What a Great Commercial Deal Looks Like

hello everyone peter harris here with commercial property advisors hope you are all doing well today well i have a question for you what does a great commercial deal look like right not a not a good one not an average one but a great one what does it look like well in this video i'm going to share with you what it looks like how you can do it and i will give you and a prime example from a student that just closed on but let me share with you right now what a great not a good what a great commercial deal looks like number one the great deal must be priced under market okay i'll share with you how to find those in a second but pay attention here uh a great deal number one is price under market so you're getting a good deal number two this great deal needs to have the ability to raise the rents okay as you know as you raise the rents you increase the net operating income the noi and the property value goes up so when you raise the rents you can force the appreciation that's a great deal number three you need to be in a great area okay good neighborhood if you don't have a great neighborhood one and two wouldn't even matter okay so number three great area number four you need solid property management okay we teach our students most of them don't manage their properties they hire third-party uh property management companies so your property needs to be managed very well or at least have the ability to be managed very well okay so one two three four now here's a big question do these deals even exist yes they do right they do because we teach our students how to fish in a different pond we don't play where everybody else is playing we fish from a different pot okay and i will show you a prime example of that in a couple minutes okay with a uh interview from one of our students that just closed this deal now let me share with you what i think are the keys for you to establish these four okay so the first key is you need to know how to generate deals off market okay the deal would you find a loop net or mls those just are going to cut it to to achieve this here so all of our deals most of my deals come from off market okay not listed anymore if you're off market we like to go direct to the property owner okay number two you need the ability to know how to structure both conventional financing and creative financing that is so important in generating a great deal need that knowledge number three uh you need to have uh expert uh knowledge on how to do uh what i call an expert analysis and also an expert on extra strategies so important this extra strategy thing people leave it out so much maybe because they don't know but after investing for 20 years and teaching our students extra strategies set the should be established at the beginning it sets up the rest of this once you understand extra strategies okay lastly probably those the most important is get help okay if you're trying to do this and don't do it yourself especially if you're 40 and over right for me to you you don't want to do this with a commercial deal by yourself if you're over the age of 40 because you can't afford to make a mistake okay this is probably going to be the largest financial investment you made in your life and you can't blow it because you probably can't recover all right so get help we can probably help you with that all right so now what i want to do next is take you over to our short student interview where our student steven accomplished that just this in about six months okay so commercials not fast it took him six months but you just need a few of these to dramatically impact your financial life forever so let's go now to this short video then when we come back i'll wrap it up and put you in his position let's do that welcome everyone hey i have a great and awesome guest and student steven with us this morning and he closed on his first deal and this is his story it's amazing before i introduce steven let me just share two things great about stephen number one stephen was very coachable he was very coachable and number two uh steven you took action you know it wasn't huge action you just you just took constant action right and the result is you're on this video your deal was so special here on this video so everyone let me introduce to you steven nguyen thanks steven for being on to this morning hi peter thank you i'm very excited to be here it's kind of funny i actually stumbled across one of your youtube videos you're interviewing one of the students and i just said you know i know i made it when i'm on this video so now i have the opportunity about six seven months later so actually just very excited to share my story all right awesome now again thank you thank you so stephen let's jump right into it right could you share us a little bit about yourself yeah so i was born in a born and raised in a typical middle class family you know right now i have no family unmarried my as my day job i actually work as a pharmacy manager in the hospital i actually moved up the the corporate ladder pretty rapidly over the past eight years and you know hit my career ceiling pretty fast but ironically you know during the cove 19 pandemic you know healthcare seems very stable it's a stable career it's a stable profession but actually my hospital laid off 20 of the healthcare workers myself included so to me this was just a huge huge wake-up call to