Ready to call brokers - What Advice Would You Give to a Newbie?

[Meredith L.]

Hello BP - I’m finally confident enough to take action. I’ve decided what markets to target, my property criteria (40+ units, etc), and want to start analyzing and looking for deals in those markets. I have a list of brokers I want to call. What’s stopping me from picking up the phone is this:

Will commercial brokers ask for proof of funds? My plan is to do a capital raise once I have something under contract, for down payment & any rehab costs. Is this a fair plan of action, or will brokers laugh when I tell them this, and not want to work with me? I’ve heard/read about investors saying they first get a property under contract, and THEN line up the capital. So I know it can work like that. Since I don’t have a track record yet, I guess my main concern is coming off as not sophisticated enough! But everyone starts somewhere and I know I need to pick up the phone and start building relationships.

For new investors taking the leap to call their first commercial brokers, what advice would you give?

[Joel Owens]

Meredith it sounds like you want to syndicate but have limited experience or a track record. What I have seen others do before is have a mentor as part of their team.

In the prospectus it does not say mentor but a trusted advisor and backer as part of your team. There are people such as Joe Fairless, Craig Haskell etc. where I have seen people associated with them have them on their website and marketing materials.

I can't speak for them or what they do and no legal advice given just something to look into. That way when you find a deal your coach or mentor could show you why or why not it's a deal, have the financial proof of funds to back the deal, and the lender relationships to get a loan easier.

If you do not get help you are stuck in a catch 22 meaning if you actually do find a deal but have limited experience to get passive accredited investors to take a gamble on you they tend to want above market preferred returns to invest. That makes it tough as the higher cap rate good deals go to the  (proven buyers) with great experience that will give surety of close but always tend to want the best deals.

For a seller to take a chance on you they often have to get better pricing and lower cap rates rather than going with their known buyers. The lower cap rates will make it to where you cannot likely offer the returns investors would want to invest with someone new for the risk profile.

So even on your first deal the likelihood is you will be giving a chunk of it away to a partner to drive the deal along with the passive investors.

You have to crawl before you walk, walk before you run,etc.

If you tell a commercial broker you want to find a deal then get capital and a loan with limited to no experience generally a hang up of the phone in a few seconds. The reason is you want to LEARN how to do something but have little to no funds or experience. So the commercial broker sees that typically as a very long shot to happen. We get paid when we close. Everything up to that point is an investment of time. Experienced brokers analyze that time spent and the odds it will lead to something.

Eventually if you look high and low you might stumble across a deal or it might not be a deal at all you might just not have the experience or knowledge level to see it yet. That is where the mentor or partner comes in.  They are not free and it is an investment.

When someone wants to buy retail and they want to learn I am happy to help when they are buying through me directly where I make a commission or invest with me passively as an accredited investor. If they just want to learn the asset class and do nothing I do not have time for that. There are courses they can go to and pay 30,000,40,000 etc. to get information and if they do nothing with it they lose money. My time is worth thousands and hour these days. 

Good luck.