What is there to do if you can’t find opportunities out there? What goes into buying deals off-market? In today’s #Highlights episode, we look back at our conversations with real estate entrepreneurs Brian Burke and Darin Garmin, and they answer these questions.
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Brian starts by exploring the nature of off-market deals and talks about the conundrum of establishing oneself in the market. Meanwhile, Darin sheds light on communicating and building relationships with building owners, which is the key piece of off-market purchases. Tune in now and find out how you can find that elusive off-market deal today!
Key Points From This Episode:
- Brian’s definitions of off-market deals and how they typically work.
- How to set yourself up as a buyer; getting those important calls from a broker.
- Brian’s advice for getting going in a market and starting relationships that matter.
- Why Brian is committed to staying in communication with as many brokers as possible.
- Why Darin believes bringing a broker into a deal is a good idea and has some benefits.
- The importance of being aligned with one specific broker rather than working with many.
- How to find a specialist broker and build a relationship with them.
- Why investors should spend more time communicating with owners of buildings they’d like to buy.
- Find out how bypassing brokers reduces competition for properties.
“There’s the off-market deal which is one where someone wants to sell and they call every broker they know, telling them they want to sell and asking for their opinion of the property’s value.” – Brian Burke
“[There’s] off-market deal is the one where you’ve got the seller that just is completely overpriced, every broker is way too embarrassed to take it out to market at the seller’s price because they know nobody’s going to want to buy it at that price so they call up their most inexperienced buyers, the ones that have been hounding them and annoying them the most to buy something that no one will sell to.” – Brian Burke
“[There’s] off-market deal is the one where the seller says to a broker, “Hey, you know, you sold me this deal, I want you to sell it for me.” – Brian Burke
“But what most investors don’t really spend enough time on, is consistently contacting the owners of the apartment communities that you think you want to own.” – Darin Garman
“When we figured out that this was a really good formula to use, this is what we spent probably 80% of our time on contacting and building relationships with these owners.” – Darin Garman
Links Mentioned in Today’s Episode:
WS301: Managing Profitable Broker Relationships with Brian Burke
WS612: Purchasing 400 Doors Off Market Last Year with Darin Garman
About Brian Burke
Brian Burke is President/CEO of Praxis Capital Inc, a vertically integrated real estate private equity investment firm. Praxis operates on multiple platforms, currently managing active syndications for the acquisition of multifamily, single-family, and opportunistic residential assets in US growth markets. Brian has acquired over $400 million in real estate over a 30-year real estate investment career including over 2,500 multifamily units and more than 700 single-family homes, with the assistance of proprietary software that he wrote himself. Brian has subdivided land, built homes, and constructed self-storage, but really prefers to reposition existing properties. As a recognized expert Brian has been a frequent speaker at real estate forums and conferences; including the SF Bay Summit, Opal Family Office; Private Wealth Management Forum, the Keiretsu Real Estate Forum, and the Institute for Private Investors. He has also served as co-host and real estate expert on the Fox News Radio show, “The Best of Investing”.
About Darin Garman
Starting his multifamily real estate career out of college as a prison guard of all things, over 25 years ago Darin Garman began his real estate investment experience as a real estate broker as a way to leave his prison guard job. Since that time, Darin took the entrepreneurial path and has established himself as one of the nation’s most “looked up to” experts in the world of apartments and commercial investment real estate. Since entering the world of multifamily investment property Darin has been responsible for over $800,000,000 in apartment and investment property acquisitions, sales, and investment and has become the “go-to guy” for those looking for profitable long-term plays in conservative apartment investments. Darin has also raised over $100,000,000 in funds for different apartment investment properties. Darin also has experience as a founding member of a startup bank – Family Merchants Bank of Cedar Rapids. Darin was one of the founding members and owners of this bank. In this capacity, Darin not only was an owner but also sat on the bank’s Board of Directors and was a member of the bank’s credit committee. Darin remained an owner and shareholder of the bank and remained on the Bank Board of Directors as well as on the Credit Committee until the bank was sold approximately three years later. Not only is Darin very familiar with not only maximizing value and cash flow from investment real estate but also currently has ownership in whole or in part in over $50,000,000 in the apartment and commercial investment real estate throughout the heartland and is a guest on investment real estate panels, podcasts, seminars, and investment radio talk shows. Darin also is an accomplished author of 5 books including Renter Nation, Getting Rich in Real Estate Partnerships, Paranoid Banker Secrets – A Conservative Investors Guide to Double Digit Returns in Any Economy, plus The 9 Month Investment, A Passive Investors Guide To Achieving 10 Years of Wealth Accumulation in Only 9 Months. Also, Darin has been the co-author of books such as – Wealth Attraction or Entrepreneurs…The No Holds Barred Kick Butt Guide to Becoming Rich with business and marketing guru Dan Kennedy. Darin oversees the management of over 30 real estate partnerships as well as the properties owned by the partnerships on a day-to-day basis and is very familiar with what needs to be done as an investor and owner of these properties to maximize value and return for investors and owners. Darin graduated from the University of Northern Iowa with a BA degree in Criminology in 1989. Darin is originally from Algona, IA, and currently lives and offices out of Marion, Iowa. Darin has been married for 31 years to Gina Garman and has three children, Madisen who is 27, Malory who is 23, and Isaiah who is 20.
