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Getting to know your buyer

A real estate transaction is like any other transaction. The buyer wants to buy something you have at a price suitable to him/her, while you want to sell that same thing for terms fancied by you. Over the next three articles, I will be taking you through the processes required to come out on top when selling a property. This first article will provide you with a basic understanding of the selling process while the following two articles will take you through the more in-depth practices you need to carry out.

So what is the first thing you need to know when you want to sell real estate? The answer is simple; you need to know who your buyer is and what he or she wants. To identify the characteristics of your average potential buyer, you need to look at the property you’re selling. For instance, if you are selling a large residential property, your prospective buyers will most probably be families, while if you are looking to sell an apartment building, your buyer-type could vary considerably. Hence, accurately creating buyer-profiles will allow you to strength your position in the selling process.

Once you have the profile ready, you need to apply the principal of motivation. Although you might feel that motivation is a topic more suited to a field like human resource, you will be surprised to learn that understanding motivators and their effects is key to real estate success. I am sure all you must be familiar with Abraham Maslow’s theory of motivation. If you aren’t, here’s what Maslow had to say. According to him, people have varying level of needs, starting with the basic physiological needs such as food and water, to high level needs such as the desire for love and self-actualization.

Now you might be wondering how hunger or the desire for love might play into your real estate career. Allow me enlighten you; you as the seller need to attract prospective clients and then hold their interests. While effective marketing (discussed in STEP THREE) may allow you to attract clients, you will need to ascertain every client’s motivators for purchasing before you can effectively grab their interest.

Next, you will need to convince them why they should buy your property instead of the others available in the market. Again, the motivators will play a key role as they will allow you to sense the buyer’s reasons for purchasing. You will then be able to outline the benefits offered by your property in relation to the buyer’s needs.

Your ultimate aim is to stimulate the buyer’s interest to the point where he/she actively chases after your property. If you are offering a high-quality property, you will definitely find yourself dealing with numerous interested buyers. Remember to consult your lawyer, or your real estate agent if you have one, at all times as this will allow you to benefit from an outsider’s perspective. This way, you might even realize that you have overlooked certain factors which are important. So always welcome second-opinions.

Once you know your buyer and his interests accurately, you will be able to follow through more effectively with your marketing.

Recent years have seen a surge in people investing in real estate. They seem to have finally realized that real estate is possibly the only investment which offers a tight safety-net in today’s volatile and highly unpredictable world economy. While the U.S. dollar can not seem to rise out of its nosedive and the U.S. economy seems to be a victim of a very bad case of volatility, land remains an important source of income for many people as it has remained for so many others since the beginning of time.

Up until the very recent past, the number one arrangement for real estate investment remained to be partnerships. Partnerships have been a force to be reckoned with, be it in terms of real estate or in terms of any other field such as sports, music, movies, etc. However, lately, people seem to be opting for TIC arrangements instead of partnerships for their real estate investment needs. This has proved to be a very wise decision as TICs are able to offer safety as well as the prospect of high profits by nullifying the hindrances found in partnerships.

Firstly, unlike partnerships where the investor would own a stake in the partnership which in turn would own the property, TICs allow investors to own a fractional interest in the property themselves. Secondly and more importantly, while all partners in a partnership need to be in accordance when replacing a property, TICs allow investors to easily cash-out of the investment or replace it without the need to consult other co-owners. Additionally, TICs further benefit investors by granting them the freedom to exchange their individual undivided interest at any time rather than having to wait for the disposal of the asset as is the case in partnerships. TICs also do not forcefully bind an owner to remain with any of his/her co-owners in the future.

Remember though that is not where the list of perks ends. TICs make it possible to compete with institutional capital and attain high-quality properties; so TIC owners not only attain access to better investment options, but they also have the option of diversifying their property types and geographical locations, thus reducing their risks. TICs also allow investors to benefit from professional third-party management which ensures a steady and reliable cash stream.

This third-party management plays a vital role in distinguishing TICs from other real estate investment arrangements. These third-party managers, known as Sponsors, take on all responsibilities of running the investment on a daily basis, hence freeing up time for owners. This concept thus runs opposite to partnerships where if you do give up the day-to-day responsibilities of the investment and become a general partner, you are forced to leave the daily running to one of your partners who may, or may not, be the right person for the job. TICs, on the other hand, ensure that the day-to-day running remains in the hands of professionals who know exactly what they are doing at all times. Additionally, since these Sponsors handle more than one property at any given time, they have considerable leverage with financial institutions. Therefore, they are able to attain very favorable lending terms for the investment.

TICs also allow an investor to benefit from various tax breaks. Moreover, these ingenious arrangements grant an investor the chance to diversify his overall investment portfolio of stocks, bonds, mutual funds, business investments, etc. So it is easy to conclude that TICs are here to stay. Whether you are for them or you are against them, you will not be able to deny that given the current economical situation in United States, TIC arrangements offer a safety net which remains unparallel in the market.

