Story to sit towards the end of 2015 I was bored. What does a bored real estate developer do? Looking for a pulp…
Story for Shabbat
Towards the end of 2015 I was bored. What does a bored real estate developer do? Looking for deals, so I took the computer and did a tour of reputable sites to see what was going on.
Finding deals that are on the market is a tricky affair. The brokerage issue in the US works a little differently. The agent represents and receives a commission only from the seller (all the smart ones do not jump, here I add for you "usually"), his job is to get the seller the highest price so these deals should have market value They have less interest, but it's worth controlling what's going on and occasionally there is a reality (I have to say it usually happens due to the seller's agent not understanding / having what he has in hand), so I did a round. It was my lucky day.
East Parkwin is a beautiful Brooklyn apartment stretching from infamous East New York (not necessarily rightly so) to the prestigious Sloop Park. Broad, beautiful and green avenue. The Champs Elysees of Brooklyn. Scroll out to 770. Because the boulevard is so different from the streets around it, making comps becomes problematic. How do you compare property on the boulevard to properties in the surrounding streets?
Let's go back to the boredom stage. While walking around the virtual spaces, I saw an advertisement for the sale of a property on the avenue, number 614. Crown Eights area, 5 minutes from my office and two blocks or so from 770 to acquaintances. The price - 1.35 million dollars. Picture only from the outside, no description of the interior. I decided it was worth going to see and picked up the phone to the agent. Why is it worth it? Properties on the street don't sell very often, so it's worth seeing.
We arrived at the property. On the basement floor is a functioning doctor's office that appears to belong to the property owners, but the surprise was on the upper floors. Two completely renovated, empty apartments. It turned out to be a fire, the owner renovated everything but didn't want to deal with tenants so he left them empty. At this point, I realized that the building must be purchased. He undoubtedly delivered to the wrong agent, priced below market value (at least 1.8 million), the wrong market and there is an opportunity here. We offered the owners a full price. Not in place, but we offered.
After two days, a call from the agent. The owner accepted the offer, pleased but hesitant. Why hesitate? He is not sure, he wants to retire but he has a partner, tried to sell and failed... stories. Since I already understood that the agent, who was extremely nice, was not the ultimate deal maker, I asked to meet directly with the seller, and the meeting was arranged at his office. It is important.
When you meet someone the idea is to connect with them. It's more convenient to do business with someone like you, so in preparation for the meeting I analyzed who the seller was: a doctor who wanted to retire, an African-American, meeting in his office. I informed the partner "Wear a suit, buttoned shirt, no tie". We both wore a suit, a light blue shirt with no ties and went out for a meeting.
At the entrance to the office I smiled broadly. Nice guy, nice and guess how dressed? Suit, light blue tie without tie. A good start.
There was a good conversation, his partner joined in with demonstrable dissatisfaction, but it turns out that the building is only his and that's it, he decided to retire. The meeting went well, he was impressed by us and we agreed to continue the deal. Excellent but not finished. At this point NYU's experience and financial education came into play and I decided to ask "What will you do with the money you will receive?" And the answer was "I'm not sure". I smelled an opportunity. I asked if he would like to make more money by financing the deal. will earn interest, we will structure the payments in a way that will prevent him from going beyond the next tax bracket and thus he will be able to earn more and pay less taxes. agreed. The first and last payment for the first year: 180 thousand dollars. Do you get it? We received a building worth 1.8 million for 180 thousand dollars. Is it true that real estate is a wonderful thing?
Three weeks after closing, the apartments were already leased, and we were waiting for the tenant to the office. It was a little more problematic. According to the CfO, it is only permissible to hire a doctor, so be patient. But life smiles, sometimes, to those who are patient.
After purchasing the property, we asked for estimates from a number of brokers. Everyone did comps and came to the same number we thought. 1.8 million, but I disagreed. 1.8 was correct on paper, but did not take into account the broadcast. Most of the properties were on nearby streets. How much is the boulevard worth? I decided that at least another 10 percent, and when a DJ called, I said 2 million.
Who's a DJ? He was an agent of a large company called Cushman Wakefield. A month after the purchase he called. "Tal do you want to sell the 614? I have a client, a doctor, who was supposed to buy a building, the deal fell through and it's hot" I said "yes, for 2 million". The offer was emailed before the end of the day. The deal was closed two months later.
Now do not tease me with the numbers, but we bought a building for 1.35 million, put in 180 dollars and sold for 2 million three months later. Let someone do a calculation of returns.
Serious moment. What you can learn here:
1. Deals can and are everywhere. Do not disqualify anything.
2. No money to go see.
3. Worth putting an offer. Maximum will say no.
4. Did the deal go crazy? Worth making another attempt, preferably with the landlord directly.
5. Stop thinking about who you are meeting, invest some time in it and be ready.
6. Experience and education are important.
7. Be more professional than you. Did not succeed? Admit it and get better next time.
8. If you sell a property, give the listing to the most appropriate agent, not your friend who has a real estate license, unless he / she is really, really good.
9. Did you take a listing? You have a responsibility. Just remember that.
Sabbath peace and good luck to everyone
Link to the original post on Facebook - Works on a desktop computer (To view the post must be members approved for the forum)
?