Whitney Sewell (WS): This is your Daily Real Estate Syndication Show and I’m your host, Whitney Sewell. Today is a Highlights show that’s packed with value from different guests around a specific topic.
Don’t forget to like and subscribe but also go to LifeBridgeCapital.com where you can sign up to start investing in real estate today. I hope you enjoy the show!
WS: Our guest is Brian Burke. Thanks for being on the show again Brian.
Brian Burke (BB): Thanks for having me.
WS: We’re going to talk about sourcing deals and how you’ve done that, how it’s evolved over your career, and things like that, and dive in. You know, maybe get us started by how you found those deals and then dive into the details.
BB: Yeah, this one was interesting, you know? Our hit rate on marketed deals is about as close to zero as you can get. But this one, they actually worked out, it was interesting because two different brokers listed two adjoining properties for sale from two different sellers at roughly the same time and it just so happened, that we managed to get both of them. And I think in part, it was because we leveraged one off the other and said, you know, “Hey, we’re going to be more motivated to close than any other buyer because we’re also trying to buy the deal next door.”
And when we get the deal next door, then we could go to the other one and say, we’re going to be more motivated to close than the other buyer because we have the other one next door in contract and so that really helped us get the second one and it wasn’t the easiest battle because the multiple final rounds and in the last sort of stuff and all that sort of stuff and we weren’t originally picked but we worked the highest offer and so we had to really do some convincing that we were going to be the right ones to actually get the thing done.
A lot of work, a lot of back and forth with the brokers and sellers but we managed to get there.
WS: Wow, sourcing those deals, obviously you had relationships with these brokers, right? But you said, your own market, the properties that you see that are own market that you’re purchasing is like zero?
BB: Yeah, our hit rate on marketed deals is very near to zero. There’s a lot of competition out there for acquiring multifamily assets as you well know and everybody who listens to this show I’m sure that it’s a competitive landscape out there and really, the one thing that gives any buyer a leg up in sourcing deals is a track record with the broker. And fortunately, we had track records with both of these brokers, they both knew us, we close with one of them before, with another one we hadn’t closed with yet. But of course, they knew that we owned over a thousand units in the market and you know, that sort of stuff. That went a long way but normally, most of the stuff we buy is off-market but every once in a while, we get lucky on a market deal and it’s not for lack of trying, I mean, we’re underwriting every marketed deal and the markets that we’re active in. We don’t usually get them.
WS: Okay. I’ve heard different people talking about an off-market deal and what’s a real off-market deal. Could you elaborate just like the broker sends the deal, he says it’s off-market but is it really off-market? Could you just tell us – walk through that a little bit.
BB: I define off-market deals and they’re residing in one of three different buckets. There’s the off-market deal which is one where someone wants to sell and they call every broker they know, telling them they want to sell and asking for their opinion of the property’s value. All the brokers render those opinions and then immediately call every buyer on their list, trying to round up a buyer so that they can get a leg up on getting the listing by telling the seller, I’ve got two buyers that really want it, so give me the listing or I’ll get you the offer beforehand or they’re trying to get in before the other broker gets the listing, right? That’s off-market deal number one, there’s not much difference between that and a marketed deal because everybody knows about it. There’s probably been 30 people on that deal and just as if they’re putting it on the market. That’s category number one.
Category number two off-market deal is the one where you’ve got the seller that just is completely overpriced, every broker is way too embarrassed to take it out to market at the seller’s price because they know nobody’s going to want to buy it at that price so they call up their most inexperienced buyers, the ones that have been hounding them and annoying them the most to buy something that no one will sell to. They’ll see if one of those will bite at this ‘off-market’ great deal and basically, they’re just looking for soccer. That’s off-market deal bucket number two and in my opinion, it’s probably the most common ‘off-market’ deal and it’s certainly the most common one that you’ll hear about from anyone that hasn’t done a lot of volumes.
The third bucket of an off-market deal is the one where the seller says to a broker, “Hey, you know, you sold me this deal, I want you to sell it for me. I really don’t want to spook my employees and have this thing sitting on the market, having 20 tours, you know, just get me an offer from your top buyer,” and that broker will call one, two, or three at their most reliable buyers and offer them the chance to buy it without it going on the market. Those are the kind of off-market deals we’re looking for.
WS: Our guest is Darin Garman. Thanks for being on the show, Darin.
Darin Garman (DG): Hey, thanks for having me. I’m looking forward to chatting with you today.
