What is the #1 Requirement of a Deal?
Most people probably jump to price. I know I certainly did for the first 10 years of my career. However, here is the absolutely, most important requirement for any Deal:
The Deal MUST Go to Closing
I have a friend who bought a apartment complex for something like $70M just before Covid. They accepted a contract for $150M in 2022 right as rates were jumping. Imagine, almost $75M in just 2-3 years. Best Deal Possible?
Because the buyer’s interest rates doubled right before closing, they  renegotiated and could close at $110M, which my friend boldly denied believing better offers would appear. Those offers never materialized, and he’d sell you the property at break even today if you are willing to buy it. The deal never went to closing, making the price completely irrelevant.
Always Underwrite Any Offer for Certainty of ClosingÂ
My first question when considering an offer on the table: Will this buyer actually close on this offer? Or will they renegotiate they day before closing? or simply cancel?
If the buyer fails, will the market be as good as it is right now? That is NOT always guaranteed. In residential real estate, the Spring & early Summer markets net 5-10% more price than any other time of year. You may only have one shot to get that right, or wait one more year and try again.
In commercial real estate the market cycles measure in decades. Retail real estate is doing well at the moment, but was soft from 2010-2021 or so. Office is currently soft. Apartments are in decline-as rents are flat, or declining throughout the country.
How to Beat the Market
- Don’t Be Greedy – Trying to set a record and extract every last dollar from the market can often be a trap. I’m sure you would agree with my buddy who denied that $110M renegotiation-$35M or so in profit would have been WAY better than the situation he is currently working himself out of – and it’s been a tough 5 years since this occurred.
- Go FAST!! When it’s time to sell a property, I opt for speed where possible. There is a balance to this-I’m not suggesting simply fire selling. Â I prefer getting to closing quickly rather than risking market changes occurring which kills my current deal. Remember how many deals cancelled when Covid hit? Or maybe in 2008 when the banks collapsed?
If you have a deal which needs a certain, quick, guaranteed sale, I’m happy to be that buyer. I buy value add residential & commercial real estate. We require the ability to push the value and create a profit by capital improvement and/or raising rents. Reply to this email if you have something like this.
Here are 35 properties for sale, many work for fix & flipÂ