Ten Ways to Gain Credibility with Brokers

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4. 1.Have a track record.
   

If you don't have one, you need to go borrow one, legitimately borrow one from somebody else and it's a different discussion. If I call you, you're a broker and I say, “Yeah, I’m Mark Kenney and I'm new to the multifamily.” You're like, “Okay.” I mean, you’re being nice to me, but versus calling you and say, “Hey, I’m partnering up with guy, Whitney. He has 4,000 units and by stage, he bought 18 deals last year.” A total different discussion. Instant credibility. It's not just this works because people are in a coaching program, can leverage us as partners and I can tell you the discussions they have with brokers are much, much different. They also get to lever the same broker connections that we have. Then when you're looking at brokers and you're in a new location that you've never been in before, we have brokers that we know make introductions to new brokers in other locations. That's step one is get a track record. If you don’t have one, then you need to use somebody else's track record.

1. 2.The two is have your criteria clearly defined.

This is something that I was horrible at when I first started. I would look at from five units to 800 unit deals. Well, I couldn't do an 800-unit deal at the time. This wasn't yet reality. The five-unit deal, I wasn't interested in, so I'm at wasting time. You're talking to brokers, it's very – it's good. One, it shows that you have your act together. Two, they know what you're looking for. If you say, “I'm looking for mid-80s construction, pitch roof, 5,000-ish rehab, 100 plus units in these locations, whatever I want to do, a Fannie or Freddie, which means I have to be 90% or more occupancy for 90 days or more,” those type of things. Has it clearly defined, written out, or where you can communicate it to brokers directly? It also helps them, because now they know what you're looking for. They’re not acting as to waste your time calling you up about deals that don't for your criteria.

1. 3.Meet face to face.

You don't want to just hop on a plane every week, because it's not productive and things like that. If you have markets, you probably – I don't know, you probably shouldn't be looking at probably more than two or three markets anyways that you're really, really considering just too many. Those ones you are considering, or seriously considering, if you’re local, take the broker for coffee, or lunch, things like that. Just meet with them face to face. You're developing that relationship. We have a guy that in our coaching program that he literally lives in Israel. He flew over to the states, to Atlanta. I think it was 10 days there and met with a bunch of brokers and property management companies and things like that. These are brokers that we've done a lot of business. They’re like, “Man, this guy is flying over from Israel, maybe he is serious.” Now you don't have to buy over from Israel, but reality is getting on the plane shows a time commitment and a financial commitment and that you're serious. Getting face to face with someone, people will always say they want to be in business with people they know, like and trust. You can develop that much faster face to face. It’s just reality.

1. 4.Do your homework.

These aren't in any particular order. Reality is you can come up with a hundred steps, but do your homework. Understand the market a little bit and generally speaking, if a property is listed, the broker is going to put together what's called an offering memorandum, or OM, which will have all the information, pictures and information with the sub-market and the property. Can be 10 pages to 60 pages. That can be a lot long. They spent a lot of time putting that together, right? I had someone that you should go on property tours with and literally, we go to the property and this guy would say, “Well, how many units is this?” That's the most basic question. Don't ask the broker that question. Read the offer memorandum, or is it individually metered, or if it has stuff in there that the rooster knew and things like that. You have to memorize – no, you don't have memorized off the memorandum, but there are some basic things. You're going to look a lot more credible talking to a broker and be able to rouse up off yourself. Understand the roofs are two-years-old. Understand it has aluminum wiring. Understand that parking lots were done. Those things that you can rattle off shows that, “Hey, I'm serious. I spent the time. I did my homework.” I's just going to give you more credibility with brokers. 

    5.Do what you say you're going to do.

It might sound, well, that's basic, right? Well, reality is people don't do things commonly where they say they're going to do something. Now don't do something if it doesn't make sense anymore, you know what I mean? If you say, “Well, hey. I'm going to meet with you, or I'm going to put an offer in,” and those type of things. You want to be known as a man of your word, a woman of your word, and that you're not being wishy-washy. Because you're going to get one chance, or maybe two chances with these brokers. You screw up once, you screw up twice, you're pretty much done with that broker. It's a small world. People talk to each other. We are dealing with sellers. When you commit to something – even if you commit something verbally, okay, it's not legally binding, right? You could say, “Well, yeah. I'm not going to do that anymore.” If you commit to something verbally, then you need to follow through and commit to that and be willing to put it in writing and things like that as well.

1. 6.Don't reach re-trade.

