The property tour is a function of working with realtors on the multifamily space. How you conduct this process may “make or break” a new relationship with a realtor. There are only two ways to find multifamily deals. Go directly to an owner or work with a realtor. That’s it.
This article will assume that you have identified a potential asset through a commercial multifamily realtor. As a reference, here is a quick breakdown of the buying process.
- Identify an asset for acquisition.
- Contact the listing agent.
- Analyze the deal.
- Tour the property with the realtor.
- Make an offer.
- Go to contract.
- Conduct due diligence.
- Close the deal.
The reason I give this overview is to start by saying that the property tour is NOT due diligence. This is the number one question or mistake I see people make when discussing the property tour.
The tour is simply that. A quick meet-and-greet with the realtor, the property, and management. That’s it. You will simply be looking at a few units on the property and getting a general feel for the location and condition of the buildings. If you do not have a relationship with the listing agent, then this will begin that. Make it count.
Due diligence is the process in which you will inspect every unit and conduct your research on the property. The property tour will be a look at only a small sample of units. Here is the process step by step.
- Identify the asset.
- Go to the realtor’s home site and download all the relevant info so you don’t ask questions that were already answered in the offering material.
- Get relevant financial information if possible.
- This will be a T12 and a rent roll.
- Analyze the deal.
- Contact the listing agent to set up a property tour.
- Don’t ask a lot of questions at this point. Save those for the tour.
- Meet the realtor at the property.
- Meet at the management office if there is one.
- Don’t be a jerk and take up front row parking. Save that for prospective tenants.
- If you show up to the office before the realtor, do not start asking the management questions. Realtors like to be present to represent the owner when the management is interviewed. Step outside and wait for the agent to arrive before you engage management.
- This goes for tenants too. Don’t interview them either without the realtor present.
- Dress code is usually business casual to business depending on the realtor and the company they work for.
- Go on the tour.
- This will be a short walk around the property and a look into a few units.
- The manager or realtor may already have a tour planned out.
- If no tour is planned, you will want to see the following units-
- 1 of each floorplan type. (1bed, 2bed, etc.)
- All vacant units
- Any units that are considered “down” or unlivable.
- Walk around the outside of any buildings and in any common areas on the property.
- Vending areas or laundry areas.
- All amenities such as a pool area or fitness center.
- Generally, keep your eyes open and take a quick look at anything that seems out of place.
- This is the time to ask questions. If you have questions about the operations or anything you found in the financials, ask them during the tour and avoid lengthy “homework” like emails to your realtors.
The property tour usually lasts from about 20 minutes to about 45 minutes depending on how large the property is. Don’t worry if you see things that concern you about the condition of the asset. Just make note and know that you will have an opportunity to conduct a full inspection during the due diligence process.
You will not be receiving due diligence items at this point either. You will most likely have financial information (T12 and rent roll) provided by the realtor or management. It’s ok to ask questions about this information but you should not expect to receive items to validate this, such as bank statements or tax returns. That data would be provided during the due diligence process.
For more information like this check out www.RealEstateRaw.com and join my Facebook group Real Estate Raw for Investors.
Best of luck!
Bill Ham
