The commercial real estate market is currently the most competitive that it has been in a great deal of time. To work effectively and give yourself the best opportunity to succeed, you must find unlisted, off-market deals in addition to looking through listed commercial deals. This article will quickly give you a few pointers on different ways to find off-market deals.
To give you an idea of one particularly successful real estate investor, he has done forty deals worth roughly $100 million over the last three years. Within that time frame, only ten of the forty deals were listed and were marketed conventionally. Thirty out of his forty deals were off-market deals. You are throwing away many great opportunities by not looking for these off-market deals.
The first pointer to keep in mind is that every person can be a potential lead. In addition to buying deals from the major companies such as CB Richard Ellis or Sperry Van Ness, you need to look for smaller brokerages too. There are often many individuals who run small brokerages who may work out of their homes and have a low profile. These brokers can often have great deals which they may have not marketed or may have also under-marketed the property.
The remainder of this article will focus upon two strategies you may use to acquire off-market properties. The first one is the failed transaction. This occurs when a property has gone into contract but failed due to reasons normally involving the buyer. The seller can become very frustrated as a result. This is a great opportunity to jump in and buy the property quickly and efficiently. Use short due diligence periods and potentially include a non-refundable deposit to appease the seller. The seller may be willing to make concessions on price and other matters within the contract because of the speed and professionalism you display through the deal.
The second strategy which you can use is to look at the largest owners within a particular market. Look at the overall portfolios for these owners and see whether there are properties which don’t fit with the overall strategy of the portfolio. These owners may not be used to managing this property and may not be receiving the type of return they would normally receive. You can enter the picture and help them out by taking over a part of their portfolio they do not want or need. This will allow the owner to rid themselves of a troublesome property while providing yourself with a deal which had no competition.
This article on off-market deals should have given you an idea on why it is so important to look for off-market deals along with two strategies to find off-market deals. Off-market deals are a source of deals which you cannot ignore. If you choose to avoid this area, you are limiting the amount of success you can have within the market. Hopefully you are able to use this information within your business in the near future. Good luck.
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This article will give you some helpful tips on potential guidelines in choosing which broker to work with. The first paragraph will focus upon some general guidelines that many successful commercial investors have found followed by explaining some of the differences between the listing broker and selling broker.
If you are in the beginning stages of your commercial investing career, you may want to look at using a young and aggressive agent to begin with. A younger agent may be more responsive in working with you and will also help foster a closer relationship than veterans who have been in the business for many years. Veterans who have been in the business for a great deal of time will often have established relationships with many clients and may not have the time or desire to develop new clientele.
This can happen because the older commercial broker has a well-developed network of contacts that bring him more business than he or she may be able to handle at one time. A younger commercial broker will often be working to establish his or her business and you can use this to your advantage to develop a close working relationship. This will allow you to develop a relationship which you can build on in the future. You can work to build your business as he develops his business. This is a good bond you two can have in common.
As with any industry, there are many different types of companies in the marketplace. You will find benefits to working with many different types of companies. Many commercial properties are listed through large commercial brokerages. Many successful investors have done this to great advantage. When looking to acquire properties, many successful investors may look to work with lesser known brokers. These brokers may hold information or listings which are not on the market or are being under-marketed currently. You may work with many brokers but be sure that you have a close relationship with at least one. A broker will be one of, if not the most important, business partners you can have. If you do not have a good broker, you are cheating yourself out of valuable industry contacts, information, and experience. You cannot focus upon using one broker for all of your activities because you are cheating yourself out of many different sources of deals.
Check out the broker and ask for references. This can allow you to check into the broker’s background and what others are saying about this particular individual. Ask around the market what others think about this particular broker as well. You need to do your homework before choosing a broker because this is a partner you will use often and a relationship to build slowly but surely.
Hopefully this article on choosing a broker has given you good insight. There is not necessarily a set formula to finding a good broker but these are tips which may be able to help you. When looking for a broker, take time to develop a relationship from the beginning and you will be rewarded throughout with the benefits of a good business relationship.
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Everyone dreams about it. From the time they are young they dream of a home that is their own, inside which they are master and the ultimate say in any decisions that are made. These are the moments in which their future will be decided and they will finally be free of outside influence. Of course, for many young adults this is a dream that will not come to be for quite some time; they will live with their parents while they finish their schooling, then step out of the comfort of that home into their first small apartment, after which they will almost inevitably bounce from apartment to apartment until they decide that it is time to settle down and start a family, at which point they will finally find that single home they have been dreaming of.
For some individuals, however, that single home isn’t what their dreams are made of. Their dreams consist of apartment buildings with plenty of people, the more the merrier. They look at single family homes with a kind of tolerant disgust in their eyes, a necessary evil to get them started on their path to the multi-family homes their fantasies are made of.
