This week we delve into the first of our property core skills: finding deals.
We will cover where to find them, deal and pipeline progression, deal positioning, and vendor or owner alignment.
This week is 'content week', which will be followed next week by 'discussion week' on the same topic.
I hope you enjoy the format of the series!
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Transcription of the show
This week we delve into the first of our property core skills: finding deals.
We will cover where to find them, deal and pipeline progression, deal positioning and vendor or owner alignment.
This week is 'content week', which will be followed next week by 'discussion week' on the same topic.
I hope you enjoy the format of the series!
Property Chatter
Welcome to the property voice podcast helping you to navigate safely through the world of property investing, get the lowdown and updates, insights, and outcomes on all matters property with a splash of entertainment along the way, the property voice or voice to trust among the crowd. Now, let's get started with your host, Richard Brown.
Hello, and welcome to the property voice podcast. My name is Richard Brown. And as always, it's a pleasure to have you join me again on the show today. Well, we're into this new series now property core skills. Today we're going to be talking about finding deals. But just before I do that, talking about finding deals, one of the deals that I've been trying to find is a deal to acquire a business. And I've probably been alluding to this for a couple of weeks, if not months. Now, some of what we've been up to. And I can actually safely say that we've acquired the business, it's a co-living, rent or rent management business based in London, by the name of a capital living or capital living London limited to be precise. And its subsidiary the HMO agent limited. So I'm delighted to announce that really to you now I can say that safely the word is out the deal is signed, we're actually in the business now. And learning all about meeting other people. Understanding all the systems getting your head around, it's a bit mind-bending at times because it's all-new. You know, one day we're a little bit arm's length, the next day, we're actually running the show. So and maybe I'll save that for another occasion to elaborate a bit more, but I thought I'd share that with you. It's multimillion-pound turnover business 40 ish properties under management, over 250 tenancies, or member agreements under management as well, mainly concentrated in southwest London right now, we're looking to expand. So we're actually looking to expand within London. And we're also looking to potentially expand into other suitable areas for a kind of a co-living model. We've got plans as well, to turn it into a full-on co-living model. It's got elements of that, but we think we can take it a stage further. So you know, we're very excited actually, about that news. So if you'd like to know more, you can look at the website, capital living.co.uk. Find out what that business is all about. If you want to talk to me about it, and how we did it, and you know, some of the principles weren't revealed some of the financial information, because I don't think that's the right thing to do. But I can give you some outlines, I'm happy to have that conversation. or indeed, if you're a property owner, with properties that are suitable to be converted into HMOs. And you like the idea of peace of mind, rental guarantees that kind of thing, then that's what we do. But equally, if you like the idea of providing, you know, quality homes, room rental, for people on a co-living type of basis, and get in touch with us, if you have a portfolio to dispose of, you've got a block that you think might be suitable. If you think you'd there might be something interesting in another city that might suit this kind of model, then I'm all ears. So there we go. Just thought I'd make that announcement before I dive into the rest of the podcast today. And yeah, let me know if you want to know more about that. Meanwhile, REITs Okay, property core skills. So we're in this series, and this is the format that I'd like to roll out really if you like each of the core skills, of which there'll be 10 core skills, and there'll be a couple of bonus ones at the end. But let's say let's work on the notion of 10. The first week I'm going in pairs, pairs of weeks, and in week one of the pair, I'm going to share some of you know the principles as I see them. Just some signposting not going to go too deep into this, some of the people on my apprentice program might be going Hang on a minute, I thought you were running masterclasses around these types of topics and then sharing it with the world. But the reality is, I'm going to be more top-level on the podcast. And there's inevitably an awful lot more than meets the eye with these topics. As you'll find out really because excuse me, the first week I'll talk about some in this panel. The first week I'll talk about some general principles. But the second week, I'm going to hopefully have more than me. And having a conversation. It might be just two people. But it could be a small group and having a panel conversation, a panel discussion around the topic that we had the prior week. So in other words, this week, I'm going to outline finding deals, and next week we're going to have a panel discussion around it. So if you'd like to take part in that panel discussion, either to get information or indeed to give Contribute information, then please reach out. Although please also be aware that because of the recording deadlines, I won't actually have a lot of time to schedule it. There'll be probably a fixed time and call, probably an afternoon, probably Thursday afternoon in reality will be when it is. So you haven't got a lot of time to join in. Because of the scheduling of the, if I can get my words out the scheduling of the series. So there we go. That's the outline. Let's see how this goes. So week one finding deals, what we're going to talk about. So really, I'm going to talk about four things, where to find them. deal and pipeline progression, as I call it, deal positioning, and vendor alignment. So I have the topics we're going to run through. So let's start off with where to find them where to find deals. Well, in my mind, I was trying to think how best to share this type of information. And where to find deals, there's really three main routes to market or channels to market finding property deals, and they are on the market, pre-market and off-market. And so I'm going to run through those obviously.
