How Brokers Find Off-Market Deals in Commercial Real Estate

0:00 People have the notion that off market deals or steals. I've I've never sold an off market deal that's a steal. It's always been, I would say definitely at market or sometimes slightly above, but for the right asset groups would pay top of the market anyway. So it's just about, you know, finding the right group for that deal. We are here today with David Cohen live in the flesh. David, thank you for being on the show today. My pleasure. Thanks for thanks for having me. David, for the listeners, who are you? What do you do and where do you hail from? Yeah. So my name is David Cohen. I'm a broker based out of Los Angeles, CA, more primarily the San Fernando Valley. I like selling off market, primarily institutional size multifamily apartments across a few states. So unless I'm completely mistaken, I believe that would be the dream.

0:58 How did you hone into that niche? So I come from a family where everyone is pretty much in the real estate field. My grandmother was the first. She would sell residential homes here in Los Angeles back in the 70s or more primarily the Valley. My uncle is a big residential real estate agent and developer as well. And then my mother did loans. So you know all that was around me and it was a given that I was going to get into doing something in real estate. That was a start to to all of this. I smirk when you talk about how everybody in your family does real estate because my family is the same. You're either a doctor or you're in the business and reverse nothing. So it's funny, but OK, the dream. Everybody wants to do the biggest deals, but say you're a junior broker, you're just starting in the business. How do you work your way up to those institutionally owned deals?

1:55 I think first and foremost it's about finding out what you want to do in the sense of do you want to go the traditional route, right, which is going to Marcus and Miller Chap or a CVRE or something of that nature and, and focus on getting the listings of those deals and, and which obviously will take time. Hopefully from there you go to like, you know, an IPA or something of that nature. Or in my case, I never went that route. Funny, interestingly enough, I did interview Eminem before when I wanted to get into commercial real estate but didn't end up going with that ended up going to like a kW just because you know, and nothing is wrong with any of that. It's just the type of person that I am and what I was into is just the more freedom, right?

2:35 Being able to have the freedom to to do what I want in a sense of not being bound to a certain style of approach. And you have to do things this way. And if you don't have financials or you do have, there's no deal here. I can really just take the shots that I want to take, do the things that I wanted to do and and obviously more so than not, save a lot more money on the commission's that I would be making, right? I think that's the first part. The second part is if we're talking about just doing larger deals with like institutional groups or just larger groups in general, start with finding out who the biggest players in your in your market or whatever markets you are. And when I say biggest, I don't necessarily mean go for the biggest, baddest buyers, but you know, go look who, and that can be mom and pop family offices or, or just larger groups in general and go find out who's actually buying these things, right?

3:30 Who's consistently active? Who's buying the type of product that you want to work on? Find out their buying criteria and then go find them deals. I think that's that's that's the easiest way to jump in. OK, So in a world where there's so much noise and so many notifications, how are you getting through to the owners on these deals? Yeah, I believe in cold outreach, right? That's oldest proven trick in the book, and I think it'll will forever be here if you know If I can get to the decision maker via phone, I call and if not I I e-mail.

4:11 OK, so how do you get the T12 or the rent roll out of these folks if they might have not been planning on it, right? That could be a wind. I think it really depends on what you say, how you say, when you say it, right? More so than that, though, you have to understand that not everyone is, you know, willing to give, give up that information off the bat. They might want to make sure that you're real or whether they just give you a price or whether they, you know, they give you financials and no prize or whether they give you nothing. I think what allowed me to be able to navigate through those things and just kind of crack open those those little doors is simply who I know, right?

4:52 It's, it's all about who, you know, right? I'm just simply referring to the buyers, right? I'm in a place where because of not just because of the deals that I've done, but you know, I just have the buyers of all shapes and sizes and relationships with the acquisition directors or the acquisition guys or the chief investment officers at these companies that trust me. And if I tell them there's something there or there may be something there, they'd be willing to underwrite it with or without, you know, any financials. Now, getting financials out of especially institutions is not easy, especially when they have no motivation or and you're just reaching out to them out of the blue. You know, a lot of times when you get that response of like, you know, if we're not considering selling list, but feel free to send an offer, right?

