Michael Blank explains what you need to say and how you need to say it when talking to a broker. If you use insider language and put their fears at ease, they won’t question that you’re new in the industry.
Michael shares the importance of educating yourself so that you can sound like an experienced investor. In addition, it can be a benefit to have a team in place as well.
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.
Michael: Hey, there and welcome to the REI Classroom. My name is Michael Blank and I will be your teacher today. Today, I’m going to teach you what to do if you want to get started with apartment building investing, but brokers are not taking you seriously.
Mike: This REI Classroom real estate lesson is sponsored by FlipNerd Investor Coaching, your blueprint to investing success.
Michael: All right. So you know you’re being treated like a newbie when you get questions from a broker like this, “What is your capacity to buy this property? Can you please send me proof of funds? What multi-family experience do you have?” When you get these qualifying questions, you know that the broker on the other end of the line thinks of you as a newbie.
And here’s how you act, okay? Here’s how you’re likely to act, based on what I’ve seen. You call up a broker and you say, “Hey, my name is Michael. I’m interested in purchasing multi-unit properties in the Atlanta area with sell-up returns, 10% to 12% cash and cash return. Can you send me over some deals?” This doesn’t sound so bad at the outset, but there are two problems with it. Number one is you’re not using the right language. You’re using newbie language, right? There’s a little bit of insider language you’re using.
And number two, you’re not actively addressing the broker’s two major fears, which is, “Oh, boy, this person’s about to waste my time. And oh, boy, if I give him the time of day, they’re probably not going to be able to close on a deal. So I know, I’ll make them go away with a bunch of questions that they can’t answer.” And that’s how brokers treat newbies. And you want to avoid that, because once you don’t become a newbie, let’s say you mistake and you educate yourself, it takes a long time to change an impression.
So here’s an example of how you might not appear as a newbie. And all I’m adding into the mix is some education, some training. I’m going to arm you with a script, for example. So here’s a script the way a script could go. It goes like this. “Hey, my name is Michael. I work with a group of high-net-worth individuals, and we’d like to expand into the Atlanta market. We already have Property Management Company XYZ on board and we’re continuing to build our team locally. We’re looking for deals in the $1 to $2.5 million range with at least an 8% cap rate, and we will consider light to medium renovations, but no repositions. Is there anything you have in the pipeline that you can send me over for me to review?” All right? It sounds pretty cool, right?
Now, here’s what you’ve done. Number one is you’ve addressed both of their objections, which is the money part, because you’ve said that you’re working with a group of high-net-worth individuals. Number two, you addressed the experience part because you said you’re already working with a property management company, and you’ve said that you’re expanding, implying that you have experience elsewhere. And number three, you’re using the right language, like cap rate, reposition. Those are words that only insiders use.
And by the way, reposition is something where you’re taking an asset and you’re taking it from a C-type building, which is kind of rundown, to a B-type, for example. Or you’re changing it from one use, which could be market rate to Section 8 or student housing, something like that. Those are called repositions, just as an aside, but in general, you’re using insider words.
Now, here’s the thing. You haven’t really proven anything, but the broker, in his mind, is going, “Oh, gosh, this guy’s proactive, addressing my two major concerns, experience and funds.” Which both lend to you being able to close, and you’re using the right kind of language. And they’re not likely to ask you those other questions because, if they do, there’s a chance you can get upset. You might go and say, “What the hell are you talking about? I own 1,000 units in four cities. How dare you question my experience?”
Now, he’s not going to risk that because he doesn’t know you, really, from Adam. So he’s not going to risk in asking you for those things. He’s going to say, “Yes, no problem. I’m going to send you over this deal. Let’s talk about it.” That’s much better from their perspective than trying to tick you off. Does that make sense? So lesson number one is to educate yourself. Use the right language. And this is an example where a little education goes a long way.
Number two, the second thing you can do to be taken seriously is to recruit a team. These are all things you can do rather quickly and over time and before you start hitting the phones with brokers. So here’s who you want on your team. You want to start building a board of advisors. These are experienced multi-family investors that agree to be on your board of advisors, whatever that means. One of the things it means is that you get to use their bio on your cover letter or with any offers you’re sending. It might also mean that occasionally you can call them. It might also mean that you can maybe meet them for lunch once a quarter or something like that. Now, most people are very busy people, but they might agree to that because it doesn’t cost them a whole lot and maybe they want to help you.
Now, if you’re working with me, you already have a built-in board of advisors because you can use my bio as well. But you can find other people in your local REI events, Bigger Pockets, great resources for networking. Whatever.
The property manager is the second team member because it adds to your experience. So being able to put that bio on any kind of offers is absolutely key. Extra credit, you can throw in your real estate attorney, your SEC attorney, your CPA, whatever, right? So the bigger your team looks, the larger you look as well and the less focus is on you.
So lesson number one, educate yourself, and lesson number two, build your team. So when you do make offers, you don’t just talk about terms of yourself, but in terms of your team. All right. That’s it. If you have any questions, the best place to ask me questions is on “Ask Mike,” which is at themichaelblank.com/ask. And remember to grab my free e-book while you’re there. I appreciate you taking time out of your busy day to learn with me today and I will catch you in the next session. All right. Take care.
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