What does "Acquisition" mean in real estate?
Roles and Responsibilities of an Acquisitions Department
In every type of real estate investing business, there is a person or department responsible for finding deals and overseeing the acquisition (purchase) of properties.
When it comes to finding deals there are four aspects to consider:
- Lead processing
- Due diligence
A person or team working in acquisitions will be responsible for each of these aspects, so let’s explore each one individually.
When it comes to marketing, the goal is to employ strategies that will generate responses from motivated sellers so that properties can be bought for investment purposes.
In many cases, these properties will be distressed in some capacity, meaning they will require additional expenses to do repairs to the property, clear title defects or some other actions needed to bring a property to it’s best use.
Some common methods of marketing to find acquisition opportunites are:
- Direct mail marketing
- Online marketing
- Ringless voicemail drops
- Text message blasts
- REOs and foreclosures
- Networking with wholesalers and brokers
Once leads are generated through marketing efforts they need to be processed.
Someone needs to be able to communicate with leads, respond to messages, gather information for due diligence and ultimately compile the information needed to make an educated offer.
Once a lead is processed and the information about a deal is gathered, a major aspect of the acquisition process is ensuring there are no unforeseen issues that could hinder the investor(s) from profiting from the deal.
Said a different way, due diligence is the research done on a property to ensure it’s going to be profitable and provide a positive experience once acquired by an investor.
Different types of real estate strategies vary based on what’s involved in the due diligence process, but some common examples include:
- Gathering information such as rent rolls, profit and loss statements and so on, to ensure the accuracy of the income claimed by the seller or listing broker.
- Ensuring the property zoning is suitable for the investor’s strategy.
- Having professionals like contractors, appraisers, or inspectors identify any major issues of the property and help determine the scope of work.
Once a property has passed the due diligence phase and the final terms of the deal have been worked out, the final step is to complete the purchase of the property.
This is normally handled by a closing agent, like a title company or attorney.
When the purchase of a property is handled by a closing agent, further due diligence is conducted on the title to ensure there are no title related issues.
They also issue a title insurance policy to cover any liabilities in case they missed something.
Some real estate investors may hire a transaction coordinator to oversee the closing process where others may have it fall under the responsibility of the acquisitions manager or department.
All in all, acquisitions is the effort, action and process to buy property and build inventory for real estate investment purposes.