In our first podcast, Jake and I had the pleasure of interviewing thirty year veteran Rick Gentry, real estate broker from Avison Young in Knoxville, TN. The podcast can be found at our itunes page.
We were fortunate to land Rick on our very first deal, a 25 unit multi-family property. Little did we know that Rick would be an integral part of the next few deals we closed on. We learned early on that a Real Estate broker is a vital team member and indispensable for your success in multi-family investing.
In this article, we are going to describe what qualities to seek out in a broker, what you as an investor need to bring to the table to attract these top notch brokers, and what kinds of questions you should ask your broker. Rick has extensive experience in all facets of real estate, from land development, to construction, to managing and selling apartments. He started out with smaller properties, but he saw as we did the potential in multifamily investing. The fact that he owned and managed apartments was the one deciding factor that attracted us to Rick and we knew that he would locate deals for us based on our specific criteria.
He also was vital in building our team members. He was able to refer a home inspector, a mortgage broker, and certain contractors because he had those contacts from his previous deals. Rick speaks the lingo of a real estate investor, and words such as Cap Rates and Cash on Cash returns are part of his vocabulary.
Brokers are key team members also because they can bring you deals before they hit the market, thus allowing for less competition and a better purchase price. Deals that have not been listed yet are called “pocket deals”. The broker is keeping these deals in his or her pocket and is going to shop this deal to his preferred buyers, hopefully you.
Where do you find a qualified broker?
Here are a couple of places:
- Loopnet. This website does not have many great deals, but it does have brokers that list properties. We scour for brokers that have multiple listings in a particular market and then make contact. These brokers are the serious players in the market.
- Other Team Members: Ask other team members for a referral. Usually, a management company can recommend brokers in their market. Other team members to ask are home inspectors, lawyers, contractors and mortgage brokers.
- IREM.org: Great website that lists management companies. It is a good start to interview potential management companies in your market and teo get referrals for real estate brokers.
- Chamber of Commerce: Every city has a Chamber of Commerce, and it is worth the effort to call and ask for a referral. Visit their website and you will usually find a plethora of brokers.
- Real Estate Investors Association (REIA): Great venue to network with other professionals in the real estate industry. Go online and locate the group that is located in your market.
How do you start up a conversation with a broker? We used a script in the beginning to help with our nerves and to make sure we didn’t forget anything. With a bit of practice, a script will become unnecessary.
This is the script Jake and I use when introducing ourselves to a broker:
“Hi, my name is Jake. I am an investor in the Knoxville, TN area and I am looking to purchase apartment buildings in your market. We like to buy B and C type properties that contain between 30 to150 units. We like to buy properties that have at least a 10% cash on cash return and a cap rate of at least 8. We specialize in purchasing apartments that are run by mom and pops, which allow us to add value and increase the cash flow.
Would you have any properties that fit this criteria?”
What do you need to bring to the table when trying to recruit brokers?
The number one rule is to follow through on everything you say that you are going to do. For instance, if the broker is expecting a Letter of Intent faxed over by 4 PM, make sure he gets that letter. Make it as easy as possible to do business with yourself. Do what you say and say what you do.
Secondly, have a plan in place and communicate your plan to the broker. Jake and I give our Credibility Book to prospective brokers, and it gives us instant credibility. Most investors barely have a plan, let alone an entire business plan spelled out for brokers to review. The Credibility Book outlines our investment strategy and gives the broker and idea of the types of properties we invest in. It also lists our current portfolio.
The third rule is to be educated and know the real estate lingo, as well as the specific market you intend to invest in. Having knowledge of the market is crucial because you can ask specific questions about that particular market and you will need to know property values.
What are some questions to ask your potential broker?
1 How long have you been selling multi-family properties
2. Do you own any real estate
3. How many properties did you sell last year
4. Why is the owner selling
5. What is the unit mix and what is the current market rent for the area
6. What is the value play on this particular property
7. Have there been any offers on the property
8. What is the tenant mix
9. Is there any deferred maintenance
10. Is the owner willing to hold paper
11. Have you sold any property in the area
12. Can you send me over any comparables
13. Can you help me build my team
As you can see, finding the right real estate broker is essential for your success in this business. Not only will they bring you deals, but they will also help you build your team.
We hope this article helps you find the right broker that will deliver countless deals. Leave us a comment down below and let us know what questions you are asking when interviewing potential brokers.