Lately, many people have been asking me ‘how can I find great property deals’. But that’s the wrong question!
The right question should be ‘how do I get to have meaningful conversations with property owners?’.
That’s much more powerful on many levels. It means speaking to the property owner. Then having a two-way dialogue, so that we get to understand their needs BEFORE we offer any solutions. Then, we get to present our options with a greater chance of hitting the right notes.
Listen in as I share some of the recent conversations with property owners I’ve had of late.
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Transcription of the show
Lately, many people have been asking me ‘how can I find great property deals’. But that’s the wrong question!
The right question should be ‘how do I get to have meaningful conversations with property owners?’.
That’s much more powerful on many levels. It means speaking to the property owner. Then having a two-way dialogue, so that we get to understand their needs BEFORE we offer any solutions. Then, we get to present our options with a greater chance of hitting the right notes.
Listen in as I share some of the recent conversations with property owners I’ve had of late.
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, a voice to trust among the crowd. Now, let's get started with your host, Richard Brown.
Hello, and welcome to another episode of 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, there's been a bit of a recurring theme Actually, that's been mulling around in my mind and in and I was going to use the word in conversations I've been having. And that's key word actually, recently, and, you know, usually, the conversation goes something along the lines of how can I find great property deals? You know, when we just started talking about how can you find a great property deal? How can you negotiate the best outcomes, and I've really thinking about this lately. And the reason it's been Top of Mind, in particular of late, is I've just started doing a lot of direct to vendor marketing, for property deals. myself actually. And so as a result of that have, I been, you know, talking directly to vendors. And I think that's the point of today's piece, really, it's about having conversations. And in fact, I find myself talking to a lot of people that I've been mentoring lately, and people in my, my community, generally speaking about the keys not so much to find the deal. The key really is to have a conversation. And in particular, to have a conversation with a property owner or property vendor.
So a lot of people are looking at the moment are on the market, and buy on the market, that usually means registered with some kind of agent. And, and if you register with an agent, you look at a nonmarket transaction, then few things exist, really, first of all, is a lot of competition, it's on the market. And it's designed to be that way to drum up the competition to drive the price up, etc. So there's competition. The second thing is usually the dialogue or conversation that takes place, he's through an intermediary, an agent, quite clearly. And while sometimes we can, we can meet the vendor, obviously, in these COVID times, that isn't always possible either. Even on a viewing, even if Technically, the vendor was the one who would meet us at the property. One of the tricks of the trade would be to try and arrange viewings outside of normal working hours, and then you could hopefully had the vendor show you around the property in the evenings, weekends, that kind of thing. And then you could strike up some sort of conversation with the vet with the vendor. But basically, with on market transactions, this is really difficult. But with off market transactions, basically, it's the norm. And I've been really enjoying myself with late, I've been having some conversations with vendors. And there's this couple of types of a property deal that we've been looking at this, there's individual, you know, single-family home style properties, or small, you know, just smallholdings, if you like a flat house, etc, maybe a couple of things in somebody's trying to move on, and having a conversation directly with the owner of the property for that. And then of course, you often end up talking about people's circumstances and their motivations. And that's kind of key really, and, but equally, I've been there.
