If you want to sell buildings, you've got to talk CAP. Capitalization Rate is the rate at which a potential investor experiences a return on the monies they lay down at the initial period of investment. The lower the Cap Rate, the higher the Sale Price. A low cap rate favors the seller, high favors buyer. In Seller’s Markets you will see 6% or lower. Balanced Markets will find you 7%-10% and in Buyer markets 11% and up are the expectations.
You might meet a property manager of property from Lowell who might tell you that they took over a project and turned it around and now there’s a 14% CAP. He’s bragging about all the wonderfully efficient things he has done for the property to operate it so full tilt-like, and how much of a genius he is. In Cambridge you would be hard pressed to find someone who can brag about anything higher than a 7% CAP. But there are some who can.
There are shark investors who swim around all day long, looking for the weakest owners on the best blocks. Over time they have developed a significantly cool skill at identifying these folks, approaching them, and convincing them to sell their properties at a price that is greatly below what the market would bare. Sharks like these men actually push the price down by leaning on an already depressed mind, that cannot think itself out of a box, and offering them a sweet candy deal of a certain amount of “NOW CASH” – Which may seem like the answer, but is really a foul ride.
PROSPECTING TIP (for the DOLPHINS)–
You can beat these sharks any day of the week, if you are on the prowl as well. Always have your business cards with you. Always be on the watch for people who are looking a little down, either in a coffee shop, in a bar, or ambling slowly.
Step one---Know you are the good guy/gal. Second---STRIKE up the chat first. Be a giver of good positive energy. Put yourself out there with a generous dosage of your time. Let a good trust bond building conversation ensue. At some point, inquire about how long the prospect has lived in the area. Ask if he owns or rents. If he says he owns---immediately give him your business card and tell him this----
“Here’s my card. Someday someone else might approach you and offer you money for your property. Before you say anything to them, tell them you have to talk to your Broker first. Then immediately call me. And I will come and make sure they do not take you to the cleaners.”
Chances are probable you can save a lot of people from a massive shark attack, earn a decent commission, be a public defender, and retire each night knowing you saved someone from a harmful situation.
This is a battle plan for getting off-market and on-market listings by just a word of mouth approach. If the property is in reasonable to good condition, and you Dolphin up, you can save your prospect from a shark attack entirely. If the property is too far gone, or sinking fast, there’s no keeping sharks away indefinitely. But Dolphin up anyway---you can incite a shark bidding war and lever up some extra dough for your principal. And that is a victory.
Reach out to me and I'll send you a free Cap Rate Calculator that you can use when consulting with sellers and buyers, especially of multi-family buildings.
Cheers and Good Brokerage!
