Lately, I have been thinking about sending out letters to owners of commercial properties I've been interested in but I only get one shot at contacting them so I want to make sure I get my point across as best I can. I haven't found any deals lately on the MLS or any other public platform so I am going to try contacting owners of properties not for sale to see if they have any interest in selling them. My main question is, what are some of the advantages I could express to the owner in selling to me now instead of listing it in the future? At this moment, I can think of saving on commission, avoiding some large tax hits if they decide to go the seller financing route and just being able to move onto bigger or different investments. Is there anything I'm missing? Is there anything I should or shouldn't say? This is the first time I'm doing this so I just want to make sure I'm as effective as possible while not coming off pushy.
Any feedback is very much appreciated. Thanks!
Proof of funds for quick close, past deals you've closed quickly on. sample contracts all typed up and ready for them to sign.
@Matthew Rembish , I would approach it as a long-term approach, rather than a "sell to me now" approach. You'll find that you won't ever sell anyone on the first contact, so be prepared to keep in touch every few months with your list of owners, and you may get a bite somewhere down the road.
It's great to list some points as to why selling direct may be beneficial, but CRE owners will be a lot more numbers-savvy than wholesale a SFH from a little old lady. Most have teams of brokers and professionals at their disposal, and are more than willing to pay commissions to brokers to get the top market rates.
That being said, I would try to add some market research behind your expressed advantages; i.e. Instead of "If you sell now, you will have cash to move on to bigger investments," say something like "Over the last 10 years in Toms River, appreciation growth rates of mixed-use assets like yours have been showing signs of a decline. Based on my research, we may be at the top of the market for this type of asset and it is a great time to take profits (and have the backup ready to share).
Hope this helps,
Before you do anything you need to determine the sophistication level of your seller. Someone selling a 100k house or a 400k small multifamily will likely have a much different decision making process than larger properties.
@Matthew Rembish Here's my perspective as someone who owns commercial multifamily properties, we know the reasons already. Sure, you might run into some folks who inherited the property and aren't too sophisticated. That will be a smaller group of people and they might need some education. Trust me, when you go through a commercial loan process, sign papers that say "full recourse", etc. you do enough diligence to understand concepts like depreciation recapture, saving on commission, etc. Consequently, I'd go into it thinking...
1.) You don't only have one shot at contacting me. If I'm not interested now odds are I'll throw your postcard in the trash. And if circumstances change in 6 months, well, I'm not going to go through the trash...
2.) The main value proposition is guaranteeing your ability to close and to close quickly. Tenants gets spooked when a property is put on the market, PMs and/or owners have to ask questions, scheduling viewings a pain, unit turnover might go up, etc. So there's some economic value to the convenience (and time savings) of not having to do all of that stuff.
Not to mention, if it's a commercial property there's a higher likelihood that we have a property manager than a random duplex for sale. Property managers (in most areas) have to also be realtors so I would have someone that I talk and text with every couple of weeks that I could say: "Does $2MM sound like a fair price for 3945 Fake St?" The classic fictional Old Lady who bought her home for $20K back in 1952 might not have that person to talk to when it comes to assessing if their property is worth $80K or $800K. I'm being intentionally hyperbolic but hopefully you get my point.
@Ronald Rohde Good thinking, thank you for the advice, Ronald!
@Andrew Beauchemin Andrew, I never really thought of approaching it like that but I really like that. I think approaching it that way would be a lot more effective in fostering a relationship. Plus, having the numbers and information to back up your claim never hurts. Thank you!
@Joel Owens That's a good point. Sounds like it's a better idea to get to know them a little better before making any moves on the buy/sell side. I'll keep that in mind. Thanks!
@Andrew Johnson Andrew, I definitely get your point and I appreciate the feedback. You're right, there is a different level of sophistication with these owners so I'm probably going to have to rework my strategy a bit. If there is theoretically a property manager in place (besides quick close/turnover control) are there any other ways you could use the property manager to your advantage? I'm just trying to see this from all sides. Thanks!