The second category of opportunity I've been looking at most recently is with blocks and portfolios. And that's really my focus for this next 12 months is to do much more transactions, you know, larger transactions involving blocks and portfolios, not necessarily and in fact, actually probably without development requirements. So these are pre existing properties, there may be some refurbishment, there may be some paperwork exercises that need to be done such as a title split, that kind of thing. So I found myself having conversations. And first of all, it's very human, it's really good to have a conversation, it kind of lifts your spirits just to have a conversation. But when you're having this conversation, the purpose really is to uncover the other sides needs to uncover the other side's motivations, and, and all of the things that are important to them. And that's that then puts us in a place where we can construct if you like one or two options to present back to them, which might meet their requirements, obviously at the same time as meeting hours in what I call a win-win outcome. So it's getting to that place where we can have a conversation and Adopt what I would call a consultative approach. So we're consulting with the vendor, we're trying to find out, what is the situation, what they want to do next, what sort of limitations and constraints do they have? What sort of nonnegotiables? Do they have? And the reason I'm asking all these questions often is, it's not usually a case of, well, you know, what's your price, and how much discount Can I offer you to perhaps take this property of your hands, that's rather crude, and it kind of commoditize is the the, the sort of the transaction, and commoditize the transaction. And very often, in that situation, it just becomes a case of who's going to pay me the most money, you know, in the least time, with the least hassle for this property. And what I've been finding of late is that there's, we try and come up with what I call multiple offers, multiple offers doesn't actually mean hundreds, in fact, it definitely shouldn't mean hundreds. So what we're trying to do is present maybe two, or at most three options for a vendor, who we've had a conversation with, and we've consulted with, and we've identified what their needs are for them to consider. And very often those options, the two basic options I want to call price or terms.
So the price would be kind of usually a discounted offer, you know that you know, from what they're asking for? ordinarily, now, it doesn't have to be, actually because sometimes we could, we could pay asking price for certain properties, it could be, you know, still a great deal. But generally speaking, you know, I talk about the three F's of how to make money through proxy, forcing the discount being the first one, forcing the appreciation and forcing the yield being the other two. So two out of three, and nothing to do with the price itself, that you actually pay for it. So there are different ways of skinning this proverbial cat so to speak. But yes, fine, we'll try and get a bit of discount going in. And why not because you make your money when you buy. But it's not all about that. So one of the options that we present is potentially a discounted price offer, usually for being able to move quite quickly. And, and that's the thing, but we asked the vendor or the owner in conversation, what's more important price or speed. And usually, if they say, speed, then that leads to a preference or leaning perhaps, to, you know, a fast transaction and usually at some sort of discount. But the purpose of asking that question is, often starts another dialogue, what do you mean, you know, if, if, if, if I'm hung up on price, what other options are there, besides, you know, this sort of discount that you can offer me to move quickly. And that moves us into talking about terms. So we've got discount or terms on either side, if you like.
So we start talking about terms, what you're really talking about is timing. So all kinds of financing in in property is relating to timing, and it's just a deferral of payment or an installment of payment. That's all it is. And so when you're talking to a vendor, don't get hung up on what the actual tool will be a tool could be a lease option, it could be an exchange with delay completion, it could be several other types. So it could be a joint venture agreement, in certain circumstances, there are lots of tools that we could pull out of the toolbox. And, and the trick is not to lead with a tool. The trick is to consult with the vendor. And after consulting with the vendor, we might identify a suitable tool to use for this particular job. I the conversation with this vendor that might meet their requirements. So what I'm tending to do at the moment, is normally come up with a couple of options.
One would be the price base discount offer. And another one might be a terms based offer, or perhaps a variation of that. So that could be in exchange for deletion, excuse me, exchange with delayed completion offer. But there could also be, for example, a lease option, or rent or rent and even, you know, it could be different flavors here that we could present. But I would normally say always present to but never more than three. Not never, but you know, hardly ever eat. You want to put some options in front of the vendor. Because then they're choosing between options. They're not choosing between yes or no. Normally, if you just make one offer, it's a choice of yes or no. But if you say well, I've got options A and option B. And you know, I've listened to what you've said. And you told me, ABC, you told me you'd like to take your time moving out, you know, so we're giving you time to move out, but it's in return for giving you time to move out. What we'd like to do is take you know an option on this agreement or maybe even exchange and defer the completion date to suit your requirements. But in the meantime, we can do ABC ABC might be a refurbishment might be difficult for still living there obviously. Or it could be, you know, seeking planning permission for example, or, or some other sort of paper-based exercise. So we were trying to construct different propositions that we could present to the vendor. And we're doing this through conversation. And there's a few I'd say, there's, there are some skills and, you know, there's, there's some tricks of the trade really to, to develop in terms of having these conversations. But once you've got a conversation, your intention is to build rapport, build trust, with the vendor, and maintain dialogue.
