Step #5: Shop You Competition

After determining a specific market area, it is time to really shop your direct competition.

Survey the other property managers and other property owners. All good sales people know their competition just as well as they know their own product. Not only does surveying your competition tell you what they have it also tells you how they are presenting it. If you call regarding renting an apartment from your competitor and the person answering the phone is friendly and inviting you will get that same impression of the property. If you arrive at a property and the property manager greats you in a robe, bedroom slipper with her hair in rollers and a cigarette hanging out of her month, what will be the impression you will have of the property.

If you are really impressed with how the property manager handles themselves, you may want to target them to become your property manager once you have a property.

Review any documentary information that you find available. This is when I start reading the Police Blotters, the City council meeting notes, advertisements, any tax information, and any other government reports that are available. There is an infinite source of information out there and now the internet has made it readily available to you. Imagine if you had to go to the library and look all this information up in person.

Talk to tenants of your property, the competitor’s property and different retailers in the area. I always broach the person with, “Hi, I am looking to relocate to the area and was wondering if you could tell me what your experience has been with…”

One time I was inspecting a property and a contractor was working on site. The broker had told me that the area was safe and was being redeveloped. There was a building that obviously was involved in a fire. I asked “Do you know what happened with that building?” From that one question I learned that it had been “torched” by the squatters when the police came in to tell them to leave and that the contractor’s feeling was that it should be demoed and turned into a playground since the kids couldn’t walk to the local park with out being hassled by drug dealers or muggers. 
Maybe the broker just had a different opinion of what “safe” was.

You can hire people to shop your competition and the property you are interested in. This way the tenants don’t feel like you betrayed them or were deceitful if you end up owning the property. I use shoppers today on the properties that I own. This way I know that my managers are answering the phones the way that I want them to and that they are giving a good first impression to potential tenants.

Step #6: Do Your Homework

After you have researched the area, determined your supply and demand, checked out the market, the demographics, the vacancy, the competition, etc; now it is time to verify the feasibility of your plan. The first thing you want to look at is:

Is it physically feasible? If you decide that your apartment with all one bedrooms needs to be converted to two bedroom units, is it physically feasible. Can you easily put up a dividing wall or do you have to combine two units into one? If you have extra land attached to a strip center and your upside potential comes from developing the land, can you develop the land or would the expansion not fit into zoning restrictions. Wanting to do something and physically being able to do something are not always the same. Just look at how many professional athletes have come out of retirement only to have a career ending injury in the first game back or worse yet in practice never making to game day.

Is it marketable? When I think of marketability I always think to those igloo style round houses that were built in the 70’s. I think some of them are still for sale from the day the construction was completed. Most people are not interested in round dome houses. You have to make sure you take into consideration what society finds a
appropriate not just look to our own interests.

Lastly, I verify if it is economically feasible and sound. If it will cost me $3,000,000 to renovate a strip center and the purchase price is $2,000,000; and the maximum value at 100% occupancy will only be $2,000,000, this transaction is not economically sound. Likewise, if I am looking to build 100 new apartment units but they do not generate enough income to support the debt, I need to find out if I can build enough units to support the debt while still staying within the city zoning requirements. If this can be done then I have now made the project economically feasible.

Step #7: Plan For The Market

The seventh step I do when conducting Market Analysis is to make sure that I design or plan for the market. I make sure that I give the property the correct curb appeal, that I offer appropriate amenities for the tenant mix, that people feel safe and secure when they are at the site. 

What ever issues or negativity that the property has that I am trying to mitigate, I want to make sure these match the market. For example, if my tenant mix is mostly elderly, my dollars would be better spent on a bus that could transport the tenants to the grocery store, medical campus, etc then on installing a new exercise room.

Also, if you spend all your money on the inside but do nothing to the outside, chances are no one will ever make it inside to see how you spent your money because the outside is not warm and inviting.

If you follow these seven steps when determining what market to invest in, I am sure that your chances of success will be far greater than if you just go by the seat of your pants.

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Step #1: Find the Market:

In order to find the market to invest in, I start with basic economics. I look at the supply versus the demand.

