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Strategy Saturday
SS7: How to Work Directly with Multifamily Real Estate Sellers
January 31, 2021
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Welcome to Strategy Saturday. Today, Charles talks about working directly with multifamily owners, building rapport, and purchasing properties without a real estate agent/broker.

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Transcript:

Charles:
Welcome to Strategy Saturday, I’m Charles Carillo. And today we’re going to be discussing how to work with multifamily real estate sellers. So when you’re working with a seller or a property owner, you want to utilize normal sales techniques, you’re going to build rapport with them. You want to relax if they’re not already ready to sell. So if you’ve contacted them through a direct mail, for example, what’s going to happen is that they might not be ready to sell. At that point. You want to start the relationship and that’s your really your only goal. It’s gonna be very rare that you reach out to someone and they’re ready to sell right away. So when you’re building rapport, you want to relax, smile, be positive, and you want to listen through questions and you’re going to want to steer the conversation more on them than on you. So what are their problems?

Charles:
You know, what are they like? What do they dislike? Find out the next phase of their life. It’s very personal when you’re dealing directly with a seller and they’re going to, if they’re working through a broker, they would tell the broker this and tell them why they’re selling. You want to find out if they have any children. If they’re interested in seller financing, which is very, very important, are they retiring? Are they full-time in the business? Do they have any debt on the property? How much debt, if you can find out at some point, this is probably not for the first conversation. Is there a balloon payment soon? Maybe they have something that needs to be refinanced in a few, few months or in a year. And it’s something definitely you want to make note of in the CRM with this contact, do you do not want to rush them?

Charles:
It’s a long play. Again, your goal is just to build rapport with them. So when they’re ready to sell, they’re going to reach out to you versus calling through a local commercial real estate agent. The only talking I really do when I’m talking to a, directly to an owner is really quickly tell them about a previous deal on a similar property that we closed. And it just shows you can close. It’s not to brag. So if you’re looking at someone’s eight unit and you’re talking with them and say, Oh yeah, we just bought this five unit over to here. And I bought this 10 unit a few years ago over here. It just shows you can close. And you’re just not kind of like a fly by night investor, especially where we are now with so much buzz around multifamily investing. If you’re talking to them on the phone, where’s the property located.

Charles:
If you don’t know, you probably already do, but a lot of these owners own a number of different properties. So make sure you know, you’re talking about the same property. How many units is the property? You kind of want to figure out the unit mix. This is an industry term, really how many, one, two, and three bedrooms find out about the current rents. This is very important when you’re dealing with mom and pops that don’t have debt on the property, you ask him, do they increase the rent annually. It really shows about the tenants going to inherit it. And if they don’t do it, cause a lot of them don’t to avoid headaches. They just keep people in them having to pay the same rent for years. So, you know, when you’re taking it over, first of all, property rents are probably under market, which is great.

Charles:
Bad news is when you take it over and you start raising rent, you might not keep all those tenants. And if it’s been years, since they raise rents last, you’re probably not keeping any of them. Are the units occupied? What’s the occupancy at the property. How do they handle management? This is very important. Do they have a property management company? Do they have onsite staff, maybe a part-time handyman maybe superintendents, very normal defined. When you’re looking at five to 50 unit buildings, maybe five to 30 unit buildings that they have some sort of superintendent that’s taking care of certain parts of management. You know, who pays utilities are, or the utilities, you know, normally on a lot of older buildings, you’ll see that the, the landlord is paying water, who pays is a water individually metered, right? Hopefully on most properties, electric is already metered, which is great.

Charles:
Sometimes on older properties, you’ll see that they have one water heating system throughout the whole property. So find out that, and you can know when you compare it to other properties in the neighborhood where your rent potential can be when you’re moving up rents, why are they selling or thinking of selling? Yeah. What is their goal after they with the property and after the property and what happens if they do not sell the property? What are they going to do? When do they want to close? This is, this is very, very important because if you can work something out with the landlord and figure out a way, you know, you’re gonna have a lot of these people that might want to 10 31 into a different property, which it differs your taxes, but they might have multiple properties. They might be different into other properties.

Charles:
And they want to do a one by one. This means that they might have four or five properties that they want to do. They’re going to really need to work with a professional investor like yourself. And they might say, we’re going to start with an eight unit. Then I have a 17 unit. Then I have a 15 unit and they do one by one. So they can 10 31 into another property and defer taxes. This is where you can start working at a deal. And this is how you can, this is a great owner that you could potentially work with. Have they tried to sell the property before very important as well. And you know, what happened with that? Did they, they just, they fell, fell back in love with the property. They didn’t want to sell the property. It, the price wasn’t where it was financing was, you know, what have you done to try and sell it?

Charles:
And why do you think it hasn’t sold and listen, and see what they say to this. These are, this is all great information. And when you’re getting all this information, make of it and then transfer those notes right into a CRM, how long have they had the property on the market if they’ve been trying to sell it, or have they been trying to sell off the market? You know, where did the tenants work? This is very important. You’ll know what kind of mix of tenants you have. And, and this will be important for figuring out the industries that they work in. And also the company. Would you be interested in seller financing if the buyer or put down a solid down payment? So this is a great way of feeling them out with when they’re selling a property. And this is great, obviously not for like a 10 31 where they’re deferring it and you’ve got to bring in some sort of other financing, but if you are okay, your property, and this might be their last property they’re selling, and they’re going to put the money into a CD or into something very like treasuries or something very safe.

Charles:
And they know that that property is very safe. They might be willing to finance it. And when I say, sorry, all down payment, it doesn’t have to be the industry standard of 25%, but maybe you can get into 15, 15, still a sell down payment. And it’s less than what you’d get through traditional financing arm, which means your cash on cash returns will be higher, which is great all around. You could ask what price they are looking for. Okay. Some, some experience owners have asked me what cap rate I’m shooting for. And I’ve actually had stop this when people reach out to us about one of our properties. And it’s happened to me quite recently, where someone reached out to me and I asked them without going through the whole process, I said, what Keppra you’re looking for? It was very high, which means that they want to pay a very low price for the property.

Charles:
And we kind of parted ways there, but it it’s what you want to do. So you want to be knowledgeable of the area of which right. Going in. And it’s very, I think the cap rates a better way to go, because if they ask for a price, they’re probably not serious about the property because they know you have to go through the whole underwriting. And that’s that’s, that can be a hindrance. So I always ask what’s the cap rate you’re looking for? Cause that gets through, through all of the, all of, any type of questions that they might have requesting finances. I always suggest an NDA. I always suggest an NDA upfront. It makes everybody feel more comfortable, right? Best to have the conversation in person, but it’s not always a possibility. Maybe you stopped by there. Maybe they live nearby. If they’re mom and pops, they might be stopping over there, fixing a few things around the property.

Charles:
You know, you want to store all this information in a serum and you know, there are a number of free CRMs out there that you can utilize when you’re speaking to owners. Typically what we use is when dealing with when dealing with sellers, we’ll put it into Podio, which is a very very normal CRM for wholesalers that do a lot of direct to owner marketing. And you can utilize it for yourself. It’s free. And I think it would be a great way for you to save all the information, set followup, and keep in contact with potential sellers. So please remember to rate review, subscribe, submit comments, and potential show topics at global investors, podcast.com. Look forward to two more episodes next week. See you then.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar incorporated exclusively.

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