So when I say maintain dialogue, it's like, well, you don't you might ring them, for example, you might go meet them. But you're really trying to say, Would it be okay? If we keep talking? Would it be okay, if I call you back, if I need anything? Would it be okay, if I pop around again, if we just need to sort of measure up a little bit of, you know, in that back bedroom that we saw, you know, you join to get permissions you're trying to keep maintain the dialogue. And, and so that's the sort of process that you go for, you're trying to build rapport, you're trying to build trust, equally, you're trying to test various options. And a really great trick to do this is to, is to use the if, as a preposition before you present something, so you don't actually say, I'm going to offer you this or in or whatever you go, if I could do this, would you be able to do that? Or would this work for you? If I could do this? So you're not actually offering that? Whatever it is, you know, if if I could actually stagger this sale over a period of time, you know, would that work for you? If you're not leading with that, and they'll tell you yes or no at work, or it won't work. And but without actually just, you know, them giving you a no to your proposition.
So we test the various assumptions out by asking open questions initially, if you ask an open question, it allows the vendor or the owner to say what they want, really In response, and hopefully to talk a lot. And but when you start to come down to, you know, selecting things that might work for you, for us, we then start to ask more closed-ended questions. You know, what would you prefer? the time or, sorry, price or speed? As I mentioned earlier? Well, they're giving you giving them a choice of two. So that's a closed, closed-ended question, you know, which one would you take a or b. Now, they may say I want C, but hopefully you've asked them after you've consulted for a period of time. So the reason this came to light is was several-fold. One is I've been talking to quite a few vendors lately, to a Saturday in one of our own mastermind group calls recently, and, you know, it was a group of people who are deal sourcing, which is talking about how to market to vendors, and the conversation evolved that way. And, and there's, there's a few of the people I've been mentoring as well. And they've been asking how to find great deals and that kind of thing. So all of these sort of roads have been pointing to this type of eventuality, I don't know about you. But from my point of view, I actually really like deal-making, as I call it, talking to the vendor, trying to listen to what their requirements are, and not prejudging what my solution or my proposition or my offer will be. And in fact, trying to construct something, or in fact, constructing peanuts, several things that could actually work for them and for us, and I think it's some, it's fun, it's a bit of a game. And I don't mean game in a casual way. I mean, gaming so far is that you need to think on your feet a little bit, we can have a bit of fun with this, of course, it's about you know, dealing with a human being, you've got, you know, emotions, and they've got needs, they might have some pressure and pain points as well, by the way. So we're dealing with real humans with real circumstances. But the point being that the more that we understand them, and their requirements, the better the chances are of us, one, you know, building that rapport in that connection, which is going to open the door for us to pitch to them, our solution or solutions, and two, that we're more likely to pitch a solution that's going to work. So let me just tell you about a couple of instances that happened recently. And it might illustrate some of the points.
So there was an HMO portfolio that was for sale, it was advertised directly by the vendor, and on one of the platforms and I reached out to them. So did several other people, by the way. That's the point of advertising, of course, but very quickly, I was trying to establish myself as a credible player, I was talking about my track record, I was talking about the values that I will always follow through if I've made a commitment. I've talked about obviously my position in the marketplace, and you leverage what you have, right? And so that was the first thing. And so you've got permission to speak really, by demonstrating that kind of thing. So you can do that in Many, many ways. But equally, what I was trying to get to was a conversation. So but before that I was asking for information, which is quite easy, but you start to form a dialogue. And this was by messenger. It wasn't, I wasn't talking, I didn't meet them in person initially. So there was a couple, there was a bit of ping pong with a vendor, and they'll providing information. And then then I'm pushing, you know, did some analysis. And I, in fact, told them that we had three people looking at their portfolio. And there was quite a lot of analysis that we've undertaken, and we'd invested quite a lot of time already before we came to speak to them. So it's demonstrating my commitment, if you'd like to them to this transaction. So by the time I asked for a meeting, I was already pretty invested. Insofar as the time that I take them, and they we set up a call. And again, in the call, what I'm trying to do then, is to find common ground, really. So this is an HMO landlord, I've got HMOs, they have, you know, they've done a lot of refurbishment to convert houses into HMOs. And they've done it in a similar way to or the way I've done it. So I can relate to that. And, you know, they've done it in a way, which is pretty manual, they don't have a lot of systems. And I can relate to that too, because I didn't have a lot of systems until quite recently, in fairness, or in a lot of automation setup in my portfolio.
