Lead Generation is at the heart and soul of any business and it is no different with multifamily investing. Are you at a loss as to how to track down sellers of multifamily properties? There are five solid resources for finding motivated sellers. These five sources are direct mail, brokers, www.loopnet.com, bird dogs and other venues.
Of these five resources, direct mail is the most effective technique. This simple technique involves mailing letters to owners of multifamily properties in your target area and asking them if they would be interested in selling.
The wonderful thing about this technique is that you can employ its use in other cities. If you are going on vacation, you can find all of the people in that city who own apartment complexes in your hometown and then send them a letter asking if they are dissatisfied with their multifamily property and let them know that you would like to buy it. Let them know when you will be in their city and when you would be able to meet them.
The second resource for finding motivated sellers is brokers. Probably the easiest method of finding brokers is through www.loopnet.com. You can get very specific about the type of property that you are looking for. You can enter a zip code with a price range and it will give you a list of all those properties that meet your criteria that are on the market.
When you are looking at the properties, some of them will have brokers. You can get the broker’s name and call him. Do not email the broker. If you are not going to even bother to pick up the phone to call then how serious are you? You should call the broker and say, “I saw your listing on www.loopnet.com. Can you tell me about it?”
After the broker tells you about it, then you say “that’s not exactly what I’m looking for. Let me tell you what I’m interested in.” Now you can tell him precisely what you are looking for. The more precise and the more knowledge you convey, the more confidence you will build in that broker that you are a serious buyer.
Loopnet.com is also a resource for finding motivated sellers. Once you find a multifamily property on Loopnet.com, you can call the seller up and negotiate. You can ask for the financials and see what is missing. If anything, Loopnet.com is a great place for you to “practice” negotiating with sellers.
The fourth resource for finding motivated sellers is the bird dog. The bird dog is someone who is out hunting deals. Their goal is to find something that looks like a deal and then they hand it to you to do the work. Bird dogs are informal brokers who scour the market for deals and then match the deals to buyers.
The fifth resource, “other”, is basically a catchall for all other types of resources in finding multifamily deals. A few of these resources are estate attorneys, Laundromat service operators, plumbers, property inspectors and insurance agents.
These five resources offer you great opportunities for attracting and getting in touch with sellers. If you utilize these resources you will have multitudes of potential sellers at your disposal.
You do not have to spend a gold mine on your marketing strategies for finding investors for your multifamily deals. In fact, there are some very effective ways to market your multifamily deals and not spend a dime doing it. There are four very effective and, better yet, free means of marketing your multifamily deals. These methods employ the use of referrals, charity organizations, networking and keeping an eye on your competition.
The most effective marketing strategy you have available to you is your referrals. This strategy that is used throughout the business world is also applicable to what you are doing. Referrals are absolutely fabulous at bringing in new investors.
Why are referrals so effective? Simple. People trust information that is given to them by their friends and colleagues. When you are shopping around for a physician, dentist or mechanic what do you do?
You ask around. Some people may rely on the Yellow Pages but the majority of people want to hear it from people they trust that a certain person or business is reputable. This is why it so important for you to begin building your reputation and for you to work with reputable contractors as well.
Your reputation precedes you and when people are pleased with you and the work you do, word will spread like wildfire. Never underestimate the power of referrals and never dismiss the importance of a stellar reputation to help you build your references.
Another free marketing opportunity for your multifamily deals is helping out at a charity fundraiser. If you sit on the board of any charitable organizations, you have a great pool of potential investors at your fingertips. You are able to get in touch with people that have money and money that they are looking to invest.
Good old-fashioned networking is another free marketing method. Network with fellow members at clubs you belong to. Reach out to those people that are in your focus groups. Take the opportunity when you are at work and hanging out with colleagues at the water cooler to let them know about your multifamily property deal and see if they are interested or if they might know someone who would be interested.
Another method of free marketing that is sometimes overlooked, is spying on your competition. Find out where they are getting their money and how they are funding their deals. Use your network to do this.
All of the strategies mentioned above are effective and cost you nothing. Take advantage of these strategies and put them to work for you. You will be pleased with the results and at the money you save.
When you are trying to pitch potential investors a deal, you have 20 seconds to catch their imagination. In that 20 seconds, you need to address the investors’ “What’s in it for me” mentality. You need to talk to their reasons “why” they need the money. You need an “elevator speech”.
Here’s an example:
I have the perfect deal for someone with $75,000 in your IRA looking to earn 15% APR over the next 6 months. You can earn 15% APR on a sustained basis if you choose. You won’t need to keep reworking your IRA money anymore. All of our deals are validated by third party appraisals and third party rehab costs. The projects are run by a very experienced rehabber who has done 8 house rehabs on budget in the last 24 months. I have a flyer with all of the benefits on the table. I will be in the back of the room. My name is Lance. Come see me during the break.
Let’s break it down. This pitch is very specific:
“someone with $75,000 in your IRA looking to earn 15% APR over the next 6 months. You can earn 15% APR on a sustained basis if you choose.” – You are giving them a choice on how they can earn their 15%.
“You won’t need to keep reworking your IRA money anymore.” – You are presuming that there is a problem.
“All of our deals are validated by third party appraisals and third party rehab costs.” – You don’t go into detail but you assure them that there is nothing to worry about. You have the bases covered.
“The projects are run by a very experienced rehabber” – You are selling people the experience or your team. People feel secure with experience.
