How do you source deals for your firm?
I am networking and looking to develop better relationships with brokers in order to bring deals in myself that fit my firms investment strategy, but this obviously takes time and often a track record with the brokers before they are sending you anything of interest. I was just curious what everyone's strategy on here is when they are looking to find new deals, and if there are better ways than just sifting through the main brokerages listings every couple days?
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The brokers who are worth knowing are already most likely covering your boss, so unless your boss is supportive of you taking over the relationship it’s probably not worth focusing on them. I focus on people around my level / level above in operating partners we’re not actively working with. It’s a slow burn but when a deal does eventually come through that firm will be my relationship. There’s also a higher probability of off market opportunities through these relationships vs. participating in competitive processes where there’s little value available.
In general, just get out and build your network. Join ULI, go to networking drinks, ask people for coffees / lunches etc. The wider your network the more opportunity for deals to be introduced.
The first point above is HUGE! I see so many people on here saying "just network with brokers and build those relationships" without any regard to the fact that all the brokers who get the best deals likely already have a relationship with your boss, and you don't want to step on their toes.
Broker relationships will generally get handed off to you as you move up the ladder (obviously the most senior brokers who are friends with your CIO aren't going to get passed to you, but you get the idea). Before that happens, you should focus on networking with other buyside groups/operating partners and keep your ear to the ground that way.
It's okay to not be sourcing deals as an analyst. Really. It's not your job. If you find one, amazing, but it's not expected of you. Focus on building an organic network. If your firm sees potential for you to take on a sourcing role, they'll guide you there.
You have to get to know the brokers well so that you are first of mind for any off-market deal they come across. That part is easy since it's typically just grabbing coffees, lunches, and drinks with them regularly and building a good rapport/relationship. Even better is that the brokers will typically pay for it so long as you turn out to be a good buyer.
You typically need to be in the top 5-10 buyers in their minds to get a look at the off-market stuff. But do know that off-market just means less competition, not no competition, and so you need to still be aggressive..
The bigger point for long term success is that you also need to prove that you can perform and execute with as few problems and headaches as possible for everyone. Basically if you are a PITA for everyone (super needy, constant retrading, being combative to every issue, low-balling, etc) then you won't get another look since people do business with people they know, like, and trust. Be that to all parties involved and you will start seeing the juiciest of deals that the brokers come across.
The alternative is doing all this prospecting work yourself to try dig up hidden gems and/or usurp the brokerages entirely. It's highly inefficient compared to how many sites brokers dig up, and can ostracize you from the brokerage community to the point that you only see open marketed "picked over" deals. However, for buyers with highly unique acquisitions criteria, this can be a good alternative since most brokers will call on properties with the highest marketability and broad appeal, so may never spend any time calling on properties that would fit for you anyways.
Something I've had luck with is networking with people in the industry who aren't brokers but also aren't competitors - specifically people in different product types. It is very useful to have a friend in say, industrial, flip you a site that might not work for them due to highway access or zoning but could be a great garden apartment site for you.
To echo some of the comments below - it's unlikely your job is to source deals, and the people who could bring you an offmarket deal are probably too senior to be truly engaging with you.
Find some people who look like up and comers on strong brokerage teams. Get to know them. Even if you could become best buds with Doug Harmon, why bother? Treading the same ground twice isn't benefiting your firm, or even you, depending. Having a close and longstanding relationship with the guy who might become Doug Harmon in ten years... that will provide solid mid to long term value for both you and your company.
Also, as @CRE said, brokers aren't always the best people to network with, since they're not going to give you a "deal" on anything. Architects, engineers, lenders... reach out to random folks, because they might have an inside scoop on an off-market deal, or one that's running into trouble, which might give you an inside track to buying an asset or development site for 80 cents on the dollar or something. Other owners/developers may need to offload assets quickly and might give you a first look to avoid paying for a broker and going through the time and expense of a marketing effort, or might bring you in as a JV partner. All these folks won't have the broker mentality of "jack the price up as high as possible by whatever means necessary," which means you might find a deal or two.
Architects, engineers and title companies can be great resources. Even if you don't source a deal directly from them they can provide great info that isn't public knowledge yet.
Title companies, architects, lenders, getting involved with ULI or NAIOP and hanging with brokers (the brokers that rep your firm on the sell side will bring most deals to you). Also, if you are known as the group that overpays for deals, that also helps!
You will pay top dollar for the first deal or two you do if its' a new relationship unless your firm is a large investment platform with a national reach!
For private capital deals, listed deals will be single digit returns especially due to 1031 buyers or unsophisticated buyers who think you should compress cap rate and rents will grow 5% annually forever to get 20 to 30% IRR when it's a sub 5% IRR deal.
Exactly this, just switched from brokerage to development and have seen that if a broker is selling it off market or as an exclusive it usually is not a really good deal. Best is having relationships with an owner or lawyer like you said.
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