invest a lot more heavily in you know commercial real estate and real estate in general wow amazing amazing so what's your reason for pursuing commercial real estate at this stage in your life yeah so actually um i actually started investing in single family homes initially and kind of my initial goal was to buy one single family home a year for the next 10 years and then use that to retire you know leave the rat race leave my w-2 job and achieve financial freedom um but actually i stumbled as i mentioned earlier across my youtube videos it just opened my eyes as to the power of commercial real estate it helped me realize that just one deal one deal is all it takes to achieve my cash flow goal and basically leave my day job a lot sooner uh compared to single family so you know once i kind of learned about commercial real estate i realized that my initial goal is 10 years i can potentially do this in you know three to five years you know at this kind of current rate i'm going so it just was very eye-opening and made me pivot 100 into commercial real estate got it got it great reason and great and i know a lot of folks out there watching can really relate to that and uh okay so let's jump into your deal okay so uh you're you're on this on this video uh because your deal is awesome right the title of this video is what a good commercial deal looks like and that and your deal fit the pitcher perfectly so share us all about your deal how it happened yeah so actually i just closed on a 26 a unit apartment complex in oklahoma so this is an off-market deal so i was able to work directly with the owner and kind of build the rapport of the owner um actually um one second so you didn't use an agent no no agent no broker just me directly with the owner just me and him face you know direct communication no no middleman what's awesome um so the owner actually um preferred communication via email which was a little bit interesting at first because it's you know it's nicer to build that personal touch and report when you talk over the phone or in person but he wanted everything via emo um he actually was an attorney by background and to kind of cater to him because i'm all about you know whatever works for the owner works for me that's kind of my little healthcare uh background helping of that so he preferred everything written everything documented and how i kind of built rapport with him was i just was highly responsive and prompted as he kind of said earlier i took small consistent action daily and just knowing that i was very responsive to his needs his questions you know when i had stuff from him he'd give it to me pretty timely so we just kind of built up that rapport and that connection throughout the process because it's a long process to kind of close on a deal um direct to owner so that's what helped me kind of build that trust and report over time okay great now share with us about the deal right um you know how you negotiate the deal um the upside i mean you're on this video because your deal is awesome so share us more about this deal yeah so actually uh i offered 520 000 for the property and that was straight off the tax record you know the owner he basically said you want to give me a price he just said make me an offer so immediately i just looked on the tax record which is you know public information for everybody and just offered that price and you know the owner immediately accepted the offer and he said the property is as is like he would not make any modifications any repairs whatsoever i'll take it as is and present day value so after but you know i got the contract settled i actually did a full onsite inspection so i flew over to oklahoma i met the owner there i had my whole inspection team we actually walked into all 26 units it was a full eight hour day it's a very long day had to you know grab a cup of coffee turn off my cell phone be free of distractions and basically go through each unit one by one had multiple you know inspectors for the roof termites pests electrician plumbers everything the whole gamut in terms of the inspection and you know i was actually pretty transparent during the whole process you know after i got the inspection report back which was very comprehensive as you can remember had photos details everything was a complete walkthrough and you know i just basically got quotes for all the deferred maintenance you know the owner was there so you saw what i was doing he saw how comprehensive the inspection was he was there the entire eight hours he saw that i was bringing in contractors to get quotes and after i got all the reports i just provided him directly the exact reports i got and exact quotes i got i was not hiding anything it was a fully transparent process and kind of after and i think initially asked for about 120 k repair credits and you know he responded the email that i was crazy hey this property is as is i'm not gonna do anything he just said but if you kind of narrow it down to items that need immediate attention you know i'm willing to work with you and give you some repair credits so i just reevaluate everything you know definitely the roof need to be replaced um a lot of like furnaces and water heaters need to be replaced you know there's some potholes in the driveway so i kind of broke it down to exactly what he mentioned what needs to be attention and we actually settled on about sixty six thousand