I talk to dozens of real estate investors every month. One of the common themes is their inability to get deals these days. They’re spending an enormous amount of time chasing deals of all shapes and sizes… and usually coming up empty.
And when they do get an opportunity, it’s usually overpriced. Or they’re outbid.
You see this is not a game that can be played part time. In this market, you won’t succeed by looking for deals on lunch breaks, evenings, and weekends. Many large operators have more cash than deals, and some of them don’t know how to fix this problem. Except through overpaying. (Please don’t invest in a deal like this!)
The best operators and investors don’t overpay. Some others do. Many will pay a stiff price for their actions. It’s a seller’s market out there, and it’s tough for all of us.
Warren Buffett says,
“The best investors say no a lot. The very best investors say no almost all the time.”
Well, almost all of us.
The Importance of Deal Pipelines
There are a handful of professional operators who have refined the art of the acquisition pipeline. And they’re getting an unfair advantage over the rest of us.
Are you a weekend warrior? Are you spending your evenings and weekends and holidays and vacations spinning your wheels looking for a house to flip? Or a duplex? Or a mobile home park or self-storage facility?
I spoke to a West Coast investor this morning. He told me he recently spent 300 to 400 hours looking for an investment property. He ended up acquiring a triplex. And it’s apparently not that profitable.
How much free time do you have per day? Five hours tops? This investor just chewed up about 70 days of free time—to get what sounds like a marginal investment.
It’s hard to go up against professionals—not to mention the masses of amateurs who are driving up prices.
Going up against the pros is like options trading in your spare time. It can be a zero-sum game, and you’re playing against corporations with billions of dollars in Ivy League grads and machines. You will not win (or not very often, at least).
Some operators are just getting the upper hand over the rest.
My friend and operating partner, Matt, is one of those guys. Matt has a team of four guys working the phones full-time. Eight hours a day, five days a week, their sole purpose is to find deals.
They dial the numbers of thousands of mom-and-pop self-storage and mobile home park operators every week. They take notes. They follow up.
Week in and week out.
Month in and month out.
Year in and year out.
By being there, being consistent, being empathetic, and being skilled, they are able to find multiple deals every month—opportunities that other operators and brokers won’t get a shot at.
Related: 27 Ways to Find Real Estate Deals
Case in Point
Matt contacted the 88-year-old owner/operator of a Michigan mobile home community over seven years ago. He wasn’t interested in selling. But Matt stayed in touch every few months for the last seven years.
Matt’s phone rang two days ago. It was the niece of the now 95-year-old park owner. She said that he was done. He could no longer operate the park. She went on…
Niece: “Is your offer from 2017 still on the table?”
Matt: “Uh, yes. Is that price workable for you?” (Prices have climbed a lot since 2017.)
Niece: “Yes. Let’s get a contract signed.”
When I spoke to Matt yesterday, he was already on the ground in Michigan.
My friends, deals like these are not for casual seekers. Deals like these are the spoils rewarding those with a plan. Those with a well-established team. Those who follow up consistently. Those who speak to mom-and-pop sellers with empathy and skill.
(Contact me to get my free special report on acquiring mobile home parks from mom-and-pop operators and more.)
You and I don’t have to have a team like Matt’s to benefit from their diligent efforts. We can get access to the fruits of their labors from the comfort of our own homes. And we can enjoy the tax benefits of direct ownership in recession-resistant commercial real estate assets like these.
The Decision to Invest Passively
In the past, I wrote a post explaining how many smart real estate investors are getting access to these deals by going passive.
Yes, I agree that passive investors don’t get the thrill of the chase. But passive real estate investors also don’t get…
- the massive time commitment involved with real estate investing.
- the debt involved in their name.
- the 3am calls dealing with toilets, tenants, and trash.
- hundreds of other challenges that often consume nights, weekends, and vacations.
And while there are no guarantees, passive investors who select a carefully vetted operator often get access to better returns and equity growth—with all of the same tax advantages.
Before this went to press, Matt called me again and told me he got another off-market deal. This one is in a north-central U.S. state. In a similar way to the other deal, he had been staying in touch with the owner. The owner had a dispute with his partner, and there is potential litigation. The guy knew just who to call when things went south.
This 300-plus-unit self-storage facility is only 70 percent occupied and in need of some TLC. This is the perfect situation for Matt to step into. His plan is to bring occupancy to 90 percent and do the deferred maintenance. This will significantly increase net operating income, value, and accelerate investors’ equity.
Matt’s passive investors enjoy the returns of his labors. He’s actually given investors over 60 percent IRRs for the past few years—a number that was independently verified by a ratings firm. My wife and I are among his investors, and my firm and our investors are investing heavily with Matt.
We spent a lot of time and effort vetting Matt up front. But now the hard work is in Matt’s court. And he does it very well.
Buying from a mom-and-pop and upgrading to REIT standards is a powerful operational strategy. But it won’t last forever.
The last WWI veteran died a number of years ago, and there are no more on the planet. In the same way, mom and pop-owned assets are being gobbled up, and eventually this strategy won’t be in play.
We are excited to be part of making hay while the sun shines. It’s shining on passive commercial real estate investors right now. Is it shining on you?
Are you investing in commercial real estate currently? How’s it going? Are you considering making the leap into commercial? Do you have any questions for me?
Let’s talk in the comment section below.