Get Specific with Your Acquisition Criteria

Author

David Wallace
April 30, 2024 • Estimated Reading Time: 6 minutes

There is a simple way to increase both the quality and quantity of acquisition opportunities at your fingertips.

Define your acquisition criteria in intricate detail. Then communicate your criteria to the people in your network.

When you know exactly what opportunities you are looking for, those opportunities will be easier to find.

Why would narrowing my criteria help me find more deals?

Because when the people around you know what you want to acquire, they will think of you when an opportunity arises.

  • Brokers will consider you a serious buyer.

  • Equity partners will see you as having a clear investment thesis.

  • Managers and staff will know your plan and understand how to help you execute it.

Here is a quick example.

I know an owner who has incredibly precise acquisition goals.

He wants to buy apartment assets, 10-20 units in size, in three specific neighborhoods in South Minneapolis. He likes to acquire tired assets to do light renovations and slowly push rents as units turnover.

He knows these areas extremely well, having owned apartments there for over 10 years.

The result? He is the first to know about buying opportunities matching his criteria. He sees all the deals and often gets a head start over other buyers in the market.

Unfortunately, few investors have defined their buying criteria this well.

If your acquisition criteria are too broad, you’re not portraying yourself as a competitive buyer.

The folks with specific criteria are picking off all the “good deals” before you even have a chance to underwrite them.

The good news is, this can easily be changed.

Define Your Target Property Size

The ability to move quickly on the buying opportunities within your criteria is a powerful competitive advantage. Some deals will be too large to be feasible. Others are too small to move the needle.

It doesn’t make sense to spend time underwriting deals that wouldn’t fit your portfolio.

Knowing how many units you can realistically onboard and how much capital you can deploy will save you time and free up bandwidth for you to focus on opportunities that matter.

Define Your Strategy

In today’s market, good deals are made, not found. Buyers need to have an operational strategy and the expertise to execute.

Everyone wants to buy assets below market value. It’s not a unique strategy.

Instead, define what is a good deal TO YOU.

Ask yourself:

  • Are you buying run-down properties in tough areas of town? Or are you more interested in buying stabilized assets in class-A locations?

  • Are you buying for predictable cash flow? Or are you more focused on value-add strategies to force appreciation?

  • How will you manage the property and implement your plan?

  • What is your target hold period and how will you finance the acquisition and improvement plan?

  • What unique knowledge or expertise do you have over the competition?

  • What pricing and return metrics are you looking for?

Having a well-defined strategy puts you in a position to be the most competitive buyer when the right opportunities come to market. You will see deals earlier because your network will know when a property fits your criteria.

Identify Your Target Location(s)

You now have a specific size property you are going after and a game plan on the type of deals to chase. But it’s also important to know which exact locations fit your criteria.

I’m not talking about cities or even counties. I’m talking about neighborhoods.

Targeting too broad of an area won’t do much good.

Say you would be interested in acquiring assets in Hennepin County.

Hennepin County has both Class-A neighborhoods and areas that would be classified as Class-C. It’s still unclear what you’re targeting. People won’t know what your position is in the market.

Instead, learn a few specific neighborhoods to gain an operational advantage over those investors whose target area is too broad.

To learn an area, look into

  • Demographic trends

  • Economic drivers and major employers

  • Housing stock and apartment inventory

  • Living amenities (parks, schools, retail, access to transportation, etc)

  • Average rental rates, vacancy rates, and market expenses for apartment units in the area.

Real estate is a hyper-local game. When you’re known for being active in a few neighborhoods, you will develop a reputation in those communities as a serious buyer who gets deals done.

Tell People About Your Acquisition Goals

Once you have a specific vision for your next acquisition, communicate your position to everyone in the market.

When brokers call, tell them exactly what you’re targeting. When you’re talking to other owners tell them about your criteria. When speaking with vendors and service providers, ask them if they know about any opportunities within your buy box.

When your network knows how to help you, they will be more willing and able to do so.

By the way, if you want to put these ideas into practice, you can fill out our Acquisition Criteria Form.

This information feeds into my CRM system - meaning when we have opportunities matching your buy box, you’ll receive information right away when the deal hits the market.

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