Who are these unique individuals who dare to turn against the conventions of society and live their lives backwards? Real estate investors of course! Real estate is one of the fastest growing markets in the world, and it seems as though everyone wants to get a piece of the pie; however, in order to turn that piece into a whole pie and enjoy the maximum amount of income that real estate is capable of generating it is first necessary for them to learn the rules of the game.
The first rule in real estate is to buy low and sell high. What does that mean? It means that when an investor is looking for a property they should keep their eyes on the ones that need a bit of work and are therefore going to be sold for a price below market value. The investor can then use their resources to rehabilitate the property and raise its value, where they can resell the property for its full market value and pocket the proceeds.
Of course, this is what investors do with those single family homes that they use to get them started. The second rule of the business is that true wealth in real estate comes not from the rehabilitation and resale of homes but from the generation of passive income. Passive income is money earned without having to work for it. Is this really possible? Absolutely; however, the secret to doing so is to look away from those single family properties and focus on multi-family rentals.
When an investor purchases a multi-family home and rehabilitates it they are opening the doors to take in tenants. These tenants will then pay often exorbitant rents in order to live in their apartments. These rents will arrive every month and can be used to pay all of the expenses on a property (assuming, of course, that the investor has done their homework properly) as well as providing a comfortable income for the investor in question.
The largest expense to owning a property is the payment of a mortgage. Once that mortgage has been paid the building will belong to the investor and all of the rent checks that come in every month will become spendable income, all generated from their original investment. It is through the accumulation of this passive income that real estate professionals are able to reap the fruits of their labors.
The secret to making money in real estate is to find a way to get your property to make money for you. That’s right you want your property to do all of the work for you and then turn its earnings over regularly. How is this possible? Well, obviously a building cannot go out and plow a field or fix a road. It can, however, provide a home to an indefinite number of individuals, and it is this ability that will allow it to turn into a positive income generator for you.
The trick to getting your property to generate a maximum amount of income for you is to purchase a multi-family home. What is a multi-family home? A single family home is one that will hold only one family comfortably, generally only three to five individuals, and generates only one rent. With that explanation, you should be able to figure out a multi-family property is one that will house multiple families and generate multiple rents, allowing you to enjoy a bigger income.
When evaluating a multi-family property it is important that you take the time to figure out its capitalization rate, or the ratio between the capital that will need to be expended to purchase the property and the income it generates yearly. This will give you some idea of how quickly the property will pay for itself, thereby allowing you to begin to pocket the proceeds; after all, unlike when a single family is sold and the income it brings in comes in one lump sum a multi-family home is not going to stop generating income after it is paid for.
Figuring (and understand) the capital rate can be difficult, so I have developed what I call my times ten valuation calculation to assist fledgling investors to determine the return they can expect to get on their investment. First, take the yearly income of your property and subtract the yearly expenses; this is going to give you your NOI, or net operating income. Yearly expenses should include such things as repair estimates, land rentals, etc.
These expenses should not include your mortgage payment. Remember this, it is a very important part of this process.
1st equation: Income-Expenses=Net Operating Income.
Take the net operating income and multiply it by ten, giving you the approximate value of the property and allowing you to decide whether or not it is a worthwhile investment.
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Your leasing agent is usually the first person a potential resident deals with at your property. If your leasing agent stands out from the rest, the customer is likely to remember your property as well. Do what you can to facilitate this.
Leasing agents will always give out cards to customers. That is standard procedure in most cases. What if your leasing agents could make their business cards special? One way to do that is to customize the backs of the cards.
There are little postage stamp sized pictures that you can have made and put on the backs of the cards. These will impress the customer in such a way that they will want to keep them. They are more than just a name and contact information on a card. This is something personal.
Another idea for your agent is to put their own mission statement on the card as well. Then, when the customer leaves, the leasing agent can take the time to personalize a floor plan drawing by writing them a heartfelt note. They may go away feeling that you have singled them out for special attention.
It is important that customers have a feeling of personally knowing the leasing agent. One way to do this is to use a section of your webpage. You can put an audio section on it where the customer can hear the voices of the staff inviting them to the property. Putting a voice with a face fosters trust.
You can personalize the apartment or condo with monogrammed linens. You can also get things like coffee mugs with your name on them. Anything that will produce a memory point with the customer is beneficial.
The leasing agents can be remembered by the clothing they wear. Every time they see a person wearing a certain type or color of clothing, they are working as a leasing agent for your property. That sparks recognition.