So on-market deals are what pretty much everybody's aware of. And by, by definition, it's also the most crowded place to go and find deals. Therefore it's also more competitive. So I'm talking about primarily the property portals and also auction sites. So this is you know, literally on the market. There are lots of eyeballs looking at things like Rightmove and Zoopla, portals and then it that's, that's including homeowner buyers, of course, not just investor buyers, and then probably more the auction marketplace for investor buyers and developers, in the most part. So if that's, you know, you're going to find a lot of eyeballs on those deals is extremely competitive. And as a result of that, you're going to be paying a fair market price essentially, for the most part for our market deals. So you're going to find most of we're going to find a lot of deals rather, but you're not necessarily gonna find the best deals on market. Now caveat that because I'm going to talk about how you can find better deals, which is still on market, as we go through this, this discussion if you like. But you know, certainly, you're going to find most of the deals on these portals. And it's just a quick word about the portals a couple of things there. There are three main portals if you like there's Rightmove, Zoopla and there's on the market. And it's a bit like, sometimes when I'm looking for, like an insurance renewal or something like that, I go-to money saving expert. And I look at one of their one of Marty lewis's forum posts about how to get the best deal on your insurance. And what he tends to say is, for example, just car insurance, for example. He says that if you go in layers, so you can cover up to you know, we're not necessarily 100% of the market, but a large proportion of the market by going to some of the platforms that are used, you know, go compare.com money supermarket, and then you can pick up some of the stragglers with, you know, struggles in terms of BEST OFFERS direct line, and people who don't advertise on those sort of portals will it's a little bit similar with the property. So the right move is by far the biggest portal, followed by Zoopla and then buy on the market. And last time I checked, I think the changing the rules, but it wasn't the case that you could advertise on every single one of those sites. There's also a prime location by the way. So there are three or four main portals. And if you just focus on one of them, then you're not going to get whole market coverage, by definition, but at the same time, if you look at you know, say Rightmove and Zoopla that you could also see the same property listed on both sides. Because some agents, you know, list on more than one platform. And so, you know, there's an investment by the way, on behalf of the estate agents who are listing on these portals, so that's part of the reason why they don't list on all of them because it takes a lot of money to maintain their membership of Zoopla and Rightmove on the market, a prime location so they tend to choose one main one and sometimes a secondary one. So you might find a property an agent who's listing a property on saying Zoopla and on the market but not the right move. Because the right move is the biggest one probably more so on the right move and then maybe another one. So my tip basically has a look or have a system and I'll come back to the systems but have a system that allows you to look at all of the main portals and then you probably going to get about 90% coverage. If you look at all four I've just mentioned. So route Rightmove, Zoopla on the market and prime location. Probably I haven't got the stats to back it up, but my hunch is Tell me, you've probably got about 90% of what's on the market with those four portals. At the moment when talking about residential property. I'll come back to the commercial in a second. And you might be thinking, Well, what about the extra 10%? Well, okay, so there are two things to say about that. One is 90% is nearly near enough hole of market.
