and off-market opportunities.

Before we dive into how we do this, I first want to address direct-to-seller prospecting as well.

This is an important strategy that has allowed many operators to source some great deals, but the majority of good deals will be coming from commercial real estate brokers.

Going direct to the seller is more time-consuming and requires more detective work on your part to track down leads, but there can be hefty rewards if you eventually find an amenable seller.

That said, you’re more likely going to be receiving most of your deals from brokers.

Once you’ve decided on the markets to target, you need to do some research on who are the top commercial brokers in that market for the multifamily asset class.

This information is available on CoStar, Loopnet, Crexi, and commercial real estate publications.

Next, you need to start reaching out and building those relationships. The important thing when dealing with brokers is being memorable.

You need to be the person they think of for multifamily deals.

One way to get brokers to remember you is to be extremely responsive. It might be obvious to you that you need to be ready to jump and submit an offer when they send you a great deal.

If you can’t make that move, then you’re never going to get anything done in the first place.

TIP: Whenever you purchase a property in your market, spread the word to other brokers in that market that wasn’t involved in the sale. This gives you instant credibility by showing them you’re actively on the hunt for new properties.

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