Monthly Archives: January 2014

Common Pitfalls in Off Market Real Estate

Looking for off-market commercial real estate deals? Avoid these nightmares.

Being in this business for so long and constantly being called on for “pocket deals” gives you an opportunity to learn about the mistakes people make in commercial real estate. Day after day, I talk to people who are looking for properties that aren’t currently listed on the market but are quietly for sale. My conversations with these people have taught me about the blindness in the marketplace toward these three problems with off-market real estate deals:

1. Who’s paying who?

Raise your hand if you’re a broker who’s gotten a call from someone saying, “I HAVE A BUYER, IF YOU KNOW OF SOMETHING I’LL SPLIT MY COMMISSION WITH YOU!”

Okay put your hands down, all of you. This is the most common mistake inexperienced brokers make. It’s general broker knowledge that if YOU have a buyer who’s looking for deals, chances are that same buyer has talked to at least a dozen other brokers or even property owners directly before they talked to you. You see, this is why most major commercial real estate firms preach to their agents to chase listings and listings only. Once you control inventory, you automatically gain access to buyers.

There are multiple scenarios in which brokerage fees kill deals. One, for instance, would be when an agent has a pocket deal but the seller is not willing to pay commissions in order to net a certain amount of money. On the other side, the buyer is represented by three different brokers who are sharing the deal and the buyer isn’t quite fond of paying commissions as well as meeting the seller’s price. Deal? Nope…no deal.

If you’re a buyer looking for off-market commercial real estate deals, you have two solid options: 1) work with EVERY broker and make it general knowledge that you’ll buy a certain type of deal or 2) work with one broker who is solely committed to finding you deals primarily, no one else. Securing their commission will prove extremely effective and if you can offer a marketing budget to help them get started, you’re sure to source the strongest deals possible. Steer clear of not delivering on your promises to brokers though, because word spreads fast.

2. Nothing off-market is 100% deliverable.

The lack of a listing agreement or contractual obligation to sell makes it very hard to differentiate which sellers are committed to selling and which ones are simply testing the waters. When you engage in a transaction with an off-market seller, know that you’re trying to negotiate and do business with someone who isn’t convinced that they need to do business with you. For what it’s worth, having the right broker can alleviate this concern. Most elite brokers are extensively trained in filtering out the least probable deals, because their livelihood depends on it.

3. You’re one of many. Stand out.

There are actually people out there who believe they’re going to be able to call every single commercial real estate agent in a specific market area and convince them to send them their pocket deals. Reality check: people want to work with people they like. That’s a multilateral fact. If you expect someone to put in hours of work and real effort to find you something to invest in, you better take the time to get to know them, get them to know you and why YOU are the only buyer they should focus on. I can’t stress this enough. Real estate (no matter which sector you’re involved in) always has been and always will be a business dealing with┬ápeople as well as properties.

 

Happy Hunting!

Secret Tips To Consider When Flipping Homes in Glendale and Burbank

For those who are getting into the business of flipping residential properties, we’re giving away some family secrets that have helped us find success in this tough market. These helpful tips apply to the process of buying, renovating and selling single-family residences.

Of course, because we’re based in the Glendale area and mainly focus on properties in Burbank, Glendale and the Foothills (La Crescenta, La Canada Flintridge, Sunland, Tujunga), some of the things we’ve proven to work here may not apply to other markets abroad, mainly because of cultural, economical and sociological differences. (That’s kind of obvious, but it’s something to keep in mind.)

1. Stick to your guidelines.

It’s very easy to overpay on a property these days, thanks to the massive amount of competition for properties in the Glendale area. When looking to acquire a property for investment, it’s extremely important not to stray from your set of investment guidelines. These guidelines are metrics or prices you determine that are optimal for your investment. For instance, when analyzing a potential purchase, you should already have a good idea of what your costs and expenses will be (down payment, hard money loan, renovation budget, maintenance, utilities, eviction, etc.). You want to be able to have a formula that will help you figure out what your MAXIMUM purchase price should be if you’re going to make money, and always stick to it. If people overbid on a property, that’s their problem. Let them lose money on a deal. You’re looking for sound investments that will make you money, not headaches.

2. Never settle for “good enough” work”.

Unless you’re a contractor yourself, you’re going to meet a lot of craftsmen who like to cut corners. Build a team of guys that you like whose work is their passion. Luckily, in our area, there’s a huge number of skilled painters, tile-setters and contractors who take real pride in their work.

Also, a big mistake people make is getting cheap when it comes to material and fixtures. Wal-Mart toilets and mismatched counter-tops are never going to help you justify your price. Your objective is to completely transform this run down old house into a gorgeous new home for someone’s family. The purpose of making the home absolutely impressive is because if you do this enough times, you begin to build a reputation among the real estate agents in the area for putting out quality inventory that’s fun for them to show and sell. Keyword: SELL.

3. Have an expert interior designer stage your home.

After diligently spending time and money on a quality renovation, it only makes sense to compliment the work with proper staging. Recently, we’ve been using a company called Color Me Sold┬áto bring our investment homes to life. There hasn’t been a single person who walks through our properties and doesn’t leave with a smile on his or her face.

 

4. Use a Realtor who has strong negotiation skills.

How do you know if a real estate agent has strong negotiation skills? Try to negotiate their fee. No one negotiates harder than a broker whose fee is about to get cut. If they don’t, you probably don’t want them negotiating price on your behalf.

5. Be a good neighbor.

When you purchase a home you’re eventually going to remodel and sell, it’s important to understand that although you’re not living there, you’re still part of the neighborhood and community. From a financial standpoint, you’re helping these people’s property values to go up. You’re eliminating an eyesore of a house on their block. You’re adding real intrinsic and extrinsic value to their neighborhood. If you acknowledge that and get to know the neighbors in the area, you’re soon going to find more and more opportunities to buy. Genuine care about other people goes a long way in this business.

Happy Flipping!