So why do you need to go further than that? So that's the first point. So if you're hunting for fairly vanilla properties, let's say a regular bicycle, that you don't really want to do much work to it. And you know, you're happy enough to pay a reasonable price and just sit on that property as a long term investment and kind of is kind of average or thereabouts, then you don't need to go hunting much further than, you know, maybe only one of those portals actually to find your answer. So you don't have to do that much work. But if you're looking for the best deals, then you want to expand your coverage, or expand your reach, do the 90% look at all of those portals. And the missing 10% are a bunch of self listing websites, minority portals that are out there, there's I have a list somewhere that actually has all of those DIY listing or self listing sites to kind of make up the 100% coverage. So if you're a professional investor, and you have time and you want to develop a system, then you want to get as deep into the 100% as you possibly can. And that will involve you're looking at some of these minority sites. And here's the thing, often on the minority sites, there's not a lot of eyeballs. So there's actually less competition. And one of the things about a manasu site, which says a self listing, you know, property sale website, then it might actually also be a clue to a little bit of motivation, perhaps on behalf of the vendor seller. So you can go as far into this as you know, you won't really, but keep in mind that a property portal is you know, there are lots of eyeballs on it. Lots of people looking there's a lot of competition, so you're not necessarily going to get the deepest discounts and the best deals here. I did mention briefly commercial. And I'm going to just come back obviously, if you're looking for commercial property and look at the commercial websites now. Rightmove and Zoopla both have a commercial site, and then you have the exchange Gazette as well, which lists commercial properties. And there's a whole bunch of independent commercial agents that you can find commercial property on to. And one of the ways, by the way, to potentially get a better deal, and I'll come back to this later, is to repurpose from one type of property to another. So for example, if you repurpose a commercial property into a residential property, you convert it, you change the use, and I'll come back to that, but so you could go hunting on the commercial sites for residential property. But obviously, then you'd need to do some kind of conversion, you probably need some planning permission. And it'd be more of a project, obviously, to do that. So that might be another way to improve your odds. And obviously, with the auction, I'm not a great fan of auction properties. In all honesty, I think you can, you know, people get carried away in the auction room and tend to overbid. I've actually recently sold a property myself and the sale of value was just crazy. Really, it just didn't make any sense. But hey, you know, that's what happens.
So you get this feeding frenzy kind of mentality in the auction room. And that's not necessarily good for us, you know, as savvy or sophisticated investor buyers, to get carried away with the emotion and maybe overpay for something. And of course, if you're not prepared to overpay for something, you can end up kissing a few frogs, so to speak, not necessarily bagging a good deal. But then there are the main on-market channels if you like. Now, I mentioned pre-market. So the interesting thing about pre-market is that these are literally pre going on the market. So they're gonna go on the market, they're going to be listed on these portals or auction sites. But if you can get that early, or if you've got a good relationship with an estate agent, then then it can be pre-market. So obviously, the estate agent is employed by the owner of the property, and he's on abound to get the best deal possible. But if you've developed and cultivated a decent relationship with, say, a local agent, then you might get a heads up that has a deal coming up that fits your criteria. That's what I mean by pre-market. So you're not necessarily getting any massive favors, is still going to be an on-market deal. It's just that maybe you'll hear about it first. And if you hear about it first, maybe you can get in there first you can secure it and you know you can get yourself a decent deal and remove some competition by being one of the fastest so pre-market but involves obviously developing and cultivating a relationship with the estate agent. And don't forget the other type of agent that could be relevant here. And that's a letting agent. And you might be thinking to yourself, Well, why don't want to go talk to the letting agents who obviously Lessing properties, if I want to buy one? Well, here's I'll just give you a clue. Sometimes letting agents hear about landlords who want to sell, or want to retire, or having problems with a property, maybe it's tied in dating it. And it's not as long void. There's a number of cases where letting agents can actually, you know, on a property, so don't ignore letting agents. And so when you're cultivating relationships with local agents, think of estate agents and letting agents. So that's pre-market, so it's just getting to something before it goes on the market. And that will get you a slightly better deal perhaps, or certainly a faster deal with less competition. And then we have off-market and on-market kind of is a bit of a misnomer at times, sometimes, there are properties that are being advertised through a multitude of deal sources, deal packages, and independent agents. And they're claiming they're off-market, but actually being broadcast quite widely.