5:37 Going and getting an offer from a credible group is, is kind of sometimes what cracks that door open, right? And that, that's that's kind of the the the first start, right? If I can get that, I can submit that, right? Show them that I'm real. And then you kind of find out if there's any motivation there, right? Obviously when you're submitting that you let them know that, you know, if they were open to giving you financials or giving you whatever you need to underwrite or have your client underwrite to tighten that OfferUp and and submit a best foot forward offer. You could do that, you know, very quickly. And then a lot of times they they're like, here you go. And then, you know, another thing is even if there's no motivation, right? Sometimes you, you, I just ask really right, like I would rather shoot my shot and get a no then not shoot my shot at all, right. So if somebody, you know, opens the door for me and tells me, feel free to submit an offer, right? Well, I'm going to let them know, like if is there any chance you'd, you know, you'd be open to giving me a rent roll on AT 12:00 so that I can, you know, bring you something best foot forward, right, based off of real numbers. I'm I'm not looking to waste your time. I'm not looking to waste my time nor my client's time, right? So, and then obviously, you know, I can get you, you know, a back of the napkin offer all day. And, and it's not, you know, it's never like, hey, here's a, a lowball number, right?

6:48 It's always, I only, I pride myself in building relationships with only, you know, credible, active and sophisticated buyers on all three levels, right? Whether it's mom and pops, the, you know, larger family offices and, and, and the institution so that, you know, and they understand what we're doing here. You're not going to get any deals or crack any windows open by simply just submitting something that that you know, is not going to work, right? But having those relationships and being able, you know, I call it to do anything I canmore so they're not kind of kind of crack those things open. I also like to work very calculated, very kind of like sniper driven step by step.

7:30 If I get any sort of response where I feel there might be something even remotely there, for example, something along the lines of like, you know, feel free to send an offer or, you know, we're not sharing anything or, but we have a client that is open to taking an offer, feel free to do so rather than just responding there on the spot. All right, I'll take back. I made my research call a couple relationships or a buyer, see if this is something that that they would look at. I kind of gauge, you know, their interest level. Then you get it. You get a response from someone and say, oh, that's definitely something we'd look at. If you have financials on that, we'd be all over that right now. I know that I have somebody lined up that is gives me a gut feeling that they're somewhat excited about that.

8:12 I'm idiot. I know if I am able to get financials or even if I'm not right, I can spend some sort of story to have them possibly write an offer without financials. Or, or even when I go and respond to, you know, the, the the seller or the owner in this case, my response is gonna be much more, you know, punch in the face, ready to go. You know, this is who my client is. This is little bit about them, you know, if you're open to sharing even a red rolling T12, you know, I'm I'm happy to sign an NDA. They're happy to sign an NDA and I can just come a lot more harder with a, with a lot more confidence, you know, at this owner to try to pry open what I what I need to, to be able to do so. So why would an owner sell on market verse off market in one of these capacities?

9:01 Yeah, You know, I think when you're dealing with larger, you know, institutions and rates and stuff of that nature, it it's, you know, bound to take it to market, right. I mean, it's, it's just, you know, protocol. That's just what they do. But you know, it can be for many different reasons. I think people have the notion that, you know, off market deals or steals. I've, I've never sold an off market deal that's a steal unless it was like a mom and pop, you know, building owned by two mom and pops and so forth. But it's, it's never been a steal. It's always been, I would say definitely at market or sometimes slightly above. And it could be for many reasons. Maybe they, you know, they would just prefer a quiet deal rather than going through the process of marketing and everybody knowing that it's for sale and possibly not selling.

9:48 Also my case, 9% of the time my buyer covers my Commission. So when you're getting to those larger numbers, it can definitely make a difference. And the way that I look at it is like, if I can get to that number, you know, what, what, what's, what's the difference, right? It's, it's quieter, it's way more streamlined. My client will cover my Commission. It'll save them going through a whole process and commissions and and people. For sale sign in front of your multi family complex. People also, you know, it's like I need to take it to market to get to the highest number possible, right? And let people, you know, do a bidding war or whatever. But for the right asset group, it would pay top of the market anyway.

