Reputation Is Everything

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“A good name is more desirable than great riches; to be esteemed is better than silver or gold” – Proverbs 22:1

When trying to purchase multifamily assets, you quickly realize that you have some stiff competition. There are many groups who understand the value of a multifamily asset. They understand the value of cash flow and how it affects their business model. However, not all buyers are created equal. One of the main hurdles we had to overcome as a new syndication group was a proven track record. When you first get started in multifamily, you must make a name for your company. This occurs on several levels. When you first start out, you are unknown to the multifamily community. This community, although national in its scope, is still a very small world. Owners know other owners, and brokers know repeat buyers and sellers. How do you enter a market and immediately make a name for yourself as a reliable buyer? To answer that question, let’s look at the definition of a reliable buyer…

A reliable buyer is a group that has credibility. In other words, they are not just “tire kickers.” There are many groups out there who are just throwing the proverbial spaghetti against the wall and hoping something sticks. These are groups that do not pay attention to the broker’s guidance on pricing and simply use their own, unproven model to underwrite a deal. The problem with this is often it ends up coming in way under guidance, or heaven forbid, way over guidance. A reliable buyer is someone who listens to the broker and bids based on what the broker’s guidance is on the deal (when the numbers meet your investment criteria).

A reliable buyer is one in which the broker and the seller feel confident in their ability to close the deal. This includes touring the property before calling for offers. If you have not shown enough interest in the deal to even take the time to come and tour the property, you will most likely not be taken seriously when offers are received. It’s very important to us that, not only do we tour the deal before the initial call for offers, but one of our managing partners tours the deal. This way the broker and the seller feel like they are dealing with the decision-makers of the group.

A reliable buyer is one that proves they have done their homework. Many brokers are interviewing you while you are touring the property. They ask questions like, “which property management company will you use?” and “what have you underwritten for vacancy during the value-add phase?” These are often test questions to see if you have done your homework and if your assumptions are correct. The team always involve our proposed property management group in our underwriting process prior to touring a property to make sure that we have a proforma and rent analysis. The proforma is the expected operational cost and “other income” line items in the operations budget. The rent analysis is the study of the surrounding comparables to see what rent is achievable and what amenities are necessary to achieve said rents. In addition to this, we also put together a renovation budget based on the rent analysis that outlines the cost of renovations to achieve the maximum rents that the market will yield.

A reliable buyer is one who shows that they have the ability to close from an equity standpoint. Let’s face it, there are a lot of people out there trying to buy multifamily properties. Many of them still work a W-2 job and try to do multifamily on the side. While I compliment them for their work ethic, it does not help build credibility with brokers and sellers if you are not full time in the multifamily space. The main reason for this is if you still have to work a W-2 job that is not in the multifamily space you may not have the net worth necessary to be a reliable buyer. If the broker understands that you make your living doing this then they are more at ease knowing that your whole well-being is vested in your reliability as a company to buy multifamily.     

A reliable buyer is one that has the net worth to take down the asset in question without the assistance of another party. Often when we get to the final round in purchasing a property we are asked if there are any more parties that need to approve the purchase before it can close. Our answer is always “no.” If you have to involve an outside party for a loan guarantee or you have someone outside of the managing partners that is making a decision, it can slow the process down and cause problems when it comes to closing. Since we at are all equal partners, we make all decisions together and need no further authorization from someone outside our company.

A reliable buyer is one with a proven track record of success. While there is no shortcut around this other than successfully purchasing assets, there are ways to show your success as a group financially and in other business ventures. Perception is reality and we make sure that we are always perceived properly as we have been successful as individuals and as a group in other business ventures.

A reliable buyer does not waiver. Once you get that first property under contract, be sure not to delay or re-trade for any reason. If you get the reputation as a smooth closer that provides a stress-free and enjoyable closing for the broker and the seller, you will become known in the industry as such. This is where your previous due diligence, underwriting, and business savvy come into play. If you know what you’re doing and have done your homework, there should not be any surprises when it comes to the closing table. This is probably the biggest piece of the puzzle when building a reputation. When big sellers hear from other sellers how easy you are to work with and how seamless the closing was, they are happy to award deals to you over other groups that do not have your stellar reputation.