So they are pretty much on market, but they're just not on the main property portals. That's the point here. So usually you need some you need to be on the right list or have the right contact to find out about these deals, these off-market deals. And we're talking about things like you working with deal sources. In particular, here, deal sources do packages, and there's a number of them out there, I highly recommend you only work with compliant deal sources. Yes, you need to be compliant use health insurance, you need to have the right credentials effectively to operate as ideal sources. So I would encourage you to work with qualified and accredited deal sources. And you can also work with other people. In fact, let me come back to that one because I want us to talk about direct to vendor DTV, direct to vendor. So that's where we are sellers are going direct to vendors. And you know this, this is the tip of an iceberg by saying director vendor, we can contact people by dropping a leaflet or sending a letter to a property owner, we could look at the empty properties, we could look at the licensed property, whether it's HMO or in selective licensing area, find the contact details of the landlord and contact them and see if they want to sell their property. Hint hint, I get a lot of those letters myself, and I ignore most of them. I'm not sure it's that effective. But there you go. And of course, you could meet owners literally knock on their door. If you see a property that's rundown knock on their door or knock on the neighbor's door to try and find out who the owner is getting their details from the land registry and make contact with them. You could be a landlord or landlord is also a property owner and a vendor potentially you could talk to them, you can meet them at a networking meeting, you could put out Facebook ads, there's a whole raft of ways in which you can target off-market deals. And of course, the thing with off-market deals is there's less competition, and you can be much more targeted, hopefully, you can get a better deal. And so you probably in the order of sequence, you probably get the least discount with on market, and the most discount with off-market deals. So the final one, I was going to come back to the member, so we're going to come back to was network referrals. So I've used this one to the good effect of late. Because I'm looking for more projects I'm looking for land to develop or properties convert or blocks and that sort of thing. And I get referred to own as a property quite a lot these days. So don't go necessarily through an agent, I don't necessarily look at a portal, sometimes have been tipped off by someone like a planning consultant, for example, or an architect or surveyor, or even local building control. You know, those sorts of people can actually refer you to properties. So it pays you to network, that this is a different type of networking. This is where you're networking with people operating the property space who could be professionals, like the ones that just gave you examples of could also be tradespeople. So and you know, tradespeople like electricians, and plumbers, etc, who are doing work on properties or properties that need work. And they could sustain the sense that the owner property doesn't have the funds, for example, to do the work. So there are a few examples of where to find the deals.
Next up, we've got what I call deal and pipeline progression. And we've got, you know, three areas I really wanted to pick up here. So we've got deal tracking, deal assessment, and offer positioning. And so let's start with deal tracking. So, deal tracking. And if you as I said earlier, if you just want vanilla to buy to let property and you're going to pay market price, you're not that bothered about things or doing a project, then you know, you don't need a big system. You probably going to buy one property maybe this year and you know, that's it, so why do you need to track anything? And that'd be a fair comment. But if you're looking for Juicy deals and you're looking for better than average returns, then it's a numbers game, quite frankly, it's a numbers game. And in order to track your numbers, you're going to need some kind of system. And a system could be, could be a spreadsheet of some description where you just track your deals and what you're analyzing, it could be a CRM system, customer, customer relationship management system, there's a lot of good technology out there, which is either free, or is it always low cost your podio got a free version, less annoying CRM, which is a paid-for version, you can are paid for Podio, there's a, there are a plethora of different CRM systems that you could use as well, but spreadsheets pretty good. You can modify and customize a spreadsheet to suit your purpose. Then there are variations on the spreadsheet theme. Things like air table, for example, Norton, these sorts of things, which are kind of got elements of database elements of spreadsheet in amongst them. So have a little play, find one that suits you. Of course, if you don't necessarily need a bit of technology, you can just have, what I quite like to talk about is you know, these, these sort of files, these sort of, they look like accordions, these kind of number one to 30, something like that. So imagine a month one to 30. And each day, you have you know, you have a day's worth of inflammation, we can just have a piece of paper, drop it in day one, dropping another piece of paper and day two, day three, etc. And as you go through the month, you just pull out the piece of paper, you can look at the deals that you've been evaluating, and you can do your follow-up. Now, this is really important. Because a lot of deals need to be followed up, you can view you can put offers in, you might not be successful. But if I tell you that 30% of all sales collapse, then actually revisiting your old deals can actually be an interesting and useful way for you to find opportunities. So it's always a good idea to kind of keep track. And even if you didn't win it in a winner deal win a deal. Now don't mean when I do have an offer accepted on a property, then you can revisit it later. So having a system to track is the first thing. The second thing is then to grade or classifies your deals. So you move them along, you know from suspect to prospect to maybes, maybe you're viewed maybe you've offered, maybe you've had the offer accepted and you're in conveyancing and then you've actually bought the property. So the important thing is to track the classification through those stages. And if you can imagine a funnel, you know where it's wide at the top and narrow at the bottom. That's what your pipeline should look like lots of suspects and prospects. And obviously, you're already winning or closing on one or two may depend on how what your volume is. But you know, there's a percentage fall out as you progress along that pipeline.