WS: Let’s talk about how you’re finding so many off-market properties. Some techniques there that you’re using and how you’ve made that happen. It seems like a foreign topic almost to a lot of people that are doing larger multifamily. It’s not something that could even be done or you know, just focus on that relationship with brokers. And you know, don’t even talk about that, don’t even focus on that thing over there, contacting sellers like maybe you would focus on if you were doing single family or small multis.
Get us started and maybe a process and how you’ve been so successful?
DG: The first thing before I get into the exact process that we use and we’ve been more successful with this, we don’t abandon using brokers. And we don’t abandon doing things on our own like you know, being members of meetup groups or landlord groups or mastermind groups. We still do those things. We really have really kind of two flows of potential properties coming across our desk. You got the using the broker of course and then doing some of those personal things like the landlord groups and the meetup groups and those kinds of things.
But one area that most investors know about. What I’m going to talk about is it’s not a mystery here, this isn’t something no one’s heard of. But what most investors don’t really spend enough time on, is consistently contacting the owners of the apartment communities that you think you want to own.
When I say that, there are probably a lot of investors that have done this. Maybe they’ve sent letters out, maybe they’ve even called these owners and maybe they’ve even had some personal conversations with them. However, I can guarantee that 99% of the investors that are watching or listening do not do this on a consistent basis. They maybe do it once a year, maybe twice a year, maybe once every couple of years.
Well, here’s what we found over the years: By consistently communicating with and contacting these owners, once they decide they want to sell – Because here’s the problem that we’ve got as investors. The problem is, these owners don’t want to sell when we’re ready because we’re basically always ready. They want to sell when they’re ready. It makes me kind of grouchy just thinking about it because –
WS: That’s a problem isn’t it?
DG: We want to buy stuff all the time. We want to do deals all the time. But the problem is, they’re ready when they’re ready. When they’re ready, Whitney, I want to be one of the first people they think of when that happens. I can tell you, most owners, most, not all, most owners do not want three brokers parading into their office and giving them a PowerPoint presentation on how much money they can get them if they listed the property with them for sale.
They would rather, “Hey, I know this Darin Garman guy. He’s been communicating with me now for about three years. He keeps telling me he has an interest in buying my property. Let’s call him.” What happens is, that they end up calling us. And as you mentioned, last year for example, you know, we purchased 400 units with owners directly contacting us, bypassing brokers or any other ways of getting a deal done.
Now, here’s what that does. That eliminates so much competition for these properties, okay You know as well as I do, the norm nowadays is what they call offers. Call for offers is basically a protracted, prolonged auction process where basically the high price gets the property. That’s the worst way to buy property. Not only if you buy or are you paying more than you probably should be, but if you don’t, you’re maybe a little bit pissed off you missed out on.
Well, a great way to even bypass that is to have the owners contact you directly. And when we figured out that this was a really good formula to use, this is what we spent probably 80% of our time on contacting and building relationships with these owners.
Again, we still use brokers. We still do things on our own but we spend a lot more time communicating with these owners. Again, the key word here is consistent.
WS: You say, 80% of your time, just mean like of the time you would be normally looking for deals or contacting brokers, you’re spending 80% now of that actually being consistently reaching out to sellers of properties that you are interested in?
DG: That is correct. So if you took all the time that we spent on let’s just classify it and looking for deals, 80% of that time is spent on finding those apartment communities that we want to own and then finding out who owns those communities and then developing a process of communicating with those owners of those communities.
WS: How do you find them?
DG: Well, the first thing that we’ll do is – Every state is probably a little bit different so I am going to be talking about what we do here in the great state of Iowa. We go ahead and we’ll contact the city or the county tax assessor. So, the city or the county tax assessor will have the owner’s information.
And we’ll find these properties in many ways but usually, we’ll do an online search and figure out online and get the properties that meet our criteria based on size and location. We may even do some driving. We may even use what used to be called shoe leather work. We get into our cars or vehicles and drive around and check and see if find any communities that meet our criteria. But once we do that then we’ll contact the city or the county tax assessor and they will have the owner’s contact information.
But here is a problem that many people will run into at this point that stops them: That contact information is only in the name of usually an LLC or a corporation.
So, the next step then is if we find that, we’ll then get in touch with the secretary of state. And the secretary of state will have information on that company and that company’s principals because that company will have to have registered with the secretary of state in order to do business in that state. And so, we’ll go to the tax assessor first, using the tax assessor’s website, county tax assessor or city, we’ll find out the owner’s information and if it happens to be a company our next step then is secretary of state which will have that contact information there 99% of the time. And then that is where we find out who owns the property.
[END OF INTERVIEW]
Whitney Sewell: Thank you for being a loyal listener of The Real Estate Syndication Show. Please subscribe and like the show. Share with your friends so we can help them as well. Don’t forget to go to LifeBridgeCapital.com where you can sign up and start investing in real estate today. Have a blessed day!
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