So I could relate to that too. And it could relate to some of the pressure points and maybe the pain that they were going through. I was also trying to understand what their requirement was. And this is interesting, because as I was asking things like, what are your plans? So you just ask an open question, what are your plans, don't know what they're gonna say. And unless you what they said to me was, well, we want to raise funds to develop, okay, so this is the carrot, right? This is what they want to do next, they want to raise some money, they want to go and do some development. And I said, Well, you know, just as out of curiosity, obviously, you work really hard to build up this HMO portfolio. And, you know, it's generating an income stream now, and I'm very happy about that because obviously, that's what I'm looking for. But, you know, out of curiosity, why would you, why would you want to work and walk away from that right now? I mean, I know what you want to do. But is there any, is a reason why, and they were saying that they were tired, they'd done a number of refurbishments back to back. And equally, you know, managing I think over 50 tenancies, you know, takes Australian, they didn't have systems, they're doing it largely themselves, you got a little bit of help. And, you know, they just want to take a different path, teachers digging around, you're fishing around finding information. And when you're having this kind of conversation, usually, golden nuggets land in your lap, right? They just say things.
So one of the things that popped out just by having this dialogue was the the the owner was describing that I asked them, How are the properties owned? And they said, Well, some of them are owned in our individual names. And some of them are owned in a company name. And I said, Okay, that's interesting, you know, a lot of people do that start out in their individual name, and then, later on, start a company. And I just asked him from a timing point of view is that is anything critical that we need to be aware of, so that when we construct our offer, we take that into consideration. And their response was, well, I'm, I'm expecting capital gains tax to increase in the spring budget. Alright, so let's read about March. Yeah, so really like to get the deal done before the end of March, if possible, which is not really going to be possible, frankly, roundabout now, it's going to be difficult to get any kind of transaction that we start now completed by then just because of the volume of transactions are looking to get through the system. Before the end of March, there's the legal process that if we're using financing, financing, lenders are never going to get it done at this point in time. It's pretty much you know, with certain exceptions. And so, you know, that wasn't going to be that likely, but we might be able to push for that with some of the properties. And I noticed that, you know, some of the properties were in individual names someone a company. And so what I did then was test. So I said, Well, how about if we aim to get the individual properties through before the, your suspected capital gains tax increases? So you get in before that happens, and then maybe we can take care of the company ones later. And these you know, small wins later, when you think about? I said, Well, you know, he and he actually said, wins later. What are you thinking about? Because I've had other people pitch me, we've long term multiple year scenarios. I'm thinking okay, Richard, scrub that one from your list, do not offer a multi-year type of option agreements or similar to this particular vendor because they're, they clearly said they don't want that. So I kind of took that on board. So well, maybe just a few months or so, first of all, just to gauge their reactions. reaction to that, and I said, will allow us to get through the ones the most important ones, take the pressure off and make sure that you don't have, you know, excess tax liability for it slipping. And so they were happy with that, as long as it was a reasonable period of time and We agreed that three, six months or something like that would be a reasonable period of time. Well, that was interesting, because that's gold dust information for me.
So what that enabled me to do was construct a proposition. Now, some of this I'm revealing to the vendor and some of that I'm not. But internally, what I'm looking at then is taking the transaction down into tranches. tranche one being the individual owned ones trying to be in the company-owned properties in the portfolio. And because of my exit strategy, is a refinancing strategy. With this particular acquisition, primarily, I was able to recycle my cash effectively from tranche one into Trump's two. So that means I needed less money to begin with. And that made it more attractive and compelling deal for me. And, but obviously, I could make it work for them too, because I was meeting their objectives and their priorities, which is to avoid any capital gains tax, you know, penalties, those they saw them if that if it changes in the march budget. So this is what I mean. So we're asking questions, we're building rapport, I'm testing it out before I pitch it. And then I go back, because the things we're moving on are the pace. I said to them, I said, I actually believe your prices is fair.