So having it in a system, having a grading system helps you to work through that. And then I just wanted to talk about some of the principles that I tend to work with when it comes to deal and pipeline progression. And the first thing is to say that, well, it's a numbers game. First of all, you won't win them all. And that's, that's right. Because if you're winning every deal you're offering on the property offering too high, leaving money on the table, so to speak, so you won't win them all. So have that mindset have that mindset. I think people some people say if you don't feel embarrassed about the offer you're making, then you haven't offered low enough? I'm not sure subscribe to that thing. You know, there is a fair value thing. But yeah, definitely you won't win them all. And the other thing to say is to have meaningful conversations. And I'm going to come back to that a little bit later when I talk about vendor alignment to have meaningful conversations, who with owners of properties, vendors properties, that's who we really need to have conversations with. And that's another reason why I'm not such a big fan of on-market deals because all market deals usually have an agent in between us and the owner or vendor. And it's very difficult to really understand their position, which again, I'll come back to if you're dealing with the agent, so have meaningful conversations, if you can, and, and the other mantra that I quite like to talk about actually has come from Ryan, sir Hans book, Ryan Serhant. If you look him up, he is prolific on YouTube. He's a New York real estate broker. And it's good, basically. And he's written a book and one of the things he talked about in the book was the three F's and that's follow up, follow-through, and follow back. So follow up is basically you know, literally as it sounds, follow up on what you said, you're gonna do follow up in a couple of weeks time if you put an offer and you haven't heard anything, maybe not a couple of weeks, actually a few days in that case. Follow-through is you know, do what you say you're going to do that's on you, you know, just make sure you deliver. And here's the interesting one follow back. So, if you don't, if you have an offer that's not accepted, and maybe that property is sold, remember what I said about the 30 plus center sales falling through, follow back, check back, see if it's fallen through there, you can be well-positioned to pick up that opportunity, perhaps later on when maybe a vendor or owner is a little bit more motivated. So that's deal tracking. And then Next up, we have a deal assessment. So this is, you know, again, on the apprentice program, deal assessment. And, you know, running the numbers type of stuff is one of the most popular, you know, themes. So I'm not going to get into too much because it's actually going to be a property core skill. But what you do need in terms of finding the deals you need to have your buying and investment criteria clear, ideally written down, you know, what, how much is it, where is it, what type of property, etc, you need to know what that criteria is, including what sort of return expectations you have, then you need to have like a quick review process. I call this the napkin review process. So imagine just you could jot down the principles of a deal, run some quick numbers on the back of a napkin within your head and filter out, you know, a deal to yes or no within five to 15 minutes. And that's the idea of this napkin review process, you don't go too heavy, straightaway, but you can kind of filter out a deal pretty quickly. And then if it starts to look like it's gonna stack up, you do a full deal calculation, you should have a model that does that. I've got some spreadsheets, which I'm always sharing, book bonuses, and podcast bonuses with my deal calculators. If you're looking for those you can write in, I'll share my standard calculators with you. But the napkin review isn't the full calculator review. I mean, I'm quite quick now.
