The Question Nobody Wants to Ask the Seller
There's one question I think we should ask more often when looking at a deal: "Why are you selling?"
Not just because the answer might tell you something about the property. Because somewhere behind that question is another one: "Why does this opportunity exist in the first place?"
We spend a lot of time looking at numbers. Purchase price, rents, repairs, taxes, insurance, financing, comparable sales. OK. That's necessary. But sometimes the story behind the numbers tells you just as much.
A seller says he's retiring. Fine. He's tired of being a landlord. Makes sense. He inherited the property and doesn't want it. Completely reasonable. He needs liquidity quickly. That happens.
But then you start looking at whether the story fits everything else you know... If he's retiring, why is this the only property he's selling? If he's tired of managing tenants, why has the property been professionally managed for years? If he desperately needs liquidity, why is he willing to lose a buyer over $3,000?
None of those things proves anything. They just make me curious. And curiosity is probably one of the more useful qualities you can have in this business.
Because there's another uncomfortable truth I've learned about things that are publicly for sale: the best-looking deals are usually suboptimal somewhere.
Think about it. Why would a complete stranger voluntarily give you $30,000 or $50,000 of value? Why would someone advertise a property publicly at a price obviously below what it's worth when hundreds of other people have access to exactly the same information?
Sometimes there's a perfectly good reason. Maybe they need speed. Maybe the property needs work they don't want to do. Maybe there's a tenant problem. Maybe conventional financing won't work. Maybe they're willing to sacrifice some price in exchange for certainty.
But there should be some reason.
That's why, when I see an incredible deal sitting publicly on Craigslist or somewhere similar, my first reaction isn't: "Look what I found." It's: "What am I missing?"
That doesn't mean I automatically walk away. If you do that, you'll eventually become the safest investor in America because you'll never invest in anything. You have to take risks.
But I want to understand the risk I'm taking. And this is also why I think relationships matter so much more in this business than people sometimes realize.
Some of the best opportunities never get advertised. Someone calls you: "I'm thinking about selling this property. Would you be interested?" That's a completely different situation.
Now somebody actually may give you a very good deal. Not because they're stupid and not because they don't know what the property is worth. Because they know you.
Maybe you've done business before. Maybe you're part of their circle. Maybe they trust you. Maybe they know that if you say you're going to close, you're going to close. Maybe they'd rather take $10,000 less from someone they trust than spend two months dealing with strangers, inspections, negotiations, financing problems and people who disappear after three weeks.
That $10,000 isn't necessarily money they lost. It's the price they're willing to pay for certainty.
And from your side, that discount isn't free either. You earned it before the property was ever for sale. You earned it by being reliable. By answering the phone. By doing what you said you would do. By knowing people and, more importantly, having people know you.
That's probably where the genuinely exceptional deals come from. Not from discovering some secret Craigslist listing that thousands of other investors somehow failed to understand. They come from situations where there's a reason you are being offered the opportunity.
So yes, I still look at public deals. And sometimes very good ones are there. But if something looks unusually good, I don't think the answer is to run away.
I think the answer is to become a detective. Find the catch. Find the motivation. Find the reason the opportunity exists. Then decide whether the risk makes sense.
Because there's a balance in this business that I don't think ever completely goes away. You have to be suspicious enough to investigate a good deal. And brave enough to buy it when the explanation actually makes sense.
(Have your best deals come from something you found, or from someone who already knew you?)
- Drago Stanimirovic