I get this question a lot and it’s a valid one. How do you approach brokers if you have never done a deal before? It’s a good question because you run into a chicken or the egg issue: you need to get a deal done to show credibility but you can’t get that first deal without interacting with a broker (you can try to go direct to seller but that’s another topic).
I think many stay on the side lines until they gather up enough courage to reach out to brokers. That’s totally understandable because you want to come across like you mean business and know what you are talking about. I spent ten years in private equity, interacting with the investment banking community to source deals just like you would with brokers in multifamily. At any given day, I would interact with bankers from multiple industries from software to healthcare services. To be effective, I would have to be well versed in each respective industry to garner the respect from these sell side bankers. This involved getting up to speed with current market events, learning the lingo and industry jargon, and knowing who the movers and shakers were. But ultimately, I would have to act fast, be responsive, and be ready to provide constructive feedback on deals. I never had much time to get up to speed when looking at a new industry before interacting with bankers. Over time I developed a knack for breaking down industries to their key drivers quickly so I could have a meaningful discussion.
If you’re new to deal making, the take away here is to not dwell too much in educating yourself because you can be stuck in that phase forever. It’s easy to resort to not having enough education as an excuse for not taking action. A big part of the learning process is to actually learn by doing. Like with anything, it takes practice and you get better the more reps you do.
Here are some other key pointers when approaching brokers:
Be specific about what you are looking for – The more defined your criteria the better. It shows that you have thought about your approach and wherewithal to handle those types of deals.
Explain how you intend to line up your equity and debt – This is critical because brokers won’t have confidence in your ability to close if you can’t convey your ability to raise the capital.
Describe your team and their roles – This includes the members of the sponsorship team as well as third party service providers (i.e. property management company, etc).
Be cordial and professional - It sounds obvious but some folks feel they need to be super aggressive when dealing with brokers to come off confident. It’s about building a long term relationship so be respectful.
Be mindful of the broker’s time – When you set an appointment, show up on time and do some prep work beforehand.
Close the loop on deals - If a broker shows you a deal, be prepared with comments and questions and provide good feedback. For deals that don’t meet your criteria, make sure to formally pass on the deal and provide your rationale. With more feedback you provide, brokers will have a better idea of the kind of deals to present you next.
Be persistent – Brokers are inundated with buyers in today’s environment so it’s challenging for them keep track of all the conversations they have. It’s wise to keep on their radar with multiple touches through emails, phone calls, and text. If you’re new to multifamily, brokers will notice your persistence and know you mean business.
What are some other advice for approaching brokers?
About Us
Overland Capital Investments is a real estate investment company that focuses on acquiring multifamily apartment complexes in markets with solid fundamentals. We implement a disciplined and conservative approach to multifamily investing with a focus on capital preservation, cash flow generation and measured capital appreciation. Our mission is to provide passive income to our investors by buying underperforming multifamily apartments, partnering with good people, and impacting the communities we invest in.
To learn more, visit www.overlandcapitalinvestments.com.
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