By Ritchie Clapson CEng MIStructE, propertyCEO
When looking for a property to develop, many new developers adopt an armchair approach – this is the internet-age. If we register our details and set up a few searches, then every new property hitting the market that meets our selected criteria will automatically hit our inbox. How good is that?
But, there’s a flaw in this thinking. Yes, it is possible to find some cracking deals using the online portals. But the problem is, this is where lots of other new would-be developers will also be looking for deals. There’s currently an army of sofa-surfers trawling Rightmove Commercial looking for their first development deal. And if you’re one of them, it means you’ll have a lot of competition. But here’s a fact that many of your competitors won’t know: the best deals never make it onto the internet. They stay resolutely ‘off-market’, and if you stay glued to your laptop screen, you’re not going to get a whiff of any of them.
When I say off-market, I don’t mean that these properties aren’t for sale, nor that commercial agents aren’t involved – quite the opposite. Commercial estate agents are hands-down the best source of opportunities for developers, but you’ll need to intercept these opportunities after the agent has secured them but before they advertise them to all and sundry. But hold on, though, surely those same agents will be putting their properties on the internet, so won’t I get an alert in my inbox? In many instances, the answer will be ‘no’. Let me explain why.
The default way for an agent to sell a property, whether commercial or residential, is as follows. Firstly, they’ll secure their client and take the instruction. Then they’ll get an Ashley in the office to pop around to the site, do some measuring up and take some photos. Then Ashley will put all this information into a pdf document and scatter some flowery prose around the place to make it all sound vaguely attractive. They’ll email it to their database and stick it on their website as well as on the property portals to try to find a buyer. This will hopefully elicit a boatload of interested potential buyers who will want to descend upon the site to view its delights. And maybe one or two of these hopefuls will decide to make an offer, one of which (after some negotiation) will eventually be accepted, and things will then rumble on to the next stage.
The problem with this process is that while it works, it’s pretty labour intensive, plus it can take a while to come off. A more attractive approach, from the agent’s perspective, is a little different. Instead of mobilising Ashley, they’ll rummage through their little black book and dig out the phone numbers of a handful of ‘hot buyers’ that they know will be interested in the property. The conversation will go something like this; “I’ve just taken on an instruction that might be right up your street. We’ve not yet put it on the market. If you’re interested, I could meet you there later today to look around. At this stage, I’m only talking to a handful of my best buyers – what do you think? Would you be interested?”
You can see how this might work for both the agent and the vendor. There’s no measuring up or taking photos, and no marketing other than a handful of phone calls. Only a few viewings are carried out within twenty-four hours, involving people the agent knows are likely to be interested in buying the property. And if they sell it, the agent gets their commission more quickly and incurs fewer costs, plus the vendor gets a good price and a quick sale.
Of course, if they don’t sell the property, it ends up on the portals as fodder for those hordes of sofa-bound newbies. In other words, if you’re looking exclusively online, you only see the deals that the ‘hot buyers’ didn’t want. And fighting for the scraps is not where you ideally want to be.
The question, then, is how do you become a hot buyer? Like many aspects of property development, the key lies in building personal relationships. There are a few points to consider. Firstly, the agent will need to view you as a strong potential buyer; you’re not going to get a call purely because you’ve asked nicely. This means you’ll need to do the groundwork necessary to prove yourself worthy of being contacted.
Secondly, there isn’t usually a computer-generated list that spews out of their laptop, which tells the agent which hot buyers would be interested in any particular deal. It usually falls to the agent to rack their brains and come up with their own mental list of buyers who might be interested. It follows, then, that to be a hot buyer, you need to be at the forefront of their mind and not just sitting on a mailing list.
Finally, there’s no ‘cost’ to the agent in adding you to their list of hot buyers. If they were going to call five hot buyers, it’s no big deal for them to add a sixth to the list. In theory, it gives them an additional chance of getting a sale.
Here’s a common challenge that befalls many new developers. They’ll meet with an agent and reflect afterward that it went well. The agent seemed very friendly, said they were confident they would be able to send them lots of deals and promised to stay in touch. And sure enough, the developer gets a steady stream of emails every week, making them aware of new instructions. Months go by, and the emails keep coming. Job done, the developer might think.
The reality is that the agent sees lots of new developers, and not surprisingly, they are usually pretty pleasant to them from the outset. There may even be lots of smiling involved. And agents are also very adept at adding people to their mailing list, so the aspiring developer will not only get smiled at, they’ll also receive regular emails of new properties as they come on to the book. While they may now think they’re in prime position to receive the next great deal, the agent probably forgot they even existed within 24 hours of meeting them. Here’s the point: hot buyers aren’t people that meet an agent once and then sit silently on a mailing list; hot buyers are the ones that regularly call the agent every few weeks to stay in touch and try and build a relationship. They’ll invite them out for coffee or lunch and make a point of creating rapport. In short, they’ll make it easy for the agent to remember them when the right deal comes up. Are they a ‘mate’? No, just a developer who’s taken the effort to build a friendly yet professional relationship with them.
Now, not all agents will fill you with the joys of Spring. Some can come across as a little dismissive, while others can take a lot of warming up, and here I suggest you cut them a little slack. Put yourself in their place: they see many potential buyers, and most won’t buy any deals from them. As a result, the default approach for some agents can be to assume that every new buyer they meet is more than likely to be a waste of time rather than adopt a more ‘glass half full’ approach. This shouldn’t deter you, as it’s simply their first line of defence. You need to differentiate yourself from the competition; where other developers might write that agent off as an unlikely source of deals, you should persist and try to earn a place on their list.
ABOUT THE AUTHOR
Ritchie Clapson CEng MIStructE is a veteran property developer of almost 40 years and co-founder of propertyCEO, a nationwide property development training company that helps people create a successful property development business in their spare time. It makes use of students’ existing life skills while teaching them the property, business, and mindset knowledge they need to undertake small scale developments successfully, with the emphasis on utilising existing permitted development rights to minimize risk and maximize returns.
https://www.facebook.com/propertyceotraining/
https://www.instagram.com/propertyceotraining/
https://twitter.com/Property_CEO
https://www.linkedin.com/company/propertyceo