Today’s REI Classroom Lesson

Adam Stern talks to us today about how to adjust your buyer expectations so they expect not only distressed properties, but also renovated properties that are ready for tenants.

REI Classroom Summary

With rental portolios that include already renovated properties, you can expand your volume and potentially sell even more product.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Mike: Welcome back to the flipnerd.com REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.

Adam: Hi, this is Adam Stern. I am president of OwnAmerica and currently the number one SFR portfolio salesperson in the country. This is the REI Classroom. I’m your host. We previously talked about acquisition strategies for bulk to retail strategy for turnkey companies and now we are going to talk about setting buyer expectations.

Mike: This show is sponsored by passiverental.com.

Adam: So your buyers have an expectation of yield and asset quality they’ve come to know from you and that has been determined by the inventory you’ve gotten which has been generally distressed inventory, probably low quality, maybe something better, but the ability for you to buy it and then sell it at cap rates that are seven, eight, nine is what your buyers expect right now. Going to a different kind of inventory where you are not buying things distressed, you are actually buying them stabilized, you are doing less work to them or no work and putting them under your management structure. Setting the buyer’s expectation that this is not going to be a property that is going to yield what a C or a D or even a B- property would if you took it from the very beginning, which you are used to doing, all the way to having a retail product.
Setting a buyer to an expectation for a product that has been bought, aggregated, renovated, tenanted and has been in operation for some kind of time where the operational history of the property is already proven out. So this is not a new product. This is a rental that has been in existence for whatever amount of time it’s been in existence for but the idea is you are selling them a product that has a proven track record and setting the doubt of the buyer’s expectation that what properties yield at this level with this kind of asset quality and this kind of operational history is less than what they are used to getting.
But the upside to it is they get a quality product with a quality renovation, quality aggregation, you know actually picking the property out and making sure the schools are great, making sure the neighborhood is good, making sure that all the things in terms of living conditions of the tenant have been researched and looked at and delivering a property that again, you didn’t necessarily do all the work on from the very beginning but someone else has although you vetted it.
There’s value to providing a higher quality product and the tradeoff is lower yields and for you, businesswise, the tradeoff is being able to get your hands on more products and being able to sell more products for a smaller margin but it should boost the amount of volume you do. And if you’re a person that’s looking at expanding the property managements and getting more rooms under management, this is a great way to do it and we’ll talk more about the exit for the properties in session three, which is coming out. Thanks for listening.

Mike: Passiverental.com is your source for turnkey, done for you, rental properties. If you’d like to be an investor and not a landlord, please visit passiverental.com to learn how to purchase cash flowing, professionally managed rental properties in the hottest rental markets across the country. We can also help connect you with financing for your next property. Invest the easy way today and get started by visiting passiverental.com.
Please note, the views and opinions expressed by the individuals in this program did not necessarily reflect those of flipnerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions as real estate investing can be risky.
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Adam Stern
Adam is President of OwnAmerica, a National Real Estate Investment Brokerage offering disposition, acquisition and real estate consulting services to investors from small mom and pop, to large institutions. Through OA, buyers and sellers can connect to real estate service providers to execute on plans requiring both a high level of strategic vision, and boots on the ground execution.