Is it better to buy and hold or buy and flip real estate

I know there are many different factors with this question, but I just looked current values on a bunch of properties that i have sold over the years and in every case, they were much higher and I would have been better off  keeping them...... Something to think about

“In Real Estate, It’s always about the buy, and the hunt is the first step”

Written by H. Jack Miller

While everyone has different ways to get “The deal,” I have never been successful following the traditional means.  I find that if a property is listed with a realtor and it’s out there on the open market, chances are it’s not a deal for me.  By the time I see it, all the insiders have seen and passed on it or bid the price up and everyone and their mother has seen the property.  Even worse is an auction or the somewhat new “call to offers date.”  With this it becomes a feeding frenzy always bidding the price up.  I cannot compete with everyone else in town, and on commercial deals, it’s out of town competition as well.  They always have more money and are more anxious than me.  My goal is to see the deal before anyone else does and have little competition.  There are many ways to do this, but here are a few ways I have done this in the past successfully.  

I try to make a few strategic realtors my advocate.  Every guy out there has less than a handful of his/her guys, people who he has a close relationship with, who have proven themselves in the past as those with whom he can make money.  I try to buddy up with the players in the marketplace and cultivate the relationship.  They know who I am, and I know who they are.  I want to be the guy they are thinking who will buy this when they are talking to the seller about it. I let them know that I will pay their fee or a buyer’s commission for off market deals.  After all, what’s the difference who is writing the check?  In most cases, it’s packed into the purchase price anyway, and I will be paying it directly or indirectly.  I have found some great deals this way and I have been first to look and deal with the seller.

Another way that I love is to offer to make the realtor your partner.  This accomplishes a few things.  You get to see the deals first, and if they are your partner, they will do a lot of the day-to-day leasing and other work for you.  Be cautioned, however, because in my experience, most realtors make lousy partners and I do not believe they know what they are talking about.  All you want is to see the deal first.  Anything else will be a plus.  This takes me to a whole other area about partnerships, which I talk about later, but for this case, it’s best to let them put their commission on the line and invest it in the deal.  Depending on the food chain, this could be a sizeable portion of the equity money you need for the deal.  Of course, if they have money which they will bring from home, that’s better yet, but that has never happened for me.  Most of the time, in the end the realtor does not want to let his commission ride; he needs it to eat.  Depending on how good of a deal it is, you can put the realtor in for some percent of the ownership which you end up with. I do have one other rule for realtors who are partners.  I make them sign on the mortgage and note with me.  I do not mind being on the firing line, but in this case, I want to celebrate or cry with the realtor.  I generally do not ask my equity partners to sign personally because I want to take all of the arrows for them.  I also want to let you know that my experience has been that a realtor always loves the deal.  By their very nature, they are salespeople, and generally have little to lose, only see the upside and do not fully understand the downside or risks involved.

I have also lucked out here and there by finding a residential realtor who had listed a commercial property listed. In these cases, the realtor is usually a friend or relative of the owner and the owner trusts him.  However, you can get lucky because the realtor has no clue as to the real value.

Of course, it’s always great to have an inside track with a lender who will call you first.  You achieve this by reaching out and letting them know you’re in the marketplace, obtaining their respect and proving that you can deliver.  This is not achieved on day one, but rather, after many years of working with someone.

I already said that I hate auctions and bidding wars and almost never participate in them, but there was one in which I did, and it was a grand slam home run for us.  I mean, we hit the ball right out of the park.  There was a trust that owned some commercial properties and a few residential properties that it needed to sell.  We got word of it from the inside and it was being handled by the bank who was the trustee and a local law firm.  We looked at the situation and realized it was a real mess.  There were options given, someone had the first right of refusal, others had long term leases and conflicting leases as well as arguing among the children of the estate.  In addition, there was cause for concern about environmental issues that could be involved.  However, the property was a class C property in an A location.  So, we made our offer with a price we could justify with only two contingencies.  The first was clear title, and the second was a clean environmental report.  The key was no financing or other contingencies.  We also said that once accepted and out of due diligence, we would put down a very large deposit to be held in escrow.  In fact, it was eye popping considering the sales price.  By the way, while we thought our price was good, we knew the children were happy with it. But thought there would be some competition. We did a lot of work behind the scenes to convince the interested parties that we could deliver what we said we would, when we said we would, and stressed the fact that since the deal was so complicated; many would not persevere through the nonsense to a closing.  Further, if there was a large public auction, it would take a lot longer to advertise and sell the property.  We made our offer so that even if there was a high-priced offer, they would have to give it to us because it was so clean and simple.  In the end, after about a year, we got the property, and like I said, hit it out of the box with this one.

There was another case where a competing investor told me about a deal that he had passed on because it was a land lease.  That did not make sense to me.  I looked into it, found out he was not correct, and in the end purchased the property

There are so many stories similar to the auction story, but the moral of the story is to do your homework, strategize and look deep into the deal.

As I look back, it seems that there is always a twist, or you need to wrestle the property from the seller.  I cannot think of a time when the property was listed and we purchased it.  The really great deals always have a story and you have to battle to get them.  Sometimes at closing, it actually feels like giving birth.  Likewise, the more obstacles there are, the more opportunity there is for you.

In the end, no matter how you find the really great deals, it’s always about the buy.  There will be many things that go wrong, but a great buy price will make the mistakes worthwhile.

  

Written in November of 2011 by Jack Miller, no part of this maybe copied or reproduced without the express written permission of the author. Jack Miller can be reached at JackMiller@GFCIB.COM

Two new clients using our Financial Restructuring and bankruptcy Support services

November 22, 2013

For Immediate Release:

Huntingdon Valley, PA./Fort Lauderdale, FL.

GFCIB and Advisors, LLC a nationally recognized financial real estate advocate and advisory firm for commercial real estate owners, developers, builders and mid sized businesses announced two new engagements to restructure and provide Chapter 11 bankruptcy support services involving complicated commercial real estate partnerships in Chapter 11 Bankruptcy. The lenders have attempted to seize the subject real estate owned by these partnerships despite the significant equity contained the properties. One matter is taking placing in the U.S.  Bankruptcy Court for the Southern District of New York and the other in the U.S. Bankruptcy Court of the State of New Jersey in the Trenton vicinage.

The first matter consists of a 78 unit multi-family apartment building in the Bronx, New York, and the New Jersey matter involves a large Recreational Vehicle ("RV") Park located in Central New Jersey. GFCIB was engaged by the Partnerships to craft unique financial solutions with the goal of both partnerships realizing the economic benefits it originally contemplated while simultaneously solving the issues with the lenders in manner which is fair and equitable under the law and circumstances and in the best interests of all stakeholders.

Protecting, advocating and satisfying the needs and desires of our client’s one at a time.

For additional information contact:

H. Jack Miller
215-947-2974 ext 237
JackMiller@GFCIB.COM