“who has done 8 house rehabs on budget in the last 24 months.” – this solidifies your statement of experience.
“I have a flyer with all of the benefits on the table. I will be in the back of the room. My name is Lance. Come see me during the break.” – You’re not waiting for a phone call; you are ready to talk right now.
Be sure that your elevator speech addresses at least some of the benefits of control, low risk and high return. If you get their attention, they will come talk to you and then you can highlight the features of your deal. The key is to grab their attention. Once you have accomplished that, you can go over the particulars of the deal.
Direct Mail is the best technique to use when trying to generate leads and find sellers of multifamily properties. It is such a simple and effective tool and it costs you very little. Here are some tips on how to use direct mail marketing in your multifamily investing business.
Direct mail marketing merely involves mailing letters to the owners of multifamily properties in your target area and asking them if they would like to sell their multifamily property. The great thing about this technique is that you can utilize it in any city; you do not have to use it just for your hometown.
Let’s say that you go on vacation in another city. You can find out all of the people in that city who own multifamily properties in your hometown. You then send them a letter asking if they are dissatisfied with the multifamily property.
If they are dissatisfied then you let them know that you would like to buy it. You then tell them when you will be in their city and when you can meet with them. A good response rate is 1% but an average response can be anywhere from 2-5%.
Direct mail is a two-step process. First, you need to identify your target market. Second, you need to deliver your message. The more precise you are with your target market, the more precise you can get with your message.
For example, an out-of-state owner may have a different message than someone who is a local Section 8 owner who self manages the property. An out-of-state owner who does not self manage has a property management company. Your message may be tied to the dissatisfaction of the management company.
A possible message to that owner could be, “Are you dissatisfied with not knowing what’s going on in your property? If you are dissatisfied, I can alleviate that problem.”
You could send the local owner of a Section 8 property the following message: “Are you tired of waiting six months to get your first payment? Are you dissatisfied with people tearing up your property? I’m a local owner and I can quickly take this problem off your hands.”
The more precise you can get on your target market and identify with their emotional pains and create a message that connects you to relieving that pain, the better your response rate is going to be.
Once you have defined your target market and you have narrowed your message to address that target market, you need to figure out how to access those people. The simplest thing you can do is to sign- up with the subscription service at www.propertyinfo.com. It is a paid package that goes straight to the appraisal district database and allows you to sort all owners of 4-20 units; all owners of 20+; all owners in a price range; all owners in a zip code; and all owners that live in a state. An Excel file is created that you can download and that becomes your mailing list.
Direct mail marketing is a great tool for reaching out to prospective sellers of multifamily properties. You need to remember to define your target market and customize your message to address the needs of that particular market. The key to successful direct mail marketing is addressing the needs of the seller.
Networking should be a primary form of marketing for all real estate entrepreneurs who are seeking investors. One reason is because networking costs very little but that connection brings with it a lot of trust, so it’s easier to ask for, and get, investors. Another reason is because the SEC has strict rules about how you can get private money and advertising for it is illegal. And the third reason that networking should be on your to-do list is because it’s something you’re always doing; you’re always meeting people, shaking hands, and connecting.
Sometimes, new real estate entrepreneurs ask me about where they should be meeting potential investors. My first answer is: “Everywhere!” It doesn’t matter where you are, if there is someone else in the room, you can network with them. They might invest with you or, just as often, they’ll know someone who might be interested.
Networking Opportunity 1: Your friends
Your friends are a great source of private wealth because they trust you and they want to succeed and they want you to succeed! Understandably, some people are hesitant about asking their friends for money but I can’t think of a single friend who wouldn’t want me to do well, and would be interested in sharing the wealth and the risk if the opportunity presented itself. Even if you don’t want to ask your friends for money, talk to them about your deal because they know dozens, maybe hundreds, of people and their trust in you will be “passed on” to their friends. Some of the sweetest words any investor can hear are, “we have a mutual friend who suggested that I talk to you about investing some of my money”
Networking Opportunity 2: Associations or clubs
It’s likely that you belong to an association or a club of some kind. It might be a social club or it might have a purpose (like business networking, or learning to speak in public, or an industry-specific organization). These groups are breeding grounds for deals and opportunities because many of these groups are formed for like-minded people who are driven to succeed. Openly share about your opportunities at various events. Even if you are reluctant to ask for money, share about your positive experiences and successes and you’ll likely find people asking you how they can be involved.
Networking Opportunity 3: Charitable organizations
This might surprise you because charities are usually asking for money for their own philanthropic needs, but you can still benefit. I recommend working in the fundraising department of a charitable organization so you can meet people where the money is. And there’s another reason, too. A little karma in the world isn’t that bad – give a lot and get a lot!
Networking Opportunity 4: Your job
Some of you might full time investors so this one won’t apply, but many readers will be putting together those first few deals and will still be juggling a job. Your coworkers trust you, and if you’re looking to make enough money to quit your job, they probably are, too. Just be careful: Don’t spend your work time talking about investment opportunities or you’ll find yourself out of a job sooner than you planned. Instead, invite some coworkers out after work and tell them about your project.
Networking Opportunity 5: Real estate clubs
This opportunity is gold! I’ve seen a few in action and I wish there were more. Basically, a real estate club meets periodically so like-minded real estate investors can gather to discuss who has real estate opportunities to sell and who has money available to invest. Consider starting one in your area to create one of the fastest ways to private money available right now.
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