With rising rents and reduced cap rates in DFW, it is extremely tempting for many property owners to cash in and sell their Multifamily assets before the end of the cycle. There was a lot of talk in 2015 about the peak in Multifamily prices. Well, prices have continued to increase through 2016 and if you own a C class multifamily property, you may be pleasantly surprised from a broker’s appraisal. No one knows when the cycle will end, but I am confident that we are closer to the end of the cycle than to the beginning of it.
In this competitive market place, brokers are aggressively looking for new listings hoping to help owners capitalize on those gains. There are many reasons an owner chooses one broker over another. This blog lists a few things to consider when choosing a multifamily broker to sell or value their B or C class Multifamily asset.
1. Co-brokering: This is a hallmark in the residential world that is more divided in the commercial world. While common sense might specify a clear answer to this debate, there are very few commercial brokers that cooperate. This is either due to a misunderstanding of how to effectively sell properties or due to other priorities, such as the brokers’ desires to control the entire commission. In a recent study of 15,000 records, transactions where brokers cooperated sold for an average of up to 9.6 percent more per square foot compared to those where brokers do not.
2. Multiple Opinions of Value: Just like multiple contractor bids, it is always a good idea to have more than one broker’s opinion of value. Brokers underwrite differently and have a different approach when evaluating a property.
3. Broker specialty: Using a residential broker for this task is a horrible idea even if it is only an 11 unit complex. The marketing strategy that must be employed is a world of difference from marketing a residential property. Same goes for the location of the property and asset type. Using a broker that specializes in small apartment buildings in East Dallas and knows that market like the back of his hand may not be the best broker to use when marketing a 250 unit B Class property in Richardson. Using a broker that specializes in other types of commercial real estate strip malls or commercial buildings to sell multifamily property is also mismatched because they will not have the right database of buyers or tools to effectively value and market the property.
4. Inexperienced: An inexperienced broker may be hungry for the business, but may not know all the ins and outs or even know how to market the property efficiently for proper sale. He also may not know how to handle different aspect of the transaction or know how to deal with potential buyers.
5. Brokers that buy listings: Some brokers create unrealistic pro forma underwriting to inflate the suggested sales price to get the listing over the other brokers competing for the listing. Coming to market at a price point higher than the market is willing to pay will cause the property to be on the market for too long and be shopped. There is much lost momentum if the property is put to market at an unreasonable price point and could be the kiss of death for the marketing strategy.
6. Broker with too many listings: A broker that has too many listings may not be able to give your property the right attention it needs to sell right.
7. Broker that does not invest himself: A broker that is also an investor provides so much value because they can show you some ideas you may have not thought about to increase the value of your asset and prepare it for sale. The can also provide you with referrals for inspections, lenders, tax consultants, and they know how to speak the lingo and navigate the waters for you.
About Angel Flores
Angel is a multifamily broker for SVN/TJF Investments in Dallas and an investor that owns multifamily and residential property in DFW.
Angel began his real estate career in 2010 with the purchase of several single family rental homes. Multifamily investing was the next logical step and in 2014 he and his investment group purchased a small apartment complex in Irving, TX. Shortly after, he raised capital and grew his multifamily portfolio by purchasing his second apartment complex…