I don't think you are asking for an excess amount. However, you know, it would be foolhardy of me to just offer what you want. And by my own calculations, I think we're within, you know, maybe 100 K, of your price point, how would that go down? How would that sit with you? And they actually said, Well, you know, we probably expecting that kind of thing. We're hoping obviously, someone would pay us our asking price, or very close to it, but I can see where you're coming from that makes sense. So that really came out just because of the way that the conversation has gone? Yeah, I wouldn't have got that sort of response. unless we've gone through all of the preambles, we built the rapport and tested various things out, I'd relate it to them. And I'd fix some of the issues that they weren't that they had in mind, or I said I would. And so then they became a little bit softer or more open about the price. And so that's, that's pretty good. I actually know that it can be refinanced on an investment value basis, significantly more than the purchase price. So I was quite To be honest, and be quite comfortable playing the asking price. So you know, these are the things that we're talking about with the vendor and some of go away. And but what I've done is it would it be okay, if we set up another call later on, to go through things, I'm going to get going to construct this proposition for you now and come back. So long story short, that's what we did. Now, I'm going to spoil all of this now, because I'm going to tell you that actually, they've accepted another offer, which is significantly more than the offer that we discussed. And, you know, I kind of tested out, didn't actually get as far as making the offer, which is an interesting thing. And but here's the point, I think over 20 offers were presented or 20 conversations were had, maybe not the conversations, but 20 people engaged. And they accepted a higher offer, which is significantly more than my offer. But I was told categorically by the vendor that they preferred working with me. And but obviously, it's such a price difference, they weren't going to ask me to match that. And to be honest, I wouldn't come from a pure pricing point of view I might do under different circumstances. And they said, If you know that they doubt the credibility of the offer. That was interesting. They doubt the credibility and the capability of the other party to follow through. But they said that they had no option really, but to give it a go. And to be honest, I'd probably agree with that. And so I'm really planning B. That's where I'm going with this. I'm Plan B, but I'm Plan B not no plan Zed, there's no there's 26 letters in the alphabet.
Don't correct me on this. But you know, I'd got into the best of the rest, if you like, I'm really because of the conversation. That's the point I'm trying to make. So that was one example. Now, I didn't win out on that one. Not yet. But just to sort of paint the picture. Because we it's a numbers game, you know, when we're talking direct to vendor or any kind of property transaction, it's a numbers game, we don't win them all. In fact, if we're winning them all, we're paying too much money. So you know, expecting not to win them all. So that was the first example. A second example is basically someone I've known for a couple of years now. In fact, I bought a property of him. And we stayed in touch, this is an important, you know, consideration. So always follow through, always follow back, always reconnect with your contacts. And so I was just connecting with this particular person, they'd sold me a property, it was a development proposition. And I was chatting to them because they're local, to where I am and I've got another site and I was looking for a contractor. So I thought I wonder if I wonder if they know. So I gave them a call and we're just catching up How are things with you? What's going on? And lo and behold, they say to me something along the lines of well, you know, I've got a couple of properties for sale actually. don't suppose you know anybody. That's what they're asking me. Don't suppose you know anything. You'd be looking for, you know, two up two down terraced house, you know, that's pretty late. And I can take over that I can look after the management there are letting agent. Well, I might do Tell me more. Right. So I'm obviously gathering information. And you know, To cut a long story short, basically, because of the relationship I already have with this person and some trust that has been built up, even though I actually pay quite a bit below market value for his previous property in the past. He's telling me information and what I'm basically offering to help. And before I know it, I've got a spreadsheet in my inbox with I think it's 10 or 12 properties of this, because now he said, Actually, I consider selling the lot. Oh, hang on a minute.