dollars uh in repair credits which you know i thought it was a huge win and uh way more than covered all the expense i paid uh for all those inspections uh stephen you mentioned you you received sixty six thousand dollars in credits yes so i was able to get six six thousand dollars in repair credits the properties as is and that went directly off of your down payment right yes yes that's amazing that's amazing so here you are right you you have number one you have an attorney they're hard to negotiate with they're pretty stern right and they can be intimidating at at times and here's a guy that says upfront you know as is take it or leave it it's yours if you don't want it i'll keep it right and then so how did you get him to soften up to go from zero to sixty six thousand dollars in in uh closing credits how'd you do that you know i think it was just building trust and report as i mentioned this was like a two-month process and i i just include him throughout the entire process like like i mentioned he was there during the inspection and he's owned the property for about 13 years so he probably knew that um there's a lot of deferred maintenance and i made it not about what i said it's about what these third-party inspectors said and what the contractor said so it's not me versus you it's this is what this third party is saying let's solve this problem together because you know he want to help me close on the deal then he knew that he had to take care of these uh deferred maintenance layer down the road so you know make it it makes a little more swallowable when you know at the close of escrow i just get repair credit it's you know he's getting paid for the prices of the apartment and he tends to give me back a little bit for credit so i think overall it's just kind of building that trust over time yeah and it's really involving in the process um like i said i was completely 100 transparent i wasn't hiding anything anytime i had pushback i just would get a third party opinion like initially when he shot down my 120k you know uh repair request i just said let me touch base with my property manager and let's see what needs immediate attention and then i basically gave him a big breakdown on the email emails about almost two pages it was like an essay after reading that he just immediately signed it right after so i think he they just want to know that you're not trying to you know you know cheat them too much you know negotiations win win it's not i don't want the other party to feel like they got fleeced or the short-handed stick i want to make it a situation sure so i think just having that approach in that mindset luckily i kind of built that from healthcare just really made it seamless like i think he just knew that i wasn't trying to pull a fast one on him no that's that that is so great now you know one of the things that you know we stress when when we're training you is is that they get to sell their motivation right direct motivation so in this case um what was his motivation for selling he actually self-managed did his own maintenance did his own pest control and he also bought the property himself because he's actually a licensed broker as well this owner he did everything himself and for him it was a job so he was at the age where between his law practice and this you know he was you know obviously very busy and he just wanted to retire he was at that retirement age and this was kind of his nest egg his retirement plan that he's been working on for the past 13 you know to 15 years and he just kind of want to reap the benefits and kind of ease off his life yeah that's great so you caught him at a at the perfect time in his life right exactly yeah right time right place that's right that's right you know we always say when they willing uh buyer and william seller get together wonderful things can happen and and here we are okay now share a little bit about the upside in the property so i actually had traditional financing on this property i did 20 down got about 4.2 interest amortized over 30 years and actually found that using a mortgage broker ironically when the bank did the property and or the appraisal the property actually appraised that 750k wow so you bought it you bought it for 520 and it appraised for 7.50 yes i got it at 520 got 66k in credit and it appraised that 750k j1 that's almost you know 200 and what 90k yeah of equity built in you know day one day one that's amazing that's amazing and this is why we like to go direct to the property owner because there's no way an agent would have sold a property at that level right yeah so that's why we always stress to everyone out there everyone listening is you know we fishing in a different pond from everyone else and you're you're the result of that yeah that is awesome that is awesome so we have uh so not only do you have upside and equity day one what about day two rent increases to increase the property value more do you have can you increase the rent the owner um he really didn't raise rents much for most of the tenants you know i believe a lot of tenants were there you know four years plus and he never really like i mentioned he self-managed himself and he drafted his own lease agreements and whatnot and he really didn't you know raise the rents that much so kind of the average rental is about 450 to 500 but you know after talking with my property manager who's actually helping me