Apartment Rent Trends 2024
August 26, 2024Multifamily Syndication 101
September 9, 2024Mastering Deal Sourcing
Techniques to Maximize Real Estate Value
If you want to build a stable real estate investment portfolio, then you have to find the investment opportunities in the market that fit your particular strategy. In the industry, we call it “deal sourcing,” the key to maximizing real estate value.
It requires a colorful combination of market knowledge and networking skills, nourished by robust strategic thinking capabilities, consistency and discipline to find and close deals that are asymmetrically low-risk and high-reward in real estate.
From leveraging off-market listings to building a strong network of industry professionals, we'll cover the essential skills you need to become a deal-sourcing expert.
Deal Sourcing Techniques: 8 Ways to Find Real Estate Gems
Let’s define what deal sourcing entails. In simple words, it means that you identify and evaluate the investment potential of a property before acquiring it. Others call it a systematic, fine-tuned approach to finding the most valuable properties in the market. That’s because the quality of the deals will ultimately affect their profit-generating potential.
The key is to find a property that makes the most sense to you! Today, you can even use some AI-powered tools to find the most valuable real estate opportunities online.
The deal-sourcing process also has several stages, such as market research, contacting your networks, negotiating with sellers, due diligence, and closing the deal. Here are some tips to help you find hidden gems in the market with relevant ease:
1. Do the Research
Deal sourcing is basically market research to verify that a real estate opportunity presented to you is truly valuable. If a deal sounds too good to be true, you should definitely do your research early on in the process. You’ll do this:
- Study market trends
- Check neighborhood dynamics
- Recheck property values
After understanding the market landscape, you’ll better understand where this deal stands in comparison with other similar properties.
2. Define Your Goals
The next step is equally important and involves goal-setting. What’s your investment strategy? What are your investment goals? Maybe, you are looking for commercial properties. Do you have the capacity to take on a big value-add renovation project in an up-and-coming neighborhood or do you need something that is turnkey with minimal effort? Do you prefer to have a rental in urban centers, villages in a city’s outskirts, suburban areas, or underdeveloped places?
At Gold MF, we believe in the constant movement towards urbanization, the trend where populations continue to densify around large amenity-rich city centers. Our preference is to be within a 45-minute drive of large Metropolitan Statistical Area (MSA) that are 100,000 or more with above national and regional average growth. We seek out deals where the “guts” of the apartment, such as electrical, plumbing, and mechanical, are all at or near present day code. That means we filter based on age of construction. Lastly, location is absolutely critical. The building must be somewhere people want to live.
Unless you have a clear idea of what you need, you won’t be able to find the perfect deal.
3. Use Different Sources
Use different sources to find valuable properties. Generally, these can be broken down by on market and off market
- On Market
- Multiple Listing Service (MLS)
- Broker websites
- Auctions
- Off Market
- Brokers
- Direct-to-seller
- Social media
Being active in your outreach is the most effective way to ensure you’re top of mind when somebody is considering or actively selling.
4. Do Due Diligence
Deal sourcing isn’t complete without proper due diligence. Suppose you receive an email from a broker that a Dallas-based property has a 100% ROI in the next 12 months. Your next step would be to verify this claim by checking the property’s:
- General and special exceptions on Title
- Physical condition
- 3-year renovation history
- MEP systems (mechanical, electrical, plumbing), roof, windows
- Financial condition
- Rent Roll
- 3-year Operating Statements
- Vendor contracts
- Insurance coverage
- Tax rates
- Neighborhood dynamics
You might also want to bring in lawyers and surveyors to make sure this property. Are you looking for a simple way to perform due diligence with no money out of pocket? Download our Guide to Due Diligence for FREE to learn how you can operate like the real estate professionals.
At Gold MF, our due diligence process is lengthy and typically encompasses 30-45 days. We push to have everything, minus the physical inspection of each unit, done prior to going under contract. Your contract-to-close ratio is a metric that brokers will consider when pushing you off market deals.
5. Negotiate Like a Pro
A key skill every deal sourcer must have is to know how to negotiate. Learn what motivates the seller so you can craft your offer in such a way that gets them what they are looking for while getting you a deal that fits your needs.
An often-recommended book Never Split the Difference by Christopher Voss and Tahl Raz. This classic is a compelling guide that transforms traditional negotiation strategies by leveraging the psychological techniques used by the FBI. Voss's practical advice and real-world examples make it an invaluable resource for anyone looking to enhance their negotiation skills in both personal and professional settings.
6. Talk to Brokers
Stay in touch with brokers to get news about the hottest off-market deals in real estate. Have regular communication with each of the top performing brokers in your targeted asset class.
At Gold MF, we systematically meet with each of the brokers in our target markets. This gives us a leg up on competitors by providing additional time to vet a deal before other buyers get a chance.
7. Attend Industry Events
Networking gets easier the more frequently you do it. That’s how you get the news about what’s new in the world of real estate. These events will provide invaluable insight that will help you identify new deals or even new ways to invest in the same asset category. Maybe you’ve been buying and holding multifamily in a traditional way. At an event, you might learn that you can convert the units into individual condominiums and sell them to homeowners for a premium.
8. Research Your Rivals
Ever thought of working with your rivals and joining forces with market competitors? Consider forming strategic partnerships. The beauty in real estate is that it is both a team-based industry and is not a zero-sum game. We can all be winners.
For instance, if larger real estate deals are outside of your scope, then you and your strategic partners can access them by pooling your resources.
What Lies Ahead?
Effective deal sourcing is the foundation of building a successful, profitable investment portfolio. Finding deals with a value-add opportunity is both a science and art. It requires consistency and discipline as well as strong communication and negotiation skills.
It’scritical to keep in mind that deal sourcing is an ongoing process. A deal that may look profitable today may decline in value due to ever-changing market conditions, and the opposite is true, too. That’s why it is important to stay up to date with the latest industry trends. Make networking your strong suit and keep refining your deal-sourcing strategies based on experience and feedback.
Who is Gold MF?
Gold Multifamily is a Leading Real Estate Syndication & Investment firm that invests in premium and value-added multifamily properties. We offer expert syndication and lucrative real estate investment opportunities.
Come explore our comprehensive services in real estate syndication and property management, designed to maximize your investment returns.
Schedule A Meeting With Us
Schedule a call with Gold MF to explore how we can help you achieve your passive income goals through investing in cash-flowing multifamily real estate.