So now, it's not just two properties that I've got available on the off chance, Richard, Do you know anybody? He's actually I've got my entire portfolio. So we can start going through the process again. Okay. So why are we looking at the entire portfolio? What are you trying to achieve here? What would be a good endpoint for you? What would be a good outcome, and what sort of timeline so I'm using the consultative approach again, and what led to this spreadsheet that landed in my inbox was their internal workings, it was everything, it had addresses, it had the purchase price, it had the mortgage, it had the rent, it had everything that you would imagine that someone would have on it on a spreadsheet, and it landed in my inbox, I was able to number crunch, I was able to work out the deposition, from a capital gains tax point of view, for example, and you know, where the pain points where I could see that, what you know, offering certain amounts of money would mean from a capital gains tax point of view, but also from an equity point of view regards to their mortgage. And this is all come out because of the relationship, it's all become out because the trust, and it's all come out because of the conversation. And that's where I'm getting to. So I've been talking for, you know, few minutes now.
So I'm not going to extend it on Julie. But I just wanted to kind of make this point, that, really, I think the best type of property deal is not really where you start looking for a property deal. The best type of property deal is where you start looking for to have a conversation or two. So just put yourself out there have conversations, you find deals in the most unexpected of places. As I mentioned, I just called someone who sold me a property a couple of years ago. And lo and behold, they're, you know, offering me their portfolio. And, and so you just talk to people have these conversations. Sure, go looking for people who are advertising, you know, directly to sell their properties or their portfolios, whatever it is you're looking to do. And just strike up a conversation with treat it like a conversation is to individuals who are talking, it's a relationship, it's a, it's a fact-finding mission, it is a consultative approach. And it's a far more elegant way, I think, anyway, of going about, you know, working in this in this industry. And don't get me wrong, I've been in there into agents putting in lowball offers, and go and take it or leave it or whatever. But that's very adversarial. And it's if you might win out, sometimes with that kind of approach, usually, if you're the only show in town, but so try and strike up this report, try and have meaningful conversations is really the big takeaway from today's podcast in case you hadn't got it. So that's it pretty much, I didn't really want to share too much more in terms of this. And, also, funnily enough, gonna be writing an article for YPN. For the next issue, very much related to this. And in that, I've actually got a nine-step process, which, which will be outlined in the article.
So I'm going to save that for YPN. But I just thought I'd share with you the principles. And a couple of examples, really, that I've been talking about of late. And it's fun, you could probably tell me my voice, I really enjoy having these conversations with vendors, and so many other examples I could tell you about. And they don't always happen immediately. Usually, they're more like a slow cooker than they are, you know, kind of a fire flaming fire, slow burners. So you have to keep in touch with people, you have to work at the relationship. And there are multiple contact points to be able to make these opportunities land, but that was it, I just thought I'd share that with you today have meaningful conversations. And in particular, try and have them directly with vendors. So there we go. That's all from me, the show notes are going to be over the website, thepropertyvoice.net as they usually are. And if you want to know anything about today's episode, or talk to him about anything to do with property, and in particular, actually, if you want to talk about the TPV apprentice program, which another cohort will be launching in the next month or so perhaps it is if you're in it, then you know, contact me my web my phone numbers on the website actually that just referenced but you can reach me personally podcast at thepropertyvoice.net and there's a chap called Daniel who actually did exist Actually, that recently he listened to my podcast, he actually wrote to me said I'm inspired, which was brilliant. And it just we started a conversation. And then you know, who knows where it may lead to, but it could well lead to him being on the apprentice program. So that could be you to only work with maybe four or five people for any particular intake. So, reach out. If that sounds like you, we can have a conversation can't wait. So that's it. Just want to say thanks very much for listening once again this week. And then until next time on the property voice podcast.
Thank you for listening today. Now head over to thepropertyvoice.net. For more inspirational content, and get updates through our mailing list. Join us next time on the property boys podcast and if you enjoyed the show, please don't forget to rate us on iTunes.