I remember the first live auction I attended for a local charity in San Diego. The scene was just like I had seen on TV: the auctioneer was speaking wildy fast. People’s hands were flying up at every number, driving prices higher and higher until finally… the highest bidder won.
If this is what you have in mind when you think about bidding for commercial real estate in 2021 you might want to think again.
Surprisingly, the highest bid in most cases only gets you to the final table.
If you want to close more deals this year, here are three things other than price that you should think about in your offer.
- Certainty of close – The last thing a seller wants to happen is to go through a 60-90 day due diligence process only to find out that the buyer is no longer interested, can’t qualify, or even worse, doesn’t have the money to close. When making offers, put yourself in the seller’s shoes. Since they probably have never met you before, what is going to give them this confidence to pick you? Is it track record, hard cash on day one, a prior existing relationship with the broker or a shared vendor? Making this clear in the seller’s mind will give you a better edge.
- Relationship with the broker – In a competitive real estate market, the true key holders are the active listing brokers. Think about the last time you purchased something over $1,000. Most of us like to think we are logical in our decision making, but the reality is, we are all emotional creatures. A good word from the broker goes a long way to get your offer taken seriously. There is no shortcut for building relationships in this business. Monthly, if not weekly, trips to your local market to meet with strategic partners and brokers is an absolute must.
- Shorten your timeline – Another great way to set yourself up for success and differentiate yourself from the competition is to shorten your window for close. One way you can still make time for due diligence and shorten your window for closing is to request an “early access agreement.” This is an agreement between the seller and potential buyer that allows you to tour the property and walk the units BEFORE your offer is accepted. This is a win-win scenario for both the buyer and the seller.
I tell my team all the time, “where difficulty increases, so must our level of commitment.” You use these tips in 2021 and you will be that much closer to landing the next deal that can change your life.
About the author:
Ellis Hammond manages a private network of investors seeking passive investment opportunities in multifamily syndications across the United States. Ellis is passionate about the intersection of faith and capital and hosts a weekly podcast show, Kingdom REI, in order to educate and inspire other investors and entrepreneurs to see capital as a means for greater Kingdom influence. To learn how you can invest alongside Ellis and this community, visit EllisHammond.com.