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The answer is simple; use, use and use. Use is possibly the most important factor in terms of the property’s value. For your investment to be a success, you need to think of the building’s use for you as well as for your tenants. Hence, you need to also put yourself in the shoes of your customers, i.e. your tenants. To kick start things, first attain information on the demographics of the area in which you want to invest in. This should give you a basic idea of who your target audience is and will also allow you to build a general profile of your typical tenant.

With that profile in mind, think then of what the average tenant would need if he/she lives in your building. For starters, regardless of who you rent out to, people will always need basic amenities near by. Thus, you have to ensure that the apartment building you buy is located near a grocery store, entertainment facilities, medical facilities and the like. You should note that although people might have cars, they won’t like driving for more than 10 minutes to get the basic necessities. For example, in an emergency situation, no person would like to drive more than 10 minutes to get to a hospital.

Following the universal needs, you need to look a little more closely into the profile you have outlined. The more you breakdown this profile, the greater will be chances for success. For instance, if currently you feel that your building will primarily be occupied by families, then you should study the demographic data carefully to figure out what kind of families are we talking about. Will the families be newly married couples or families with school-going children? If it’s the former of the two cases, then your building should ideally be located near a good quality daycare center. Meanwhile, if it’s the latter of the two cases, then you will be best positioned if the building is a near a good quality school.

Use is possibly the most important factor when one is to make a purchase. Combine that with customer profiling, and you have the recipe for success. However, always remember that you shouldn’t venture outside your comfort zone unless you absolutely have to. Comfort zone here refers to areas with which you are familiar and have possibly had experience in previously. This point is important always but even more when you are initially starting out as a real estate investor. When starting out, stick to what you know and try out new things only when you feel you have a handle on the situation. And always, always, keep your eyes and ears open to absorb whatever information you can about your location so that you are never left in the dark.

know everything you should The things you need to look out for before you buy property

In this article we assume you have identified a property to invest in. You have also started the negotiation process but don’t know what warning signs to look out for. This article will serve as an aid, outlining the aspects you need to be wary of before you sign on the dotted line.

First things first, don’t, under any circumstances, assume anything about the property, especially its value. Never make any forms of guesses as that will surely get you nowhere in this business. Always, and I can’t stress this enough, confirm all information with the seller through proper, valid documentation.

Next, take on the services of a qualified building inspector as well as a qualified land inspector. Hiring such qualified inspectors will allow you to get independent verification of the property in question. Many sellers try to off-load their properties without bothering to inform buyers about various problems associated with the property. Therefore, it is a wise move to get qualified independent verification about the property.

However, this is easier said than done most times, because good-quality inspectors are hard to come by. As a result, when you are short-listing potential inspectors, make sure to follow up on their references. If possible, try and trace back their former clients and ask them whether they have experienced any problems which the inspector should have been able to identify.

Similarly, you might need to also hire the services of a professional accountant to audit all the leases for you. Unless you have the relevant experience in this field, you must ensure that your accountant has done similar work before. What your accountant or you need to look out for are any irregularities in the lease, such as problems with terminology which the pervious owner might have overlooked given his/her lack of understanding.

Additionally, you will also need to ask the seller to secure an estoppel letter from all tenants. For those of you unfamiliar with this term, an estoppel letter basically verifies that the attached lease is a true and accurate copy of the existing lease. More importantly, an estoppel letter also clearly specifies that there are no other agreements pertaining to the property between the tenant and the owner.

If so far you feel that the process of auditing leases and getting estoppel letters is mundane, you have another thing coming. You need to complete a thorough review of the entire inventory list to ensure that everything is in its said place. In addition to a visual inspection, it is advised to videotape the inspection as well. While making the videotape, ensure that you have one member of the seller’s team with you and remember to point out any item missing or in need of repair.

Additionally, you will also need to attain a certified property survey, either requesting a copy of one already available, or, by conducting a new survey. You need to ensure that the survey includes information regarding the property’s location, easements, and dimensions. If you feel you yourself don’t have the experience required to conduct an accurate survey, you can always turn to a professional surveyor. Lastly, you will need to make sure that all debts and liens pertaining to the property are accounted for in correctly.

You might wonder why all the caution. Just think about the stories you read in the paper about how so and so got scammed out of all his money. Being on your guard is not the same as being cynical. Remember that is your right to carry out this due diligence before you sign any document. Regardless of the property type, just before you sign the final contract, it is advised to make a final inspection.

If you do go through all of the above steps efficiently and whole-heartedly, you will definitely avoid any unpleasant surprises later on. That said, here’s wishing you Happy Buying! Remember to reduce your Taxable income

Boomers Bank The Investor’s Guide to Commercial Real Estate and Retirement Planning How to Invest In Commercial Real Estate Using Your IRA or 401(k)

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