I’ll explain what that is in a second, unless it's absolutely necessary. Re-trade is let's say, Whitney you're selling a property to me. I put up a offer in 7 million and then we get the contract, 7 million. Then at some point in time, typically it's going to be related to price, but it can re-trade other terms if you wanted to. Now after the contract’s been signed by both, or once it’s fully executed, I say, “Whitney, you know what? We did due diligence and there's more stuff there than I thought. I want a $300,000 credit.” You say, “Well.” You’re going to have some reaction. Now there is a time, I know some people say, “Oh, we never ever re-trade.” Well, you know what? That’s a ridiculous statement too in my mind. Either you’re buying newer assets, or you don’t have as many things that could go wrong with it, or you're pulling out, or you're actually buying a property you’re overpaying for, reality. There are times. If you go to a property and you see – you get the line, plumbing lines scoped and this happened to us, right? There was a $110,000 collapsed line below two buildings. Well, how do we know that? It wasn't disclosed to us. We didn't know that ahead of time. Any other buyer coming in is going to find the exact same thing if they scope the lines, so that's legitimate. Say well, you know what? It's something like, the parking lot needs to be redone, or needs to be painted and I know an example where someone actually, bigger deal and they wanted a – they’re going under contract, one other contract and came back and said, well, after our due diligence, we found out that we need to paint the building, $70,000 to paint the building. How would you not know that when you looked at the property before you went on a contract? Don't go back on things you should have been able to see at a time, or that were disclosed to you. It is okay, not ideal. Now if you come back and you say, well, it's a 10 million dollar deal, and we found $50,000 of extra stuff that we didn't plan on it, you have to make a determination. I would say, eat it. Your deal is going to – I mean, if your deal doesn't work, $50,000 and a 10 million dollar deal, then you're probably too tight on your underwriting to begin with. In that case, I would eat it. We've done this before, where it's like, “Hey, you know what? It's not worth it. One, rather be known in the industry for not re-trading by brokers and sellers.” Now if it comes back and you’re like, “Hey, this deal just doesn't work anymore.” Literally, we have this much more of rehab that we never could have known that the plumbing, the roof and whatever might be, electrical needs to be redone. In order for it to work, we need a credit. If not, we understand, but we need a credit. Be very cautiously in my mind on doing this. Don't feel that the seller is winning, or getting something up on you, because you're paying an extra $50,000 for it. You have to make your own personal decision on that.

1. 7.Be a good loser and no one wants to lose.

We know many examples of we lose way more than we get. Just reality. We're always very cordial about it and we're like, “Totally understand. Thanks for your time Mr. Broker.” We'll get the next one. We know examples of people that I know too, where they go after a deal, they don't get the deal. They think that they have the relationship with the broker and they're on the inside track. They don't get it and then they start literally reaming the broker. “Oh, my. You told me this and that.” They're not reaming to me, right? They're not complaining to me. Well, you know what? How do these things come back to me? I'm not even involved in the transaction. Now I hear about these guys and I know several of them, right? That do this to brokers. Brokers don't want to work with people, so you need to be a good loser, if you want to say, and just be – and you're going to be disappointed. The question, you're right is rightful to be disappointed, but get yourself in check and realize it's a long-term game and you're going to lose more than you're going to win.

1. 8.Give brokers feedback on deals.

If you get an e-mail and you get 10 deals sent to you a week, don't reach out to a broker on all 10 deals. I’m not interested, not interested. If you engage on a particular transaction, you're having a discussion, which you should have, not just e-mail but a phone discussion with them, understand the story. Maybe you're going to underwrite the deal. Then you get to that point, maybe even look at the deal and then the broker is like, “What do you think?” You’re like, you don't respond, right? One, the broker might know something you don't know, reality. Two, you want to get on and by defining why it didn’t work for you, well, you know what? We've been in a situation before, by the way. One guy was like, “Hey, I told the broker the deal doesn't work, and now he's actually asking me why.” Well, if you don't have any information to tell. Now if you say, “Well, I did some preliminary underwriting versus I got with a property management company, have a budget from a property management company, I got with a mortgage broker. I have a term sheet for mortgage broker. I got the property tax consultant. I got the property tax.” You’re doing all those things and the deal doesn’t work and here's why, that's a much different discussion than it just doesn't work. The advantage is one, the broker learned something, they might print to learn something they didn't know. Two, they start understanding your mindset and how your underwriting deals and what you're really looking for. If you say, “I'm looking for a 10% cash on cash return,” most brokers know within reason whether that deal is going to be a 10% cash on cash return within reason. They might be more aggressive than you're going to be and things like that, but not going to send you a deal, or call you about a deal. “Hey, Whitney. I have this deal and it’s going to be a 6% return per year over five years.” They wouldn't waste your time on that. They get to understand the way your thinking is and I’ve done my homework again. If you've done all those steps, we have steps to follow before we submitted a letter and 10 is an example. If you follow those, you look like you've done all your homework ahead of time. If it doesn't work, it just doesn't work.