The customer will definitely remember their leasing agent if a strange package arrives at the door from them. It might be anything that you can use to drive home your message. For example, you could send a valentine heart with the message, “We heartily invite you to come back and rent with us.”
The agent can distinguish him-/herself by using the telephone. People like to receive friendly calls. It might just be a call saying that the leasing agent invites them to come to your property before they go to any others.
If this sticks in their minds, it can have an enormous effect on the number of people who will rent. By seeing your place first, they judge every other place by yours. This gives you a definite advantage.
The leasing agent can put in an effort to make a good and lasting impression. When customers have a warm feeling towards the leasing agent, they will feel more comfortable about visiting your property. They will also feel a sense of trust in that agent when leasing that condo or apartment. It really makes a huge difference.
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The effectiveness of your network determines the strength of your real estate investment business. I’m always on the lookout for new people to work with – new private investors, new bird dogs, and new players in the market. The way I see it, I am only as good as the weakest member of my team. In fact, I firmly believe that a strong network of people working together can propel any investor to new heights in their commercial real estate career.
A strong network of experts lowers investment risk. Needless to say, I hate losing money. While I can’t factor out all the risk in any real estate investment I take on, I understand that I can remove most of it. How do I do that? I get my team of experts involved in my deals. I have a great team of people working for me, but did you know that networking was critical in the formation of my team of experts? I had to get out of my comfort zone and start meeting professionals who could help me. I had to seek out the counsel of other professionals when parts of the deal didn’t go as planned. I had to network myself.
A strong network of deal sources means you always have a full pipeline to work with. A broker may bring two or three properties to the table. Mr. Smith the postman may inform you that he heard through the grapevine that the owner of a small, local mall nearby plans on selling. Ms. Mae just referred you to her rich Uncle Benjamin who wants to buy another apartment building complex. All of these sources have one thing in common. They all relied on networking to bring in deals.
Networking ensures that you’ll always have people to work with no matter what type of property you’re investing in. Smart investors continuously work on building a list for three groups of people – buyers, sellers and private money investors. This is where I focus most of my effort. If you have a constant flow of people moving through your business, chances are you’re running a successful commercial investment business.
Okay, at this point we can all understand the need for networking. We understand the power of what a group of people can do for us in our lives. But how effective are we? If you’re out meeting people at every opportunity you can, but you’re not yet realizing the results, it’s time to make some improvements. The success of your business is counting on it. Here are a few tips.
1) Be sincere when meeting people for the first time. Insincerity will often speak louder than anything you could verbally say. Any attitude of insincerity will show through in your body language, tone of voice and even when you may seemingly be smiling.
2) Make it a point to develop a deeper relationship. People will do business with you simply because they feel more comfortable with you. For that reason, spend a few minutes and get to know as much as you can about the person you just exchanged cards with. In fact, eliminate business card blitzing. Not only is that impersonal; it’s also difficult to really remember and get to know 20 – 30 people you just met. We don’t only want to spread our business card around, but we also want to develop a quality relationship that blossoms into something further.
3) Have an elevator speech already prepared and practiced. For many people, networking doesn’t come easy. They have to work at it to be successful. Write out your speech. If you have others around you, ask them to role play with you and practice until you’re familiar with it.
Successful networking brings you business. You’ll need people to protect and operate your commercial real estate investment business. You’ll also need people to keep your deal machine running. Commercial real estate investing is a people business. By practicing these few tips, you’ll be well on your way to achieving all the success and dreams you desire.
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There are three main reasons novice investors fail in commercial investing: inaction, being cheap, and doing deals that shouldn’t be done. I can’t tell you how many times I hear young investors tell me the reasons why they haven’t reached their goals. Well, it’s time to get out of the slump of wrong thinking and doing what it takes to make this year your best investing year ever. Think of it this way, even if you do only one deal this year, that’s one more than you did last year and basically, that’s a huge financial improvement.
Get Over In-action
You’ve been learning the ropes and studying deals. You may have even written some offers, but you find something wrong or something that you feel you need to research further and ultimately, the offer never gets submitted. That is what I call inactivity. No matter which way you dice it, education and research is important, but it’s not the thing that lands you deals.
Now here’s how I define activity – submitting offers. Submitting offers is the only way to land deals. I find many new and would-be investors often fear making a mistake and committing themselves to what is probably the largest financial undertaking of their lives. What you should know is that you’re not really committed yet. Submitting an offer can easily be done by submitting a Letter of Intent to Purchase. This is not a binding offer; it’s just a door opener which shows that you’re a serious buyer. The next step is negotiations.
Get over in-action by making offers and engaging in the process of negotiations.
