Updated: Mar 7
When an apartment building that interests you comes on the market, you do your due diligence and if it meets your investment criteria, you prepare to make an offer. The only problem is that you’re not the only one who will be making an offer, as sound multifamily investment properties attract a lot of investors and syndicators.
The key is to find a way to make your offer stand out from the rest of the crowd. It’s not an easy thing to do, as everyone is trying to make his or her own offer look unique. I’ve submitted countless offers, and I’ve learned some tactics and techniques that have helped my offers stand out. I’m happy to share them with you, so with several in place you’ll be able to have an offer that captures the seller’s attention.
Understanding the Process
Buying an apartment building is not at all like buying a residential property. When you buy a house, for example, you submit an offer based on the asking price, and if the seller accepts your offer, you can move ahead with the purchase. Many people are pre-approved by a lender in advance, so there’s no issue with the financing. The entire process takes several weeks until an agreement is reached and a deal is signed.
With an apartment building, the process starts when the deal is marketed. You tour the property, often with the property manager. This is important because the property manager knows the property and can point out maintenance issues and other areas that may be of concern to the buyer.
After the tour, you do some due diligence and submit an offer via a LOI - a “letter of intent.” The seller may select the top 3 to 5 offers, and ask those potential buyers to resubmit a final LOI. After those new LOIs are received, the seller will have a phone conversation with each buyer, asking questions about their experience and track record. A winning buyer is selected, and they will then sign the purchase and sale agreement. This process can take several months.
After submitting your “best and final offer,” you can’t make changes to the offer. That includes the price, closing times, or any other information that was previously submitted. Your best and final offer is exactly that: final.
Surety of Closing
Before discussing the different ways to make your offer stand out, there’s one thing I’d like to share: the most important thing to most brokers and sellers alike is surety of closing. That simply means the deal will actually close. The surety of closing is critically important to both the seller and broker; for the seller, if the deal falls through because you weren’t able to close, they have lost valuable time and have to bring the property to market again and begin the process all over again.
For the broker, they not only lose potential commissions if the deal doesn’t close, but they also might damage their reputation with the seller if they were the one who recommended the buyer who could close the deal. That could do irreparable harm to their business, because property owners tend to talk with each other.
So be sure to emphasize a strong closing will occur, include the projected date, and deliver what you promise.