How To Find Profitable Apartment Deals Without Spending A Fortune
Let’s face it, you can be thoroughly versed on every aspect on apartment deal analysis, financing and property management, but until you have a motivated apartment owner wanting to sell you his/her property you are not going to make a inch of progress towards your goal of financial freedom.
So, creating a steady stream of motivated apartment owners “calling you” every day is a critical part of making Deal 1, and every deal after that happen.
You need to create deal leadflow.
The Two Best Sources of Deals
There many sources of apartment deals but two of these stand head and shoulders above the rest, both as being low/no cost, and by being most effective at delivering deals that are true profit opportunities.
That is, good properties owned by motivated sellers.
Deal Source #1
The first source you can get going without spending any money, but does require some time on your part, and that is, commercial real estate brokers.
With the right relationships, commercial brokers can provide you with all the deals you can physically buy. They provide tremendous leverage for you, obviously because they have access to all of the properties that are currently listed, but also because of the relationships they have with the other brokers and their network of sellers.
Establishing a good relationship with a commercial broker is the key to receiving a steady flow of deals from them. If they do not believe you are a serious buyer, that is, someone who can close and generate a commission for them, you simply won’t hear from them again.
On the other hand, if you come across as a player, someone who has cash and is looking for a deal to close on asap, you not only will hear from the commercial broker again, you will access to his/her “pocket listings”.
Pocket listings are listings the broker has a signed listing agreements for, but hasn’t yet placed on the public MLS systems. They reason they have them in their “pocket” so to speak, is that they know they are good deals that will go quickly and they want to run them by established investor clients first to see if they can generate a quick sale before going all the expense and hassle of listing the property.
The key to coming across as a player is positioning yourself in the mind of the broker as an already successful entrepreneur.
You do this by:
1) speaking firmly and confidently, giving the impression you know exactly what you want.
2) giving the broker precise criteria for the properties you want to buy.
3) letting the broker know you are a cash buyer and you have the funds to close on any deal, no matter what price range, provided it fits your buying criteria.
Often a broker will try to qualify you by asking you to send him/her your financial statements or proof of funds.
***This is a trap!
Don’t fall for it, it just reveals to him/her that you are a newbie and you don’t know what you are doing. Instead, respond congruent with your positioning as an already successful real estate entrepreneur.
A successful real estate entrepreneur doesn’t need to grovel, and is certainly not going to release his financial statements to a broker he/she has no relationship with simply to win their favor and see a few lisitngs.
A successful real estate entrepreneur knows that commercial brokers need him/her more that he/she needs them. There are plenty of brokers to work with, and if one specific broker is going to blow this opportunity to earn commissions bringing property to you then another broker will happily take their place.
Have confidence, know the game, position yourself as a player.
Just briefly, an exchange with a broker (who doesn’t “get it”) might go something like this:
Broker: Well, I need to see your financial statements before I can send you any listing information.
You: You what? Come on … that’s ridiculous. I can’t believe you are even¨asking me that.
Broker: err … ahh.
You: Have you been doing this long?
Broker: Err yes, I’ve been a broker for 11 years.
You: Really! Then why are you asking me to release my financial statements? We don’t even have a deal yet.
Broker: Ahh … OK well let’s see. I need you to sign an NDA.
Broker: What’s your email?
Some brokers still won’t get it. Just thank them for their time and move on to the next one.
After finding a few commercial brokers that do want to work with you though, it doesn’t take long before you have a steady flow of “good” deals piling up on your desk.
Deal Source #2
The second deal source does require an upfront investment from you, but you are rewarded for this investment by the owners of the property “calling you” directly. This deal source is, direct mail.
The beauty of direct mail is your ability to target precisely only those you want contacting you in the first place. So by eliminating owners of property you are not interested in from your mailing list, you save yourself from talking to people who who have buildings you don’t want to buy.
For example, if you decided you wanted to buy apartment buildings 100+ units in size in Phoenix, Arizona, in most cases you can acquire that list.
Some list sources are:
– local title companies
– list brokers (http://apartmenthouseprofitmachine.com/aptowners)
When you get this list you have a very important part of your business in place. That is, the names and addresses of all the people who you “want” to do business with, in the market you are interested in.
Now you can send a mailing piece to this list with the knowledge that, whoever responds will at least have a property you are interested in buying, and all that remains to be done is determine whether the seller is motivated enough to let go of the property at a price or terms that fit your buying criteria.
You will always get responses from mailing this list, and a certain number of those responses will result in deals. But you don’t just leave it at that. You mail this same list again, three months later, and again three months after that, and then again three months after that. And every three months for the rest of your life.
Two things are going on here.
1) Owners’ circumstances change. On the day they receive one postcard from you everything may be going just fine. Then, when the next of your letters hits their desk, maybe there are a few problems lurking for the apartment owner. Nothing serious though, nothing that would make them want to sell their property.
But then something happens in the apartment owners life that turns everything on it’s head. It could be anything; divorce, illness, business failure. But now, he/she is seriously thinking about getting rid of the property. Whether it is to raise money, to lighten the burden of responsibility, to free up time; it could be any of these, or all three.
The key is though, the owner no longer sees the apartment building as a prize asset. Instead, they see it as something that is holding them up from attending to a larger priority somewhere else in their life … and the building has to go!
2) Every time the apartment owner sees your mailing piece, he/she is reminded that you are there as an option to sell. Over time, they think about the idea of selling, weighing the pros and cons of their own situation in their mind.
Apartment owners have a lot going on, so as long as your letters and postcards keep coming in, they keep being reminded¨(by you) that selling is an option for them and that it’s just a phone call away.
Additionally, every time your mailing piece hits the apartment owner’s desk, what you are saying to them is:
“Hey, here I am again. You can rely on me. I am serious about buying your property. Are you serious about selling?
There is also the subtle inference of:
“So you still haven’t sold? Well, hey, whenever are are ready, I’m here.”
As you can see, your repeated mailings to apartment owners work on two fronts; a) you are waiting them out, waiting for circumstances to hit them that force them to sell, and b) you are building credibility with them by the repeated fact of your mailing showing up like clockwork on their desk every three months.
Direct mail is a very, very good source of highly motivated apartment seller leads. You may not be in a position to invest in a list on you first deal, however as soon as your financial resources allow, do invest in a list of apartment owners for your chosen market. It is a very powerful source of leads and deals.
Commercial real estate brokers are a very good source of deals and are probably the best source for you to get started. Once started though, the combination of commercial brokers and direct mail will create a steady consistent flow of truly profitable deals.
Once you have your dealflow, your path to wealth as an apartment entrepreneur is virually assured.