I know, just reading these words, you’re already dismissing the idea. Cold hard reality? For working your local market this is one of the most productive things you can do. For a number of reasons.
1) When you walk into the leasing office and ask to speak to the owner, and then start speaking with the owner, you uncover situations that do not show up anywhere else. The owner knows the property like no other, and he/she alone knows when there is trouble brewing, and if selling now may be a good idea. There may be partner trouble, the death of a principal, foreclosure looming. Previous to any legal notice, the only signs of any of it would be the stress lines on the owners face. When you knock on a troubled apartment owner’s door; a) he/she sees you as a godsend, b) this is your motivated seller and no-one else’s.
Here’s how this conversation might go:
You: ”Hello, my name is Ben. May I speak to the owner please?”
Leasing Agent: ”Er … he’s not in. What is this related to?”
You: ”I’m interested in buying the property.”
Leasing Agent: ”Ah, OK. Could you just … give me a minute.”
The leasing agent will either make a call, or get up and disappear into another room. If she (my experience is it’s almost always a she) made a call, she’ll either set you up with a phone that has the owner on the other end, or she’ll provide you with a number for the owner. If she disappeared into another room, she’ll either reappear with the owner, or usher you into a meeting room or office where the owner is. When you are on the line, or in a meeting with the owner you can talk about the property generally and find out more about his/her situation to see if there is motivation and a desire to sell.
2) You discover properties that don’t show up anywhere else. A good way to organize your prospecting is to start with Loopnet to see what properties are selling. Say there is a 30 unit property listed in a certain part of town. Get the property address and pull it up on Google Maps. Zoom in so that you are looking at a quad, an area bordered by main roads. You will have a geo tag on the property address, and you will also see other apartment buildings showing up on the map. Either print out the map or make a list of all the apartment buildings in the quad. Visit each property (walk into the leasing office).
When visiting the properties on your list you will find there are always other apartment buildings nearby not showing on the G Map. About one in five times, they are distressed, or boarded up. No signs, nothing.
Researching these properties reveals some interesting information. Stuff you would never think of. For example, a lot of characters are still trying to milk government programs with apartment properties (tax credits, low income loans), and when the money runs out they simply move on and the property is just left. Big mess, but also opportunity. Some research and a bit of genuine nosiness and pointed questions will always reveal the owner’s name current phone number. Call, and offer them an out.
*** a little sidenote. The research on some of these properties reads like a crime novel, and reveals just how scarcity-minded, sick, and lacking in imagination some people are. However the deals you end up with for extricating them from their mess are second to none. When you do the work to find out what happened and who the owner is, it’s just you, and the owner. Tip: do the work.
Go Where The Crowd … Isn’t3) You will get to know market rents, as well as vacancy rates down to the detail. Your converstions with leasing agents and owners will reveal all of this data, and your knowledge of the area will be authoritative within a few months, giving you confidnece in your numbers and sharpening your deal analysis.
4) Within these same few months you will also have met or spoken to most, if not all of the owners of apartment buildings in your target area. Some will be in need of help. Those go on your follow up list as motivated sellers, and whom you stay in touch with until they sell to you or someone else. Other owners you speak to will be doing just fine and don’t want to sell. These go on your Buyers List, and you follow up every couple of months to see if they are still buying and what they are interested in.
5) It’s get’s you out of your comfort zone and into unvarnished reality. That’s just good for you. Most investors are in their heads too much, struggling with the swirl of emotions and all of the excuses they (their emotions) offer up. It’s easy to get nothing done every day by avoiding what you have to do.
6) You are working with first order information. In other words, you are standing right next to reality. You are at the property, and in the neighborhood, talking to the owner, not relying on anyone else’s reporting or interpretations. You are getting the facts direct from the Seller. You can see the condition of the property. You will know the truth about the neighborhood.
This is a Road Less Travelled strategy for creating dealflow that indeed makes all the difference. It will put you in touch with every owner of every apartment building in the part of town you are targeting. No gatekeepers, no intermediaries. Within a short period of time, all apartment owners in the area will know your name, and you will have their phone numbers. Your task? Simply follow up and stay in touch. When one wants to sell, you will be on the phone with them.
Commercial real estate is a business of relationships, and relationships are established person to person.