So I can do the full deal calculator review in about five minutes with just some key information. But you know, for a lot of people, they just want a quick, quick and dirty view. And then if it starts to look like it's got legs, you do a full deal calculator review. And then in a beautiful deal calculator review, you're doing comparable data and stuff like that. So it takes a bit longer. And that goes on to my next point really, that you have layers of research. So when you first looking at properties, like peeling an onion, the top layer is as far as you go. If it starts to look, likely you've done your napkin review, you've done a full deal review, you know, maybe you peel off another layer, then you do a viewing, then you peel off another layer, you look at this sort of transport links on the employment links in the local area, you peel off another layer. So you go in stages, peeling off layers, in terms of due diligence, and that also avoid you over you know, pontificating really on your due diligence, you just, you know, go in stages, then the other principle I've got is good enough. Well, people are looking for perfect deals, well, let me tell you there aren't perfect deals out there, there really aren't rare, I've got a scoring system for my investment criteria. And I rarely get full marks, I don't think I've ever had full marks actually. So get used to good being good enough, don't seek perfection, because you probably won't find it. And the other thing is deal velocity so that I was talking to someone recently who I was previously mentoring. And that was some time ago now. And there was saying that they haven't actually bought anything. So they've had quite a significant sum of money, which has been sat around for quite a significant period of time. And of course, how much money have they made on that money, which has been sat around in the current climate pretty close to zero.
So, you know, good is good enough is one of the principles that might relate to them. The other is deal velocity. So the quicker they put their money to use the quick and start earning the money if it's a project where they're going to sell it or pull out some of their cash from refinancing. And the quicker they can do that they could work or they can move to the next deal. So it's all about moving, you know, moving parts. And sometimes it just needs to take a view, you might aim you know, I don't know 20% return on investment, and sit there for two years waiting for a 20% return on investment deal to come along. And maybe you know, you could have done to 10% in the meantime and achieve the same end result. So that's kind of what I mean by that. And the other thing to keep in mind is how many deals do you actually need to do this year? Most people I had a service called property deal tips. Most people were on I asked that question as a sort of a survey went out when people signed up and for most people is between one and three you know and most of them only one. So if you only need one deal this year, then you know good is good enough to get moving. You don't have to sort of you know faff around too much. And the other good principle here is to have a what I call a peer a peer deal review it's not easy to say that but you know if you're not so confident on running the numbers thing getting a little group get a property buddy and just get them to sanity-check your numbers I had this other day somebody was getting put an offer in they're actually going through conveyancing and they just said to me Richard, would you mind you know having quick look at my numbers. I'm kind of just going to be a cold foot here. Am I doing the right thing? Now a couple of good reasons that they were feeling a little bit nervy But yeah, I was happy to look at that deal, and in Just five or 10 minutes, I was able to give them some headlights or highlights, and they felt better. And it really just because somebody else another pair of eyes It looked at it in my eye gave him a thumbs up. You know, there isn't such a thing as a perfect deal. But I was definitely thinking it was the right sort of deal for them. And the thing I would add to that is to know what's important to you. So if you've got someone who's doing a peer review, they might have different criteria than you. So it's also important to state what your criteria are, what you're looking for. And so when that person is cross-checking, if you like or giving their view, they can come from your perspective, not just purely from their perspective.
There we go. And in terms of offer positioning, really just three things be credible and professional in how you present yourself always to everyone. And submit offers orally, that means, you know, face to face or over the telephone, but back them up in writing, especially with agents. Agents are notorious for Well, no, no, no, I'm not gonna say notorious agents are on abound, but put it the other way on abounding just submit all offers to their vendors or owners. So even if they think it's a crazy lowball offer, you know, if you've put it in writing, they are all about to relay that to the owner of the property. So hopefully, it should get through to the owner of the property, if nothing else, so back it up in writing, and then demonstrate your capability to complete capability and certainty to complete and avoid that 30% rule. So that means things like having your solicitor lined up, it means having your proof of funds or finance offers in place or certainly offers in principle and is ready and capable to move. Hopefully, you've got a track record that you can demonstrate. And that should set you apart across different types of the bidder on the property as well. Maybe get you ahead of the game.