with the renovation we believe we can probably average about six thousand dollars per unit and then raise the rents about you know 50 to 150 uh per unit conservatively depending on the one bedroom versus two bedroom um so we think there's huge upside and you know after we're done with the turns and the renovation plan and raising the rents you know we think we can at least double the value of what i purchased it at uh being conservative that's awesome that's awesome okay now here you are in there's problems in oklahoma right and uh you know tell us about this proper manager that you have uh by the way and he's a proper manager that i use and so i so i know he's awesome but uh but but you have to share with us you know you as a beginner being coached by us how are you going to manage the property from california knowing that it's in oklahoma so share us about the property manager and the process yes as you mentioned i was very fortunate that you could refer me you know amazing property manager you know that they have a lot of experience in managing multi-family apartment complexes they're very good at renovations they're very cost effective in terms of how much do i need to spend to maximize my rent value so they just have a very strong pulse on the market and they actually are very hands-on they actually were working in my apartment complex uh directly this actually past weekend um to kind of you know show the tenants they were there but yeah what's fortunate about having a great property manager is you know i'm in california they're my boots on the ground so obviously they're going to be the ones that tell me you know what needs to be done to make an apartment you know clean for oklahoma standards you know obviously i'm from california so it's different here versus in oklahoma so they gave me that kind of real world practical um sense of what needs to be done and for me i just you know create a system you know to meet with the property managers once a month so we we have you know monthly reports that they automate um through rent manager and from there i'll kind of review those reports and then meet with them monthly to discuss the plan so you know obviously i have to do a lot of renovation to do the value add investment so just kind of meeting with them to say okay like what do we need to do for these two vacant units um to raise the rents and then once tenants start to turn because i imagine as we go through the apartment complex there's gonna be some turnover uh getting maybe getting rid of tenants that you know maybe don't fit what we want and there'll be some turns and just having that plan in place to renovate those units as fast as possible to then um rent them out um to clientele that would you know pay those higher market rents yeah absolutely absolutely okay now um uh quick change of subject you know some of the maybe some of the audience is wondering you know you mentioned the rents are low so maybe it's a bad area right so uh and by the way we wouldn't have you behind a bad area so so share something about this area right yeah so i ironically when we did the google street view it did not look that good of a property i remember we both did the google street view it did not look very you know good from that view but when i actually flew there the first thing i noticed when i drove in was it was a lot better than i expected in person you know despite it being kind of a c-class neighborhood a lot of you know work you know work-class uh renters and tenants but what really surprised me about the property was there was no trash anywhere like during the on-site inspection actually left my starbucks uh on the staircase by accident and i walked into the unit and every time i walked out someone was grabbing my starbucks cup and throwing in the trashcan so i actually was ironically the messy one but it just showed me that you know these tenants they really cared about the property yeah there's kind of pride of ownership yeah you know so that that was really you know impressive to me and you know just driving around the area um i drove there during the daytime at night time to get a sense of you know the area and it's just very quiet no one was lording around i was actually surrounded by a lot of single family homes so it's actually a very very you know nice pocket you know and i would have not known that had i not flown you know to oklahoma and saw myself because google street view did not do it justice yes i remember that i remember that yeah because i was surprised you know that the price is low okay maybe it's in a tough neighborhood and then you and i googled it on our coaching call yeah and then uh yeah and then i had reservations and then once you flow out there and you send back the report that okay he's there he approves of it yeah so let's uh keep watching forward yeah yeah i was actually ready to you know get rid of this deal but i remember he kept on pushing me with the numbers so i just said you know what let me just give it a shot worst case said um i just say no yeah and back at my current baseline yeah yeah okay and uh uh let's see stephen can you share with us uh you know most of our audience are beginners who just want to get started can you share just a couple things uh maybe encouraging things or some tips on how they can get started how they can come or do what you just did yeah so as we kind of alluded at the beginning of the