Don’t Be Cheap
Many new and would-be investors make the mistake of doing things they should leave to the professionals. For example, many try to save money on property inspections, property management, legal counsel, and realtors by taking on these responsibilities themselves. I may own over 7,000 units, but I always make sure I hire professionals with credentials and expertise in their field for every deal I close on. In fact, I make these professionals a part of my team and I benefit from their experience and knowledge.
I also don’t scrimp on maintenance and repairs. I train my property management company to jump on tenant issues as soon as they arise. Why? Tenants leave because maintenance issues aren’t addressed. I also train my team to be proactive in taking care of property wear and tear like painting, buildings and grounds maintenance and any other issues that affect the image of my building.
Cutting corners like these will not only cost you, but it will also zap you of any time and energy you have left to do other deals.
Don’t Do Deals that Shouldn’t Be Done
Many young investors also believe that just because they’re making money on a deal, then the deal must be good. That is far from the truth! These deals are called marginal deals – anything less than 10% cash-on-cash. There are also commercial property owners and realtors that will tell you that making more than 10% is virtually impossible in the area you’re thinking of. While that may be true, be conservative and look for other deals.
Cash is king in the real estate industry but that cash has to come as a result of making calculated risks based on the property’s actual performance; not based on what might happen. You may already have heard horror stories of previous so-called investors jumping in on a deal based on what will happen. Don’t get me wrong. There are many speculators who do make money and lots of it, but that’s not the kind of deal that many can tolerate financially. My point is to invest in commercial property based on it’s actual performance; not based on what you think or you’re told might happen – the key word is “might”.
Taking the failure out of commercial investing comes as a result of setting specific ground rules for yourself as an investor. For example, there are three basic things that new investors should be careful to avoid: in-action, being cheap, and doing deals that shouldn’t be done. Avoid these activities and make this year, your best investing year ever.
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Lead generation is a foundational activity of your commercial real estate business. Without it, you’ll fail before you even begin. Many people don’t think they have the time or the energy to find deals. I don’t care how busy people tell me they are. My response is always the same – if you want it bad enough, you’ll make time for the important things. When you discover how easy it is to get started, you’ll be kicking yourself for not starting earlier. Here are six ways to generate commercial property deals.
1) Direct Mail
Direct mail is one of my favorites. In fact, it’s how I got started. After I would get home late at night, I’d always make sure I’d stuff envelopes and get those letters out. Why? Those letters represented my future success. There are many investors shunning the idea of snail mail, but the truth is, it’s still works and it’s still a great way to generate leads.
2) Reading the Classifieds
With the number of short sales, pre-foreclosures, and foreclosures on the market, you’ll be sure to find something in the classifieds section of your local newspaper. Be diligent and read each ad. The more ads you read, the more you’ll become familiar with them and know how to spot a potential deal. That’s what I did and after awhile, I started calling these people. The more ads I called, the easier it got to make those calls and eventually, I ended up getting a couple of deals that way.
3) Local Investment Club
These clubs can provide a few leads for those seeking commercial property deals. I started attending their monthly meeting and started talking with some of the members. Real estate is a people business. The reason I mention that is because other people are going to help you get where you want to go. Well, my trips to the local investment club paid off in networking. A few of the members knew somebody, who knew somebody, who was looking for a buyer. I was in the right place at the right time.
4) Real Estate Brokers
Real estate brokers are also a great source for leads for two reasons. They’ve got the Multiple Listing Service at their fingertips or they are working with a client who can provide me with a sweet deal. I also make it a point to work with multiple brokers and I have at least three who send deals my way on a regular basis. There’s no leg work to generate leads; no licking and stuffing envelopes; and they also send me commercial property comps, tax information, and other documentation I need to analyze a deal. How easy is that?
5) Keep it Professional
While this isn’t really a source of leads, it’s the thing that will bring you ongoing leads in the future. Nobody, and I repeat, nobody wants to work with someone who’s unprofessional. If you don’t follow through on your deals, chances are, you soon won’t be getting any. People go out on a limb to refer their lead to you and when you mess up, they mess up too. Don’t ruin it. Always do what you say you’re going to do and you’ll always get leads.
6) Be Easy to Work With
One deal might not make you a millionaire, you’ll probably need a couple of deals to reach your financial dreams and goals. Generating leads can be time consuming so it’s often best to have a team of people “scouting the land” for you. When you’re easy to work with, they’ll want to work with you more and you’ll be the first person they think about when they have a lead.
As an investor, you’ve got to make sure your deal pipeline remains full. The six easy ways presented above for lead generation work. I’ve used every single one of them. My advice to you is to start with at least one and consistently work it until the deals start coming in. Soon, you’ll be working all of these ways and you’ll be on the path to being a successful investor.
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