Multi family real estate investors have been complaining that in today’s market everything is overpriced, there is way too much competition and there aren’t any good deals left. These concerns are valid complaints if you are in a hot market, and the multi family apartment industry is hot. It has been for years and will be for years to come. The reality is that there are always great deals if you know exactly where to look. The question is, how do you find great deals in hot markets?
Hot Markets
Our students Dave and Andrea landed two great deals back-to-back in Northern California, one of the hottest markets in the U.S. Not only did they find and land these two deals, but both deals were priced under market, with under market rents.
Dave & Andrea’s Story
Dave and Andrea began researching online for someone to train them to invest in commercial real estate when they found the YouTube Channel for our company, Commercial Property Advisors. They connected with us and ultimately joined our team for hands on training and step by step coaching. Dave and Andrea began interacting with our team and learning the foundations of the commercial real estate business. Soon they were instructed to start making phone calls to reach out to brokers and get a feel for their market. They also began diligently sending out letters to owners.
Shadow Inventory
Our students find the best deals off the radar screen. They can’t be found on MLS or LoopNet, and Brokers don’t know about them. You must find your deals in what our company calls the “shadow inventory”.
A Relationship Business
Often owners are in difficult situations and taking time with them personally can make all the difference. Commercial real estate investing is a relationship business. You must give your energy and time to the owner, because no matter how amazing a deal is, if the people you are negotiating with do not connect with you, the deal will not happen. Dave and Andrea spent hours nurturing and building relationships with owners and brokers before finding a deal.
Deal 1
Their first deal was a five-unit apartment building. It needed work but had a lot of upside potential. The next step for Dave and Andrea was to find a local lender that could see the property’s potential. They found a local banker who was enthusiastic about the deal because he was familiar with the market in their area. He offered them a loan-to-value of 75%, which is almost unheard of in Northern California where the average LTV is 55%-65%.
Upsides:
As a property’s NOI goes up, the value of the property goes up as well. By fixing and repairing the units, Dave was able to increase the rents, thus forcing the up the property’s equity. This allows them to do a cash out refinance; to refinance the property, pull out the down payment, and use that money to purchase another property.
Deal 2
Their second deal was a six-unit building below market rent. They connected with the owner through a letter campaign for this deal as well. The unit was stable but also had a rent upside. Both deals required building rapport, diligence, persistence and patience.
Words of Encouragement from Dave
One thing Dave learned through the Protégé Program is that you need to have the right mindset to be a successful investor. Don’t make excuses, just believe in yourself, and take the next steps. If you are thinking of entering the world of commercial property investing, then you should really focus on your “Why?”. What is your driving force? What is going to motivate you and create the passion to really work hard and accomplish your goals. Work hard and learn to be patient and the you will reap the benefits in the future.
Watch Dave and Andrea’s Story on our YouTube Channel
Summary:
I am so grateful to Andrea and Dave for sharing their story with us. I hope you have found it helpful and inspiring. Here are some of the key learning points from their story.
- You don’t need to be a professional or have a degree to be successful in commercial real estate investing: Andrea is a nanny and Dave is a truck driver.
- Have Powerful Whys: Dave and Andrea had two powerful whys. They were passionate about securing their retirement and buying back their time by trading time for dollars.
- Connect with Owners Directly: They used our proprietary techniques on sending letters to a targeted list of property owners. There are certain criteria that help determine which owners are most likely to sell, which I have figured out over years of experience. No brokers were involved at all.
- Know What to Do Once You Find the Deal: Many people understand how to find owners directly, but our training also instructs you on how to negotiate the deal once you’ve made contact. Not only were Dave and Andrea able to build trust and rapport, but they understood the owner’s motivations for selling. They also had the training to structure a great deal around those conversations. I have a video on YouTube called “The Three Tips on How to Get Owners to Say Yes to Your Offer”. Watch this video to learn exactly how Dave and Andrea got the owners to say yes.
- Market Rent Increase: Both deals had a rent upside. Once renovations were complete in their first deal, they were able to increase the rents by 45%, doubling their profit. Their combined exit strategy on both deals is to refinance and pull the down payment out to accumulate more properties and build their portfolio.
- Having the Right Mindset: I have video called,“Do You Have the Right Mindset to be Successful in Commercial Real Estate?”. The video has really helped Dave overcome his fears speaking with owners and brokers and interviewing property managers.
- Caring is Key: We are a commercial real estate company which must work directly with people. In order to do that successfully we must honor and respect them and cultivate a good working relationships.
