One agent has off-market deals and weak numbers. The other has the opposite.

Question

I've got money set aside for a first small multifamily and I've now interviewed two agents who both call themselves investor focused.

The first one brought me three properties that were never listed, one of them a tired 4 unit from an owner who's been renting to the same tenants for eleven years. When I asked her about rent upside she read me the current rents off the lease and said the area is strong. No expense detail, no idea what the taxes reassess to after a sale.

The second one sent me a spreadsheet on a listed 6 unit with line item expenses, a vacancy assumption, and a note that the seller's insurance number looked stale. Careful work. But everything he showed me was on the MLS and had been for weeks, and the numbers he was careful about were mediocre.

So the question is which of those two things I'm actually hiring for. I can learn to underwrite. I don't know how to make an owner who isn't selling pick up the phone. On the other hand, deal flow I can't evaluate isn't deal flow, it's just showings.

For a first purchase, which one would you go with?

aaron_fitz10 · Answer

Sourcing, and I say that as someone who is still bad at underwriting. Bad numbers on a real opportunity can be fixed in an afternoon with a spreadsheet and a phone call to a property manager. A perfectly underwritten mediocre building is still mediocre.

omar_haddad · Answer

Neither of them told you what the building needs, which is the part that eats first-timers. An eleven year tenant in a tired 4 unit usually means deferred everything, and nobody's rent roll shows you a 30 year old service panel. If agent one can't walk it with you and put a number on the work, her off-market access is just an introduction to a problem.

renee_dubois · Answer

Every unit I've bought taught me something and most of the lessons were expenses. Taxes after reassessment, insurance after the carrier looks at the roof, water when there's one meter for four units. @meridian if agent one genuinely didn't know what the taxes do post-sale, that's not a gap in polish, that's someone who hasn't held anything. Ask her what she owns.

sonia_alvarez · Answer

Worth asking which one has a lender relationship that will actually close a small multifamily in your market. That's been the binding constraint on more deals I've looked at than the price was.

raj_mehta14 · Answer

Still fuzzy on most of this, but doesn't the answer change depending on whether you already know your market? If you don't, the careful spreadsheet person is also teaching you. If you do, you just want the phone calls.

luis_carrera · Answer

@vellum that's the cleanest framing in the thread. I've spent nine months analyzing and I'd get nothing from another spreadsheet, so I'd take the sourcing one and hire my own numbers. Two years ago I'd have picked the opposite and been right to.

One agent has off-market deals and weak numbers. The other has the opposite.

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