First Time Investor

General Real Estate Investing
1

Hello Everyone!

I’m a 23 year old recent college grad and I’m looking to get into investing in commercial apartment units. Like many other aspiring investors I’ve tried to gather knowledge from several ‘gurus’ via books, podcasts etc. I’m a guy with low capital of my own, however I’ve heard of different scenarios where it is possible to acquire commercial apartments without using much of your own money such as using seller financing and closing early in the month so that you can use rents collected as a down payment.

I’m wondering is this type of thing possible or just another fable to draw people in to buying their products?

Thanks in advance for the responses guys!

2

Everything you’ve mentioned is ‘possible’ to do.

However, you’ve got to recognize where seller financing will work, and where it won’t, and why. Also, your offers have to boil down to solving a problem for a seller that includes your particular solution, and then knowing how to negotiate ‘that’ solution to closing.

For example, when I first started reading about creative financing techniques, like you have, I got all sorts of concepts fed to me, but not the nuts and bolts.

So, armed only with concepts in my head, I pitched sellers on my “no down” offers and had my hat handed to me immediately and repeatedly.

I knew to pitch motivated sellers, but I couldn’t really seem to find ‘them’ the way I was told to, and so I settled for anyone that would listen, in hopes of converting them into motivated sellers with my ‘fantastic’ offers. That approach will take the wind out of your sails in no time.

To make matters worse, I was hardly in control of my negotiations and nearly always negotiating from my heels. Even motivated sellers won’t take us seriously, if we’re not confident in what we’re talking about.

Anyway trying to pitch anything, but a price tag, is difficult when you’re dealing with sellers who think they’ve got options. All of the sudden, none of your negotiating skills seem to make a dent on the situation.

The good news is, you can define what your most motivated seller looks like; look for certain owners that fit that profile; get them to call you, and then qualify them before you ever pitch them on ‘anything.’ All of the sudden your creative offers fit more prospects, and you close on more deals.

I’ve learned to wait for and pitch only exhausted sellers who think they’re out of options. The more out of gas the seller is, the less negotiating there is.

I think that is the secret sauce of creative financing offers. In fact, I’ve purchased income properties with not much more than a ten dollar bill, because the seller just ‘had’ to get out. However, I knew who to look for; knew what they owned; knew they were out of options (or felt like it); and best of all, got them to call me. That’s still what I do.

You can do it.

a. Profile your most motivated, out-of-options prospects.
b. Profile what they own (what you want to buy).
c. Get them to call you (advertise with qualifying/sifting ad copy).
d. Qualify the lead (ask if they’re ready to sell today, or not)
d. Pitch them (offer your solution to their problem/pain)
e. Give them a chance to say “yes” to your “pain reliever.”
f. Close on the deal.

Hope that helps…

3

Thank you very much for your input.

I understand that finding a motivated/desperate seller is key when it comes to creative financing and little down deals. I suppose my next roadblock would be actually constructing a deal to pitch to a seller. How could I help them when I have little cash to offer?

4

There’s several ways to answer that question…in constructing a no down offer.

First, not every seller needs cash. Some need debt relief. So we give them that, instead of cash.

Not every seller needs cash today. So we give it to them over time.

I’ve done this particular thing many times. I’ve asked the seller to carry back the entire down payment on a short term note, giving me time to turn the property around (fix it), and then refinance (or sell) the property and pay the seller the rest of his money.

I’ve also borrowed down payments, and asked the seller to finance the balance.

I’ve also traded equity with a seller and we each took over each others loans subject to.

I’ve also simply taken over a seller’s loan, and gave him enough cash to cover dinner with his wife at Taco Bell. I’m not talking some junker houses either, but first class properties.

Meantime, we structure our offers based on what the sellers tell us they want to accomplish by selling. Sellers are rarely honest about what they will take. It’s a matter of questioning until the seller can’t lie anymore. Which in my experience is no more than 30 minutes of lying, until they crack.

BUT this means listening to the seller talk. This means letting the seller talk. This means not assuming we know what the seller wants to accomplish, so we ask questions and then shut up and listen for clues to motivation, and clues to the solution we custom tailor for the seller.

I’m pretty sure that asking questions and listening is about 90% of closing on a deal. It’s also the way we can limit 90% of the time wasting that can occur otherwise.

There’s no use making offers that will never close, only because we were too impatient to ask some qualifying questions.

Meanwhile, since we have no money, we sift out the sellers that have to have cash to close. Otherwise, we negotiate a good enough deals that borrowing the money to close makes sense for us.

It’s often OPM (other people’s money) that makes our deal a ‘no down’ deal. There’s a down payment, yes, but it’s not ‘our money’ being put down.

Anyway, that’ll give you some ideas.

5

Some really great advice above.

My way of saying more or less the same thing is the secret to knowing how to structure the offer is listening to the seller. They will tell you everything that they need to have in the offer. You will need to separate what they ‘need’ from what they ‘want’. The seller is making it up so let them do so and then use that info to craft your offer.

Also remember it is like a first dance. Best not to start out the relationship by debating who is going to pay for the children’s university education. The seller does not know you from Adam. They have no idea if they can trust you. If you are polite, listen and then demonstrate that you have listen, then they will start to open up. If you want the seller to carry back some of what they are owed, you need a good relationship so build it first.

6

It’s great to see professionals at the top of their game present material that educates, informs, and shines a light on their craft. This is especially true when the presentation holds value for both the inexperienced and the expert. Thank you for a presentation from the top of the food chain!

altered due to rules violation

7

Great explanation of letting the seller talk. We are a society that doesn’t listen well as a whole and we think we know more than the other guy. Sellers have a lot of angst and they need to take it out on us. We are a great sounding board with a lot of knowledge that they need, too. I never try to interrupt them. I let them sometimes speak for an hour or two.
It is about building relationships.