10:29 So it's just about, you know, finding the right group for that deal. Yeah. OK. So there's this interesting progression. As a broker, you are starting out, you're doing your ones and twos, right, small deals just to get deal flow going. But then you know that there's a world where you can go out and slay these elephants. And by slay the elephants, I mean do large transactions. How did you get from essentially the ones and twos to the elephants? What did the transition look like for you from that shift? In the beginning when we started to put deals together, right, my job was like selling 10 to 30 unit deals in Koreatown. That was my area.

11:24 This was prior to meeting the individual kind of at the off market approach to stuff in 2000. I saw what he was doing first and foremost, right? He was selling call it like 10,000,015 million, $18 million deals. And I noticed the listing was like, you know, why do I have to list a property if I could sell it off market, right? And if I can make right buyer to a deal, they're going to pay, you know, the price that the owner wants anyways. Why not? And so I just really just jumped into shifting my focus. I remember he told me, you know, which I can't say that I, I fully agree with, but I, I think it's, it's just the nature of the beast, right? A lot of the problems and the headaches, right, come with the smaller deals, you know, that actually when you're dealing with the larger just stuff, you're just dealing with more sophisticated parties.

12:09 And it's a it's a little different and you're not, you don't, you don't have to do too much hand holding. But I just jumped in. I just started. He would tell me what his clients would look for, for calling those deals. I would start calling these owners and just simply trying to see if there was a price or any indication or any motivation whatsoever, if they'd even look at an offer. And then slowly, slowly we started doing some deals. And then very quickly and do do the, do the buyers realize as well that wait a minute, it's not, you know, so and so finding these deals, It's it's David, you know, how do we well, the relationship with David, but then also you realize that I am giving away a lot of money for a phone call that I can make myself because obviously the hardest part is finding the deals.

12:59 I am not finding buyers. So that's really, you know, how I jumped in. I think it takes a lot of definitely takes risk. You have to be OK with, you know, not doing deals, you know, every month or, or, you know, sometimes every two months or three months or sometimes longer. No, but in in my case, and I'm only speaking for myself, OK, I don't do real estate or sell because I necessarily love real estate. You know, I just I like putting something together out of nothing. I like the ID of sitting on my computer, cold calling, cold emailing, having an idea of, you know, a client with, you know, might buy this or whatever the case may be. Driving by a building, writing an address and being like, I wonder if I can sell that, you know, starting from a no to one day, maybe walking this property, you know, while you're in inspection, like, what the hell am I doing here? You know, and, and selling that I, I like the art of deal making.

13:55 I like having relationships with these groups and, you know, getting special wish lists or hey, David, which happens to me. Hey, you know, this is a building that we'd be all over, you know, if you can get them to sell like this is our Unicorn like and then just trying to figure out how to go do it. It's funny, it's like, it's like I said, like the most simple and complicated job. Yeah. Yeah. You know, again, I'm solely speaking for for myself, right? I could see how you know, some individuals, you know, like, what do you mean you don't love real estate? Like, you know, what if deals are not happening all the time or you're only working on larger deals and things like that. But it doesn't, it doesn't bother me because I I necessarily more more do it for the sport, but I think because I do it for the sport as well.

14:40 I don't get frustrated when you know, deals fall out when things are are not moving because I also know that I've been there a million times, right? And when you're there, you kind of, you know, the only thing that gets you out of those things is to just go look for more deals. And then the next thing you know, you, you end up doing a deal. So, you know, you never get stressed because you just realize, like all I got to do is pick up the phone or send some emails and leads are going to come. And then you just, you know, you work on those leads and try to get into the finish line. Yeah, no, it's like energy in results out. That's that's really it. I just try to do everything with intention and understand that at the end of the day, even though it is me, it is not me. Oh, and whatever I have or you know, God can make something, you know, 10 deals happen like that in the 2nd. And I and I just do my part, try to be a good person and just have faith that, you know, whatever happens is the way that it's supposed to happen.

