When everything for sale is a dump...

[RedlineBrett]

What do you do?



Most investors I know are apprehensive about buying a property and then turning around and putting between 5 and 10% of FMV back into it to set it up for a solid long term hold with few recurring maintenance issues.



I tell them that 'no one will sell a trouble free asset in a good location at a price that cash flows well'. That's what everyone wants but that deal is very seldom found.



I'm curious to know how important good condition is to the REIN buyer.



Two questions:



1. If it cut your cash flow by 30% would you pay a premium to get a property that had zero issues on inspection and all the wear items (flooring, bathrooms and appliances) updated?



2. For those investors that do business in illegal secondary suites would you pay more for a legalized property if one were to come up for sale? (they never do) How much more than a comparable illegal suite? 5%? 10% 20%?



In the used car market dealers charge more for 'certified' used cars that go through their repair shop. Do you think the same would be true in investment real estate if such a service existed?

 

[housingrental]

1. No if you are using long term calculations and accounting for deferred maintenance in other purchase etc..

2. Do business in only legal suites so would say stick with them and ignore ones that aren't



I'd also add as a realtor aim to:



Develop diverse buyer agent client base so you have suitable customers for available product - your problem re cash poor investors might be indicator of an issue with your lead generation



Find off market opportunities for motivated buyer agent clients - ie cold call owners of turn key not for sale buildings

 

[RedlineBrett]

[quote user=housingrental]1. No if you are using long term calculations and accounting for deferred maintenance in other purchase etc..

2. Do business in only legal suites so would say stick with them and ignore ones that aren't



I'd also add as a realtor aim to:



Develop diverse buyer agent client base so you have suitable customers for available product - your problem re cash poor investors might be indicator of an issue with your lead generation



Find off market opportunities for motivated buyer agent clients - ie cold call owners of turn key not for sale buildings





Thanks Adam. Remember Calgary basement suites are 99% illegal and they very seldom make it to market.



Brokerages can always have more leads... but I've had lots of buyers across the ranges for several years. I think more lead generation would just give me more of the same. If I had better product to sell I think my current client base would scoop up 2-3x as many deals as they're doing now. But getting to the bottom of that is kind of the point of this thread.

 

[housingrental]

Hmm



To expand



I'd say for expanding potential buyers for available product look to where you're generating your leads - if you are trying to sell places that need investors that are cash rich / less leveraged you need to target that profile - generally this might mean older, wealthier individuals (or not .... - or retirees vs younger, working, professional's that might have high income and some cash and ability to finance but not sitting on a pile providing a 3% bond return and would then require something more turn key. To expand the client base to be better suited for available product ask yourself where can I find these people? (as a possible example might it be referrals that you can reciprocate with other services providers already tapped into your target market such as estate planers? lawyers? private lenders that are also looking for investments etc..)



For cold calling might seem painful and without reward but if you can waste 50 hours on it one month with no results 8 months later you might get someone coming back to you and you put together a deal between them and buyer client - and make $$ - and look very good to buyer client and seller. You will also likely have a certain portion of cold called owners looking to sell X years down the line and a certain portion of them when they do will be more likely to phone you to list it, or offer it exclusively for a period, than would otherwise.



A proactive approach to client service, although painful and without compensation at times, over the long term gets results.

 

[housingrental]

RE:





Brokerages can always have more leads... but I've had lots of buyers across the ranges for several years. I think more lead generation would just give me more of the same. If I had better product to sell I think my current client base would scoop up 2-3x as many deals as they're doing now. But getting to the bottom of that is kind of the point of this thread.





Influence the quality of product available for sale to the best you can -
through proactively calling potential sellers - but your best bet is a change of perspective - there's product available to sell - you're role is to get it sold and match buyer to seller - work with what opportunities that are available instead of idealizing the world. Profit.

 

[RedlineBrett]

Sounds like you're proposing a lot of good honest sales work.



Why don't you board up shop in ON and move out to the wild west?

 

[ChrisDavies]

Good questions Brett, and I have one client who is renovating houses and installing fantastic basement suites. They still cashflow, but you definetly pay a premium for what is essentially a new house. The question is how to price it (as the agent) and how to communicate value to the buyers.



I've also had reasonably good success with clients and my partners using 2 stage financing or using mortgages for purchase plus improvements to ensure you can capitalize the renovation expenses.

 

[bizaro86]

[quote user=RedlineBrett]Most investors I know are apprehensive about buying a property and then turning around and putting between 5 and 10% of FMV back into it to set it up for a solid long term hold with few recurring maintenance issues.





Interesting. That basically describes every property I've ever purchased. I've concluded the only way to buy something in my niche that cashflows is to buy something and substantially improve its condition. That may just be true for MLS properties (I've never tried the yellow letter type techniques). It's a bit more work, but it works for me. I would actually also be interested in any anecdotal answers to that question, as turn key type properties is something I could supply fairly easily, if I could get good prices for them.



So I suppose I would say I would pay a very small premium, as I have the skillset and experience to convert poor condition suites into excellent condition ones in a cost and time effective way.



Regards,



Michael