Right. So now wanting to talk about positioning deals. And this is an interesting one because I kept saying earlier on if you're looking for a vanilla deal, standard ish type of things. Well, what is standard? What are market averages? Well, here they are, the average discount, historically, recent history is about 4% from asking price now in the current market that actually might be quite high, you might be having to pay asking price at the moment because markets a bit hot, not a lot of stock, a lot of buyers, people trying to beat the stamp duty window case closing soon, but there's a secondary one in September. But over the longer-term 4% discount from the listing price is what people tend to pay. And then you know, typically in the realms are four to 6% gross yield, it can be lower in central London, can be higher in the northeast, for example. But generally across the country, four to 6% gross yield, and 0% value add funnily enough, what I mean by that is that you know, a homeowner buyer might go in and put a new kitchen in but not looking to make any profit. So they might bid up the price because they like the property and then splash out on a fancy parents' kitchen. And you know, the property is worth the total of what they paid for the property and the kitchen at the end of it, there's no value add as such. Now, so that's my, maybe it'll be a bit harsh by saying zero value add, but there's a low value add with homeowner buyers particularly. So what I tend to say is we'll focus on the three F's and the free f SAR to force the discount, force the yield, and force the value. So basically, all that means is beating the market average beating the norm. So a better than 4% discount, for example, is forcing the discount, if you get a 5% discount, you've forced the discount by 1% extra, you know, over and beyond the market norm. And we are well done, you know, a lot of people tend to get hung up with discounts, in particular, thinking our 120 percent BMV below market value. But if you look at on-market deals, four percent, the average, so you're going to be spending quite a long time, probably won't get anywhere actually trying to find 20% BMV deals on the market. But maybe you can get a 10% discount now and again, and then maybe you can get a little bit extra yield, maybe you can add a little bit of value. And then you can combine all of those three F's and get a little bit from each one. And then you get yourself overall a cracking deal. So we're not going to dwell on that too much. But hopefully, that's given you an idea. They don't have to be greedy in any one area. Maybe you can have a little bit here, a little bit there, and a little bit of the other. So that's that. The other thing we do positioning is this. If you are offering a discount when offering a discount your offer includes a discount from the expected asking price listed price the property and let's say it's beyond 4%, then justify your rationale. It may well be that you're a cash buyer so that's why you're positioning a discount. It could be the condition of the property required. A lot of work and perhaps it's been overinflated in terms of price, but then you can actually justify your position by saying, I need to put gas central heating, and I'll have to replace those windows. Now I'm gonna have to do fix that, you know, a bit of damp over there. That's why my offer is as it is, and you know, that will be well received, let's say or better received. If you can justify all points of some comparables, if you think we'll hang on, mate, you want 120,000 for that, but next door, you know, sold for 100,003 months ago. So that's the reason for my offer of 100,000 because it compares with next door.
To explain and justify your rationale, with discounting, and then when it comes to adding value to a property, you can actually create value or arbitrage value in a number of different ways. What I mean by that. So for example, you could do an update or refurbishment, lots of people looking for those types of properties. But you could extend or you could convert, you could repurpose it or change its use, you could develop it, you could gain planning permission, or extend the lease, there's a number of ways in which you can create value, or change its use. That's what I mean by arbitrage. So convert commercial to residential and you increase its value because residential values are higher than commercial values on a cost per square foot value per square foot basis. So you can create value or arbitrage, you don't necessarily need to be looking for discounts all the time to make money. That's my key point. So that's, excuse me, that's still positioning. And then the next point I want to talk about, and again, I don't wanna go too deep into it, I'm probably going too deep, really anyway, to be honest. But here we go, is vendor alignment, excuse me, vendor alignment. So what I mean by this is kind of getting close to the vendor. This is a bit of psychology, a bit of, you know, positioning yourself with the vendor or the owner of the property. So the first thing to say, really, is to have direct and meaningful conversations with property owners. It could be a property owner, homeowner by seller, rather, it could be a landlord, for example. And so having a direct meaningful conversation with a means literally, you need to get in front of them. And so it's kind of difficult for as an agent and the way. So there's a couple of ways to do that. One is to try and arrange an evening or weekend viewing and agents don't always want to do that. So they asked the vendor to take it. So that's a neat little trick. So but you want to have a conversation with the vendor? Why do you want to have the conversation with the vendor, because you want to understand some key drivers? And that's my next point. The key driver's circumstances, motivation, leverage, and future plans. They're the main things that you're listening out for, obviously, you don't go in with a clipboard and go, what are your circumstances? What is your