video it's just taking small consistent daily action you know initially it doesn't seem like much but once you kind of compound that over you know six or seven months you know you can see massive results it's just kind of like uh that hockey stick effect first it kind of starts off flat and also it just kind of skyrockets yeah i feel like i'm just right at that inflection point then it was just due to my small consistent action you know it can seem intimidating to and even myself i was very intimidated uh by apartment complexes if if he asked me you know a year ago hey what do you think about owning an apartment complex in oklahoma i'd say you're crazy you know i can barely do a single family home here in in california where i'm based but just taking that if you kind of break down that big problem in the small little problems like you know hey there's one issue today okay what's the lending like how do i run the numbers on this property how can i find a property manager what calls do i need to make how do i reach out to many different lenders you know so i just always had that approach of no didn't mean stop it just meant ask someone else so one lender told me no that's a different lender that lender said we know as a mortgage broker yeah so it's just never taking no for an answer and just taking that small daily consistent action and just never giving up if you kind of have that mentality you'll eventually land a deal maybe similar to mine awesome awesome no thanks for sharing that okay and let's close with this so um what does the future look like for you what are some of your commercial investing plans what do you what do you plan on doing moving forward yeah so actually um i'm actually a buy and hold investor so kind of my exit strategy for all my you know commercial real estate is you know buy it add value and then cash out refinance within you know three to five years depending on how fast i can go and kind of my mentality for that is as you know it's a lot of work to find a deal to stabilize the deal renovate the apartment complex and then cash out refinance so once you did all that initial heavy lifting after that you kind of like just need to you kind of cruise for lack of a better word and i want to kind of reap the fruits of my labor you know this sure been a long hard two months it's rewarding but now i just want to reap the benefits of this apartment complex once it's you know the rents are raised it's renovated and it's just stabilized but what i hope to do is after i cash out refinance i'm going to pull all my initial equity and use it to buy more um commercial real estate so actually i'm kind of focused on uh what you call that the four recession resistant assets so number one is apartment complex number two is mobile home parks you know people always need a place to live so that's not going anywhere and people need um low-income housing you know it's a bigger need now more than ever yep uh number two but number three is a self-storage a lot of people have a lot of stuff that they need to store unfortunately um so there's always a need for that and then lastly industrial yeah um you know e-commerce is a booming business you know covet definitely expedite that so you know people need a place to store inventory and then um actually i have um one office building in the pipeline actually um that's actually three miles away from my apartment complex and you know i'm trying to you know do diligence on this office building right now to see if it's a good fit but it's just kind of nice how it's only three miles away so i'm trying to see if i can use my current property managers maybe i have to find one that specializes in leases and i just know the error very well because i during my time there i you know explored all of oklahoma essentially in my car um so yeah i'm just kind of hoping to do more deals for this first deal i actually self-funded it myself and that's kind of the reason for that was i kind of want to prove to myself that i could do this deal by myself but later down the road i'm hoping and you're kind of helping me what that is i want to start syndicating deals and getting other investors involved but before doing that i just kind of want to prove to myself that i can find a good deal i can negotiate a good deal and i can manage a good deal and execute my exit strategy plan so it becomes an easier pitch that you know i don't need to sell you on my deal the deal will just sell itself yeah so that's kind of my my approach i'm unfortunately not the greatest salesman um but i just kind of want the deal to speak for itself yeah and that they have confidence that i can manage and find these good deals yeah excellent excellent okay and we're here to help you here all right all right so steven uh this morning's been wonderful so uh thank you for sharing everything about yourself and this deal and i'm sure it has encouraged many people out there so again i appreciate you very much and we'll be talking next week yeah no i hope to be back with a second video you know i'm competitive uh so uh hopefully i can be back for a second video all right let's plan on that hello everyone welcome back now isn't stephen incredible he is right incredible young man nothing but success is going to happen to this young man at his pace okay now let me just do a quick recap because as i promised i want to put you uh exactly in his place so you can do exactly