Multifamily Passive Investing: 5 Ways to Increase Your Deal Flow

If you’re looking to invest passively in multi-family real estate, you need to increase your opportunity deal flow. There are literally thousands of deal sponsors out there.

But who is the best fit for you?

In this article, I’m going to cover five ways you can increase your deal flow by meeting more deal sponsors so you can scale your multi-family investing.

The “Deal Flow Funnel”

But before we get into the five ways you can meet more deal sponsors, it’s really important to talk about the deal flow funnel. As a passive investor, you’re going to be employing the same type of funnel that an active investor or a deal sponsor would put into place to find deals.

Let’s say you are a deal sponsor and you’re actively looking for properties. Most deals come from brokers or direct-to-sellers. So if you can imagine a funnel, the brokers would be up there. Then you have to vet or underwrite the property. So that’s going to be the second part.

Then you have your LOIs (letters of intent) and then you’re going to have closings down the funnel. You’re going to put usually on average 200 deals up at the top of the funnel to get 1–3 good deals under contract, depending on the type of market you’re in and the stage of the market cycle.

For you as a passive real estate investor, it’s all about deal opportunities — passive investment opportunities. So at the top of the funnel, you’re going to have deal sponsors. These are going to be syndicators and fund managers, real estate fund managers, because just like how brokers usually control most of the active listing flow, deal sponsors are going to be your gateway to investment opportunities.

So at the top you’re going to have all your deal sponsors up there in the funnel. And then, in the middle part, we would be doing letters of intent and underwriting and vetting the deal. We would be vetting the deal sponsors themselves. So that means asking for referrals, figuring out how they work and what their personalities are like.

Because let’s face it — there are hundreds, thousands, and even millions of different personalities out there. While one personality might work really well for one person, it might not work for the other.

There are people who really enjoy working with me and I go along great with them. But for another personality, it might not be the right fit. And that’s okay. It’s all about figuring out who you are most comfortable working with.

Because in any sort of real estate investment relationship, you are investing not for a short period of time, but usually for the whole period of 5–7 years, if not more. So you have to make sure you have a good relationship or are able to communicate well. Your communication styles should be very similar so that everybody feels like they’re being taken cared of really, really well.

Now after you have all your sponsors at the top, you start vetting them. You get them on the phone and figure out how they work. And then, in the end, instead of closing on a deal, you would actually close on an investment and invest your money into that syndication or fund.

There are a lot of passive investors who don’t really think of it this way, but you are really working a funnel, just like an active investor would be. The only difference is, you’re funneling sponsors, fund managers, and syndicators — vetting them and putting them through the entire funnel process.

So let’s get into the five ways you can increase your deal flow by meeting more sponsors.

How to Increase Your Deal Flow for Multifamily

1. Referrals

Ask for referrals from current investors that you know. As I always say, referrals are the best way to get recommendations. You can ask the person point-blank about their experiences — what they find the sponsor does well and what the sponsor could improve on.

Or you can ask what sort of issues have come up and how the sponsor handles unforeseen circumstances just like the coronavirus. You can ask a person all these things when you’re asking for referrals.

I strongly recommend seeking out referral sources as the number one source. That’s going to give you a really accurate picture of what the person is all about. And also, if they’re good friends with you, chances are you enjoy their communication style and their personality.

It’s a good fit so it’s most likely that that friend that you know would find another sponsor out there that is a good fit for them. So it increases your chances of finding somebody that works really well for you as well.

2. Conferences

Real estate conferences are great for both active and passive investors. Because if you’re a passive investor, you can go to a conference and there’s going to be people speaking on stage. There’s going to be other vendors and exhibitors there.

I’m actually hosting the multi-family conference next May. In May 2022 in Toronto, we have people coming from all over the United States and Canada to Toronto. Kevin O’Leary will be our keynote speaker. I’m really excited to have a shark from Shark Tank.

So head on over to multifamilyconference.ca to get your tickets. Early bird tickets will be on sale in the next couple of days. So I just want to invite everybody out to the multi-family conference.

But it doesn’t have to be the conference we are hosting. It can be any other conference out there. But if you’re a passive investor, don’t just think it’s for active real estate investors. Go there. Talk to the speakers. Talk to the exhibitors.

We’re all about adding more sponsors to the top of your deal funnel. And as you work them through the process, you’ll find people who don’t work well for you. But all we’re doing is finding strategies to add more people to the top, so you can start getting more people and in turn get more passive investing opportunities.

3. Podcasts and YouTube

Podcasts and YouTube are great resources for potential deal sponsors. I’m a big fan of YouTube and video, but I also host a very successful podcast called Real Wealth Through Real Estate. What I do on the podcast is interview a new investor every single week.

So if you’re a passive investor looking for experts out there, actively doing deals, check out some major podcasts out there. And check up on the guests to reach out to them. With my podcast, I’m sure most other people do the same thing. They’ll actually have the guests tell people where they can get in touch if they’re interested in learning more.

It’s up to you to decide if that person is good or not. That’s going to come in the vetting process. If, when listening to the podcast, you get a good vibe from the person — if you’re resonating with them or if their story or style of doing business is resonating with you — add them to your list. Start the vetting process. Narrow things down.

4. Meetup groups

These can either be in person or virtual. I prefer in person so you get a really good read on people. I think there’s a whole lot of energy to be found in an in-person setup. But that’s my preference. I host one in my area. We always have guest speakers coming in. If you are a passive real estate investor looking to expand your deal flow, meetups are perfect for this.

Find other passive investors at the meetup. Ask them for referrals. You can even talk to the visiting speaker if they are a deal sponsor, whether syndicator or fund manager. So it’s really just networking with people.

You will be surprised at how you can expand your range of possible sponsors to work with just by going to meetups, meeting and asking questions. So meetups are almost kind of like a conference. Not quite, but it’s an excellent source for potential referrals.

5. Facebook groups and message boards

Bigger pockets are a great resource. Lots of people are big fans of bigger pockets. You can go and ask questions. Ask members there for referrals. It’s not as good as in person or asking for a referral from a friend, but it’s still a great way to add people to your sponsor list at the top of the funnel and put them through your process.

This is all about prospecting, really. Just like an active real estate investor prospects for sellers and brokers and those deal opportunities, you are prospecting for good sponsors.

The Bottom Line

These are five ways that you can increase your deal flow. Think about it as a funnel. So many passive investors don’t think of it as a funnel, but it really is. And you are really in the business of investing in passive real estate opportunities.

So really think of this as a marketing funnel. I guarantee your deal flow will increase!