14 Steps to Multifamily Acquisition - Step #2 Build Your Team
Introduction
Investing in multifamily real estate is no easy task if you’re doing it alone. With the right team in place, you’ll have a much better track to scaleable success. Contained herein is a comprehensive list of the individuals and entities you will need to gather around in order to successfully acquire a multifamily real estate asset. Besides yourself, your trusted partners, and the key principles, the list below should get you well underway.
Education + Foundation + Relationships
Before entering any investment, it is crucial to be educated on what you’re doing. There are various ways that you can do this on or offline. Podcasts and video content from professionals in the industry are helpful to learning the language of multifamily before you start building your team. Real estate is very much a “relationship business” and the sooner that you start building your network - the better. Attending local meet-ups, workshops, and conferences will allow you to meet industry professionals and experienced operators.
I recommend accessing our Groundswell Assets "Multifamily 101” e-book, a guide to getting started investing in multifamily assets. This e-book will explore some of the rudimentary “ins and outs” of investing in multifamily real estate.
“An investment in knowledge pays the best interest.”
Needless to say, literature is always beneficial if you are just starting out in your multifamily education. Here is a link to some of my reccomendations: 10 must-read books on investing in multifamily real estate list
Attorneys
SEC - the SEC Attorney will ensure that you are following SEC guidelines while you are raising capital, which you cannot afford to overlook.
Transaction - this attorney will handle all of the specific paperwork that has to do with the transaction: from the LOI all the way to closing day. It is important that you have a strong transaction attorney who is willing to go to battle and protect you against any mishaps on the road to closing.
“One-Stop-Shop” - (Reach out to us and we will be happy to provide a list) There are many law offices that are "a one-stop-shop,” meaning they will handle both the transaction and all of your SEC paperwork.
One common myth is that your transaction attorney must be in the same state as the subject property. We are not attorneys, so make sure to consult with your legal counsel before forming any entities to purchase real estate assets.
Before closing, you must also set up your ownership entities, preferably in business-friendly states. There are several good options and they will also protect your anonymity.
Seller’s Brokers
AKA the Belles of the Ball.
You absolutely need these individuals to know, like, and trust that your organization can close if you're going to get access to off-market deals and first look at pocket listings. Spending time with brokers touring deals, underwriting, and giving valuable feedback notes from your underwriting will keep you fresh on their minds. Doing this will help to ensure that you are at the top of their list when they’re given deals that match your criteria. Make sure to “Define Your Investment Criteria” if you have not done so already.
Insurance Broker
When you buy multifamily assets, you inherently “acquire the sins” if there are any of the previous operators (such as fires or crime). You can’t always underwrite to the typical rule of thumb for that market because there may be a very valid reason why your expense is $500/month instead of $350/month. My pro tip when it comes to insurance brokers is to pick just one. Don't shoot the deal around to multiple insurance brokers because they will get locked out from the providers if the deal comes across from multiple sources.
Third-Party Property Management Company
We only use third-party PMs that have been in business for at least 10 years and have at least 10,000 doors under management (preferably all 10,000 doors in the subject market). We like to see that a large chunk of their management is in the asset grade that your asset is in; meaning you don't want an A-Class PM managing the C-Class project you are trying to renovate to B-Class. Furthermore, we always verify whether or not they are under any current lawsuits, or have previous egregious litigations brought upon them outside of normal eviction court. The PMs will be the ones executing your business plan, so it is CRITICAL to have the right PM for your job. Click Here to Access our PM Interview Questions .pdf
Due Diligence Team
This will consist of your selected PM, contractors, cost segregation consultants, environmental assessment agents, surveyors, appraisers, etc. I cannot stress enough how critical it is to have the right Property Management team working on your behalf. As with most things, their value will be indicative of their price, and I would not skimp out on having the best management team you can afford!
Mortgage Broker
What are the benefits of working with a commercial mortgage broker, as opposed to applying for a CRE loan directly with a local bank? Firstly, a broker can save you time and money by quickly helping you secure the most profitable deal. Brokers handle more loans and have connections with a broader network of lenders than you do as a borrower—especially if you are also a small business owner or have a 9-to-5. That means they have more resources available to find and secure the best deal for you by getting multiple lenders to provide quotes at once. They can also direct you to the right lenders for the type of property you’re looking to finance, which saves even more time.
Secondly, brokers are experts in commercial real estate investment. Their knowledge and negotiation skills will be essential in helping you choose the best real estate loans for your current situation, evaluate loan terms, and finalize deals. Brokers are skilled negotiators, and they can help you save money by avoiding hidden costs and selecting the best deal structure based on the unique circumstances of your investment. Working with an experienced commercial mortgage broker is a way to eliminate surprises and ensure you can close your deal.
The bottom line is that working with a broker will give you access to a broader network and deeper expertise than you could get on your own, and that helps you get the most value from every investment in a much more efficient manner.
Social Media / Marketing
One of the best ways to engage with prospects is to meet them where they are – on social media. Many prospective residents are using social media to find their next home. While multifamily communities do not need to have a profile on every platform, it’s a good idea to start on Facebook and/or Instagram. A strong and creative multifamily social media marketing strategy will drive prospective residents to the property website, increasing traffic, generating leads, and converting them into leases.
Local Tax Office/Consultant
Outside of the local tax office for the county where your property is located, there are also tax consultants. With rising real estate costs, come rapidly increasing property tax valuations. There are also endless amounts of complexities involved with the development or sale of these properties. If you plan to diversify into multiple markets then having a national network of subject matter experts can help navigate the tax processes of multi-family properties. We choose our consultants based on their industry expertise and state-of-the-art technology, guaranteeing maximum tax savings for our multifamily buildings.
Personal Development - You are the most important team member in your business.
To meet and exceed your multifamily goals, you’ve got to get the mechanics down– research, investors, technical details, etc. Our success also relies on an even more vital component – your mindset. The wrong mindset will sabotage your efforts – draining you of the motivation to start, the will to continue, or the determination to get back on your feet after a failure. When (not if) you inevitably face challenges, you need to have a mentality resilient enough to overcome them.
No amount of knowledge or money can replace the right mindset. This is especially true for the business of multifamily property investment. The world is full of would-be syndicators who had initial success but didn’t have the grit and determination to see their efforts through. If you drop us a line we’ll introduce you to strategies used by the top investment experts to maintain a successful attitude and master the psychology of good business.
The get a head start in the multifamily investing industry I recommend joining with operators you identify with and already have a team established.
To Your Success,
Benjamin