what hit he did and this is what our company does okay all right so number one a little bit uh let me recap the deal so 26 units in oklahoma uh he uh the contract price was 520 000 dollars and then uh upon the appraisal it appraised for 750 000 right so he walked in with over 200 000 equity day one day one right and then let me skip to number four he also negotiated 66 000 of closing credits at closing that came off of his down payment right so basically you can and maybe to six thousand dollars to this and he may come away with uh you know 280 thousand dollars equity day one incredible incredible but uh that's what a good commercial looks like okay so he followed all the steps right okay now probably the most important thing and i want to talk about this because this is stephen stephen's goal when he originally came to us he dabbled in single-family homes it was taking him nowhere fast and they said peter i want to do multi-family so this is why we teach our students about their family okay so the rents can go up they can be increased by 150 per unit and he has 26 units right so do the math 150 dollars per unit per month times 26 units okay times 12 months that's about an extra 46 thousand 800 per year okay to his bottom line it's incredible yes it's gonna take him two and a half years but that's okay right all right so additional forty six thousand and dollars on his bottom line on his noi right now he's in a seven cap market it's not a super expensive market it's not a very poor market he's middle range so about a seven cap market so if i if i divide this forty six thousand eight hundred dollars by by seven percent by seven cap uh it comes out to be a a forced appreciation over two and a half years of six hundred and sixty eight thousand dollars okay so i'm gonna take stephen a few of these deals again to dramatically impact uh his financial life forever and when he has kids forever okay now okay enough about the deal now let's talk about stephen himself right so uh not only did steven uh you know find a and execute a what a great commercial deal is he was a great person himself as you can tell from this video right and he was to me he was very coachable very coachable number two he took action uh he didn't take like huge action he just did exactly what we wanted to do but he did it consistently okay over time it took him a half a year to get this deal okay so commercials not quick but in six months look what he accomplished okay now many of you know my mom is japanese so my mom taught us this it's called kaizen right so so we were very studious he's japanese right so what we did was kaizen means continuous improvement over a long period so that taught us patience right and that's exactly uh what's what stephen did he had a kaizen principle in him uh so he he just took what we what we taught him and just did it consistently month over month over month over month look at the results okay number three he was i thought he did this very well i mean he was able to negotiate uh sixty six thousand dollars in credit from a seller who's an attorney and how many of you you all know that negotiating returns very difficult very difficult okay and uh but uh stephen he honored the relationship he was transparent with the salary was an attorney and look at the result here okay so uh so i always preach that this business of commercial estate is a relationship based business there's proof okay all right number four stephen has a good proper manager he has my proud manager right and he's a good proper manager which makes his business scalable right we always teach our students that when you find a good proper manager because let's face it nine out of ten are not any good okay when you find a good proper manager stick with that person and build your business around that person or that person's company that's what stephen's gonna do and that's what he's doing currently okay now number five now that uh stephen has systems in place uh after uh our student close deal we meet with them every month to establish the systems so they can build their business so now that he has this in place he can go for his next deal right don't just buy a property and think you can just buy another one you have to put your systems in place to make sure it's operated correctly okay and now stephen's goal is he wants to his goal is to do syndication i have a feeling that stephen's investors can be very very happy with their returns after he's going all right okay everyone so i hope you enjoyed this video now you understand what a great commercial deal looks like not a good one but a great one so thank you steven and hey everyone out there could you just say congratulations to steven just give him a high five and tell him great job tell him great job all right thanks everyone if you want more videos like this go ahead and like this video go ahead and subscribe to our youtube channel thank you so much everyone and i'll see you at the next video

Channel: Commercial Property Advisors

Views: 5,998

Rating: 4.9499998 out of 5

Keywords: Commercial Property Advisors, Peter Harris Real Estate, Commercial Real Estate Investing, Commercial Real Estate, Commercial Real Estate Mentor, Commercial Property Advisors Portege Program, Apartment Investing, Beginner Commercial Real Estate Investor, Creative Real Estate Techniques

Id: G7fIpHKFfjg

Length: 33min 10sec (1990 seconds)

Published: Fri Sep 24 2021