Updated: Mar 7
If you purchase or invest in multifamily properties, you have to have an effective and efficient acquisition process in order to successfully bid on and win deals. If you don’t, you’ll find that you’ll end up losing a lot of time chasing deals that never come to fruition. You’ll also lose credibility with investors and brokers, miss deadlines, and become very frustrated with the entire process.
As the founder and CEO of Blue Lake Capital, I buy and manage properties across the United States. I’ve raised tens of millions of dollars for apartment syndications, and currently own multifamily properties across the U.S. I believe that a lot of my success comes from having an effective acquisition process, and I’m going to share that process with you to help you become more efficient in sourcing, bidding, and winning deals.
The Process Starts with Sourcing
The acquisition process begins by sourcing your deals. You’ll decide what asset you’re going to purchase, and where you’re going to buy it. While I focus on multifamily properties, this process works for almost any asset, from mobile homes to commercial real estate.
We start by developing a list of websites where we source our deals. The list includes brokers in markets where we’re looking to buy properties, which in our case is Texas, Georgia, and Florida. Deal sourcing is a weekly activity, as we continually check with broker’s websites to see if any new properties have been posted.
Analyze the Neighborhood
Once we have a list of properties that are under consideration, we analyze the neighborhoods where they’re located. This includes a look at household income, which should be greater than $40K, crime statistics, demographics, and school ratings. You should set up your own criteria, but make sure you are comfortable with them. To find information on neighborhoods, we have access to Yardi-Matrix, but that can be costly. You can also find all of the items to analyze for free on www.citydata.com.
If your neighborhood analysis indicates a positive area, you can move on to the initial underwriting portion of the process. This involves a phone call with the broker, where you’ll conduct preliminary underwriting based on current financials and general rules of thumb.
For us, those rules of thumb for a Proforma include income and expense assumptions on the property, renovation costs, premiums we could gain by doing value-add improvements, and financing. (Premiums is the amount expected to be gained over the existing rents after the renovation and upgrades are completed).
During the initial underwriting, we also perform sales comps and analyze recent sales in the area. If you don’t have access to databases like CoStar or Yardi, ask the broker for comps, or even from your property management company.
Property Manager’s Budget