1. 9.Don't screw a seller, even if you can.

It's a small world. You never know who you're going to be buying from, never know who you’re going to sell to, things like that. We had an example recently, where we signed a contract, PSA was signed, fully executed and the broker called my partner at the time and said, “Well, the contract says that the seller is going to pay the transfer tax of – it’s $80,000 for the state transfer tax. In this state, it's not common where the seller pays it,” so they wanted us to come up with $80,000.” Literally, just kindness of our hearts. We’re like, “It doesn't matter what's common necessarily. The seller signed the contract. I mean, did they read the contract?” $80,000. For us, we have investors now. $80,000, we have to look at how our investor's going to be treated based on that? Reality is we could have said, “Screw you. You signed the contract. You're going to pay the $80,000,” but we need to negotiate with some other things. These guys are trying to bully us from the very beginning. They're very large and they wouldn't give us extensions. They wouldn't do several things. We said, “This was a fair trade.” I think we wanted 12 days or something. Give us 12 days and we'll pay the $80,000. That is a very fair transaction in my mind. I mean, without him hauling around. They're like, “Yeah, we'll do that. You're going to pay $80,000.” Reality is we didn't know if we needed 12 days, but let's say we did need that 12 days at some point in time, or two days, or one day and we screwed them and told them they had to pay $80,000, you can bet what would happen if we were one-day late closing. They were to cap all around this money and things like that. I'm not saying to bend over and be a wimp about it, but reality is this was a very more favorable trade for them than for us reality and it is something we wanted, but there are other examples where you have an opportunity to screw a seller in some form or fashion out. It doesn’t matter or a partner, or whoever in the industry don't do it, because I can tell you, I've had examples where people have called and me said, “What do you think about so-and-so?” Well, let me tell you my experience with so-and-so. I have someone that actually was trying to – going to try to raise and come in and raise capital on deal and just really trying to screw us, frankly. I would never do business with this particular person ever again. People have asked me, “Well, what do you think about so-and-so? I'm looking at a deal with them.” Well, I can just share my experience that I had with you. This is what happened. I’m not telling you what you should do or not do, but small world, don't screw people.

1. 10.Don't be a jerk.

Or you can reverse it if you want to be a little more be easy to work with. We hear time and time again from brokers and sellers that we're very easy to work with. I tell brokers, “I want to make this the easiest transaction that you can do. Make it easy for everybody involved. Make it easy for the broker. Make it easy for the seller.” Now I have an example of someone I was partnering up with and stuff like that. He was a little more difficult for people to deal with, to the tune where two different occasions brokers actually hung up the phone on him, because they were pissed off at him, right? It doesn't matter whether you can execute, doesn't matter how much money you have, or how smart you think you are. Reality is people don't want to work with jerks, okay? Now if you're sitting there and going, “Well, I don't really know if I'm a jerk or not.” Well, if you're married, ask your spouse, he or she could probably tell you whether you are or not. You know who you are and you just have to learn to bite your tongue. It's a pride thing typically, right? I want to win. I mean, I was on this call and I'm just like, “Guys, this is so unproductive. Who did what and who was the better –” “It happened, because I did it and I was the one who got it through,” and who cares end of the day, right? It doesn't matter what you're doing, you say people want to do business with the people they know, like and trust. They could trust you. You can be a jerk, they can trust you, they can know you, but they're not going to probably like you. Even in the IT business, I had – I start with a software in ’97 called SAP. Some people probably heard of it, but it’s a very large software company. At that time, I had a guy I was working with, they had over 20 years’ experience, but was pretty much unheard of. He would bill $6,000 a day, but he's a jerk and people didn't want to work with him. Probably, he literally wanted to top whatever maybe 10, 20 people in the world on the software. I mean, he taught me so much. He really did, as far as learning perspective, but people didn't want to deal with him, because he was condescending and arrogant and things like that. Even our business, right? We used to always say, when I worked for all the companies who were not hiring any jerks. Reality is you can still get stuff done if you're going to be a jerk, but you'll get a lot more done and people will be attracted to you and want to do business with you and partner with you if you're easy to work with. Brokers want to do business with you, sellers want to do business with you so. End of the day, don’t be a jerk.