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Updated over 6 years ago,
Creating Relationships: A Vital Tool in a Competitive Market
What's up BP? I want to share a story about how our team was able to secure 3 off market properties we are closing on today. The key to this deal is that we were able to identify the seller’s goals and build a relationship that made him feel heard and understood. As the old saying goes, we are in the relationship business not the real estate business. The relationship on this deal started with a cold call from our inside sales agent regarding a property we identified as run down. Our ISA is responsible for calling owners of properties that our bird dogs identify as distress (I go into a little more detail about are the off-market system in this post: https://www.biggerpockets.com/forums/311/topics/55...). We make a point, when cold calling, to find ways to provide value to homeowners and come from a place of contribution. It is important to remember that most owners of rundown and distressed properties have emotional ties to their homes. To do this successfully, you have to make sure you listen and understand the owner's key motivators. Our ISA identified the seller had interest in discussing selling his property (at this time we only knew of one) so the lead was transferred to our closing specialist. The closing specialist picked up right where the ISA left off and focused on building a relationship. After a few conversations, our closing agent was able to identify that the owner had two additional properties he needed to sell quickly. He explained he was no longer able to keep up with the maintenance of the properties and was thinking about listing all three properties for sale on the MLS. This "black swan" piece of information took five conversations before it was finally revealed to our team. We knew the owner was interested in selling, but until we identified the key motivators, we could not have a purposeful conversation about how we could help the seller solve his problems.
Because we came from a place of contribution and were concerned about the owner's needs, and not just our own, we were able to acquire three properties before they hit the MLS. That is why I preach to my team the importance of coming from the point of contribution and placing the client's needs first. Many times it is easy to lose sight of this very basic concept, and as a result, mean great real estate deals are lost. In a competitive market, building a relationship and hearing out the sellers needs is the difference between getting the deal and not.
About the Properties
Two of the three homes purchased will have minor repairs and updates before being listed for sale on the MLS. Based on area comps we anticipate a return of 8-10% after all closing costs and fees. The real value of this deal is in the third property. Unlike the first two which we will quickly touch-up and list for sale, the plan for the third is a substantial remodel. This home sits on an 8,925 SQFT and is currently a rundown 900 SqFt home. After the rebuild, the house will be over 2,500 SQFT and located in a neighborhood with $600,000+ homes.
The remodel will be extensive, taking this home that has been forgotten and essentially creating a new build. We have completed similar remodels like this before, creating a larger home from an original 2 bed one bath home (check out this remodel where we enclosed the carport to create a grand living room https://www.biggerpockets.com/forums/311/topics/55...).
FinancialsWe are purchasing this property for $185,000. We estimate that the remodel will be $230,000 because of the high-end finish, and the transformation from a 1,200 SQFT home into a 2500 SQFT home. Total investment is $415,000. The timeline for this project will be six to seven months. We expect the house to resale for $650,000+.
Coming from a place of contribution and creating relationships is very important and can be the difference between your offer being accepted or missing out on a home run deal. Even though this home was off-market, the owner had received two other offers. By coming from a place of contribution we were able to identify that he needed to sell not only this property but two others. By being able to identify that issue and solve the owner’s problem we were able to close on this deal.
Hopefully, you found this post valuable. Would love to hear from you on how you have created value and helped owners accomplish their goals to land great real estate deals.
Have a wonderful day!