motivation, etc, you don't do that. You have a natural conversation, but you're trying to identify what are their circumstances? What is their motivation for selling? Is there anything you can leverage, such as the property condition? And what are their future plans? The reason I asked future plans, quick sidebar, I don't want to get too much into creative deals in this episode. But the reason I asked about future plans is they might be able to position what I call terms to offer, instead of a price offer. So price or terms, you know, and I find to know what their future plans are, that might enable me to put together terms offer usually involves payment over time, or a delay or something like that. So if I know that they certainly need the money to have a link purchase, for example, then maybe they might be open to a terms offer. But that brings me to my next point. And my next point is the level of sophistication, commercial awareness of the owner. So if you, for example, want to present some sort of terms offer an exchange within a completion lease option, for example, or rent or rent talking about the business I bought earlier, I mentioned earlier rather. And well if they don't, you know, if there's a little granny and you know, she doesn't understand these things, it's going to be unlikely that your offer is going to be well received. To gauge the level of sophistication of the owner. So if there if they're, you know, if it's commercial property, there may be more sophisticated as a business owner, business operator, they may be more sophisticated, as a landlord, they may be more sophisticated. So that's what I mean. And therefore you match your offer to their needs. So you establish that you hope you've had a direct conversation, hopefully, establish their circumstances, motivation, leverage, and plans, you understand their level of sophistication, then you can actually present your offer in a way that means something to them because you found out the information as well. It sounds like a lot of work maybe. But if you want to do you know, interesting complex, very creative, deep discounted deals, then this is what you have to do. If you just want vanilla to buy to let you don't necessarily need to do this.
And then coming towards the end now, don't worry. There's a couple of points just want to finish off. One is there are in fact three sales You need to secure. The first is with the vendor. And the vendor may be more than one individual. So I'm gonna say the vendor or vendors, but the owners of the property. The second is with the agent. And people forget that. What does the agent want, the agent wants to get paid, but they want to make sure they get paid. That's the most important thing. And so sometimes you can knock out another bidder on a property by being the most credible, being the one that's most likely to complete. The agent might be persuading the vendors to take your offer because they themselves think Hang on a minute, I'm more likely to get paid of Richard's offer than Joe Bloggs offer. So that's the second sale. And the third sale this you might need to secure. They don't they're not always there. But you may not know they exist. And that's the hidden influence or decision-maker. So they may not be on the deeds of the property. But they might have something to say typically could be, you know, siblings or children of owners or parents of owners, for example, you know, who get involved in things or the significant other who lives with the person but isn't actually an owner of the property cup, there are a few examples. So just keep in mind three sales and have your antenna up to work, you know, working with those three types of decision-maker. And the last thing really spoke about today is always go for Win-Win outcomes, be ethical in your approach, and, and you're more likely to be accepted. If you're genuine. If you consider it towards the individual, you're trying to match their needs and you're genuinely trying to understand them, then you can put forward a decent offer, which has a win-win outcome, and then you're more likely to be accepted. And you can sleep well at night as well. So there we go, I feel like a rattle through that. You might need to listen to it more than once. Obviously, you can check out the show notes. And I've got a little presentation actually I use to queue this podcast today. If you'd like the copy of the slides, which just be a prompter really hasn't got a lot of the text in. But if you'd like a copy of the slides, if you want to see the show notes. First of all, go to the website property voice.net. Or you can write in podcasts at thepropertyvoice.net asked for slides. I'm happy to share them with you. And don't forget what I said. So, this week is this shared part next week is the discussion part. All being well, let's see how this goes. So I just need a few people to join me so we can actually have a conversation or discussion. So make sure you listen in next week. Then we'll talk about finding deals, but we'll have a conversation about it. If you'd like to ask any questions, y'all if you'd like to maybe participate in that bearing in mind or probably need to decide, you know, pretty quickly after this podcast goes, the episode goes live, then reach out to me and let me know. But equally, I'm going to be repeating this format for the next 10 or next nine property core skills. So there'll be an opportunity to get involved in future conversations that I shared what the 10 property skills, core skills were last week. So check out the show notes for that. And you probably got an idea about when things are coming down the track, and you can get in touch. There we go. So I guess all that remains has to say Well, I've already told you where the show notes are going to be and how to reach me. So I won't say that this week. But thanks very much for listening once again this week to the property voice podcast. And until next time is Joshua.
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Transcribed by https://otter.ai