15:38 And that's just the way that, you know, supposed to be for me. And it makes life 10 times easier. Maybe 100 times is you wait. If you're, if you're in the right place, I think you can feel that, absolutely. Other people can feel that, too. Absolutely, absolutely right. OK, David, before I let you go today, what is your commercial real estate secret? So I'm going to leave you with one thing and something that, you know, could help anybody who wants to sell larger assets, especially off market. You know, nobody cares, you know, if a deal you brought them didn't work out or they submitted an offer and it didn't work out or, you know, whatever, all they care about is, you know, where the hell does David keep pulling these deals out of his, you know what from? And how do I make sure that every time he does, he calls me first, right?

16:28 And think that's, that's really just it being willing to put in the work, build a relationships and, and find the opportunities and, and, you know, there's really no secret. It's just about doing some research, finding who these groups are that actually, you know, the five these deals that you want to work on. If you reach out to the right person and ask them what they buy, they're going to tell you. And then you just simply have to go punch in whatever data they gave you in the costar and start reaching all bones. Now, if anything, you do it with a lot more confidence because, you know, you actually have these people, right, that, that, that I and these who are extremely credible that just told you what they look for, what they buy.

17:12 And then you, you know, you go find stuff and then you take it to them. And if it doesn't work for them, well, you're not going to let your deal die. Do some research, right? Find out, you know, the next most credible group that you see or that you know, might, might take this thing down and then reach out to them. And the next thing you know, you're, you're, you know, it's a win win situation because you're finding deals, bringing them to, you know, larger groups who are sophisticated and active. And I'd either they're buying those deals from you or you're finding deals bringing them, you know, bringing these deals to, to groups who are sophisticated and active. And they're not buying them from you, but you're building relationships with them and, and, and, and you know what they buy. And you can now, you know, go try to put these deals together. Right. I think there's like a funny distinction between a broker when they feel like they're bugging a buyer or a seller, and then when they realize you're actually bringing a value to a buyer or seller. That's a that's kind of my unlock is like, no, I'm I'm valuable to you.

18:07 I will bring you the deals. I make you money. Absolutely that's why I think it's all about working smarter, right, Obviously working hard, but but working smarter, right. You know, the, the value that I bring to a buyer is, you know, tell me what you buy, I'll go find you deals right now we see it gets way more calculated than that, right? Because you don't want to be shopping deals around and blasting them. You know, if you take a deal and send it to you 5 buyers or 10 buyers and, and, and wait for everybody's feet. Well, now it's not necessarily off market, right? It's, it's about being calculated. You know, who's the right person for this? You know, based off the area, the product type, who you may know that owns around here, who you, you may not know that owns, that doesn't, that owns a route here. And, and you know, maybe it's worth me reaching out to this group 1st that I don't have a relationship with, but based off of whatever research I, I did or I'm doing, I, I think that, you know, they may be a better fit for it and running it by them first.

18:58 But I try to just be, you know, sniper calculated. David. Yes. That's bad ass. Thank you, I appreciate it. For the listeners want to find you, follow you, contact you, I believe you do mentorship and mentored by you. Where can they do so? Yeah. So I just just to be 1,000,000% clear, I am not a coach by any means or a coach by nature. I do for fun. It really happened on accident many, many years ago. But I just like teaching individuals do larger deals and, and changing their lives or their family lives or do whatever they want with it. That's none of my business.

19:38 But but yeah, I just, I, I, I like, I love nothing more than, you know, getting, you know, Adm or getting especially, you know, all I have is is Twitter, first and foremost. It's my only social media, let's call it. I think it's the real David Cohen or the David Cohen, excuse me, under score. So David, thank you for being on the show today. If you have an off market multifamily property, call David, he's your guy. Thank you. Thank you for being on the show today. Pleasure. My pleasure. Thanks for having me. Of course. And for everybody listening, we'll see you next week. That's a wrap for this week on commercial real estate secrets. If you found value, do us a favor and subscribe, leave a review and share it with a fellow commercial real estate lover.

20:30 For brokerage services or to connect, visit warehousehotline.com. I'm Aviva. We'll see you next week.