Story sit down towards the end of 2015 I was bored. What makes a bored real estate developer? Looking for ...
Story for Shabbat
Towards the end of 2015 I was bored. What is a bored real estate developer doing? Looking for deals, so I took the computer and did a tour of recognized sites to see what was happening.
Finding deals that are on the market is a tricky thing. The brokerage in the US operates a little differently. The agent represents and receives a commission only from the seller (all the sophisticates do not jump, here I usually add "for you), its job is to get the seller the highest price and so these deals should be of market value / value and They have less interest, but it is worth controlling what happens and there is a reality every now and then (I have to say that this usually happens because the sales agent does not understand what he has in hand), so I took a turn. 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. As I walked around the virtual spaces I saw a post for sale of a property on the avenue, number 614. The Crowneverse Area, 5 minutes from my office and two blocks or something from 770 to salespeople. Price - 1.35 million. Picture only from outside, without description of face. I decided to go see and picked up a phone for the agent. Why Worth? The properties on the boulevard are not sold very often, so worth a look.
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 phone from the agent. The owner accepted the offer, blatantly but hesitantly. Why hesitate? He's not sure, he wants to retire but he has a partner, tried to sell and couldn't ... stories. Since I realized that the agent, who was very nice, was not the ultimate micro deal, I asked to meet directly with the seller, and the appointment was set up in his office. It is important.
When you meet someone the idea is to connect with them. It is more convenient to do business with someone like you then in preparation for the appointment. I analyzed who the seller is: a doctor who wants to retire, African-American, meet in his office. I told the partner "Wear a suit, buttoned shirt, no tie." We both wore a suit, a light blue striped shirt and went out for a date.
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 a show of discontent, but it turned out that the building was just his and that was it, he decided to retire. The meeting went well, impressed with us and we decided to continue the deal. Excellent but never ending. At this point, NYU's experience and financial education came into the picture and I decided to ask "And what will you do with the money you receive?" And the answer was "I'm not sure." I took a chance. I asked if he would like to make more money by financing the deal. He will earn interest, build the payments in a way that prevents him from going beyond the next tax bracket and so he can earn more and pay less taxes. agreed. First and last payment for the first year: 180 $ 1,000. Got 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 is a DJ? He was the agent of a large company called Cushman and Wakefield. One month after the purchase, he called. "Do you deserve to sell 614? I have a client, a doctor, who was supposed to buy a building, the deal has fallen 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 don't freak me out with the numbers, but we bought a building at 1.35 million, we put 180 thousand and sold at 2 million three months afterwards. Someone would make an account 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
An anonymous member of the Real Estate & Investment Forum USA