To Determine the Demand I look to see:

• Who are the Users?
• Where are they located in comparison to the subject property?
• What is the income level in comparison to the rental amount charged or the tenant mix of the property? It does not make sense to locate a designer boutique retailer near section 8 housing. Likewise, if your income level of your potential tenants is around $12,000 per year, you can not expect to charge $800 a month for rent.
• Who are the main employers? This is critical because jobs bring people to an area and people like to live and shop near where they work.
• What are the commuting patterns? If your potential tenants need public transportation, then you need to focus on a property that has convenient access to bus routes. Also, accessibility to major highways is always a positive attribute to a property location.
• Lastly, to determine demand I look at the overall demographics. If your target population is families with 1.5 children, then buying an apartment with all one bedrooms is not going to be a wise decision.

To Determine the Supply I look to see:

• Who is my Competition? I want to not only look at the current competition but I want to find out who is planning on coming on line in the future. If I am looking at a retail strip center and next year a new highway exit is going to open up. I need to research what impact that will have on my potential property. If I find that immediately off that highway exit is a new strip center that all potential customers for my tenants will have to drive by in order to get to my location, this will be important information as to my ability to lease my space.
• Find out what is the current market vacancy. If the potential property has a vacancy of 25%, initially I might think there is great up-side potential. However, when I do my research on the market vacancy I find that market vacancy is actually 30%. Now I know that the property is performing above the competition and there may be little room for improvement.
• You want to find out the types of tenants. As I mentioned earlier, if you have all families in the market area, one bedroom units will not meet their need.
• You also need to determine what amenities your property has to offer versus the competition. If all of your competition has on site work out rooms then maybe you need to convert a unit to a work out facility or make arrangements with a local gym for your tenants. It is always a positive if you can differentiate from your competition.

Step #2: Gather Data and Verify Information

It is important to not just go off your gut instinct or what the broker is telling you. Remember the broker’s goal is to close the sale. They are not going to mention to you the new competitor up the street and may even bring you to the property from a different direction just so you don’t see it. I use sources like the US Census Bureau, The Economic Department of National Associations of Home Builders, The National Housing Center Library, The Chamber of Commerce, I will meet with the Economic Development Director, and I will utilize the internet searching on the market area.

Step #3: Pick An Area

The next step that I take after I verify supply and demand information is to pick a site or pick the area I am interested in investing in. When finding a city to invest in I look for Population growth, vacancy rates, growth in the economic base and the population mix. The next thing I do is to pick the target sector. I determine if I will be investing downtown, in the neighborhoods, and what I want to be located near. Do I want to be near colleges, retail, highways, etc? Some retailers will only locate near other larger retailers. This is because they know that they have the same demographic requirements and that they target similar markets. Next time you are shopping at Target, make note of the other tenants in the plaza. I am sure you will see a lot of the same ones no matter what Target you shop at.

Step #4: Determine Your Timeline

Now it is time to figure the timeline for meeting the investment objective. If it will take me 18-24 months to renovate the property, then I need to determine where the market will be in 18-24 months. If 400 units are coming on line two years from now I know that I need to have my units completed prior to that so that I can get my building filled prior to the newer units coming available. I also need to know that I may need to offer concessions or lower my rental rate in order to keep the tenants that I will have. What ever the case, the timeline of your project is a very important aspect of any Market Analysis and is often the most overlooked or forgotten all together.

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Remember keeping good, organized books isn’t just to keep you out of trouble with the IRS; it is also to keep you out of trouble financially. Without good records you will not find inefficiencies with your properties and therefore will not be able to maximize cash flow and value.

As an example, if you have one tenant paying $400 per month that you did not notice was past due for 60 days, you have not just lost the $800 but you also will now lose another $400-800 during the eviction process, the $800 that you would have gotten from a new tenant, plus the cost of eviction is around $300-$500 per occurrence. So, one delinquent tenant can cost you thousands of dollars if you are not managing your finances.

It is also important to keep good records for when you want to sell your property. If you have accurate records you can normally generate a higher price since the new buyers feel more comfortable with the books and knowing exactly what they purchased.

Documenting the Income Received

With today’s technology in banking there are many ways that you can make available to your tenants for them to pay their rent. They can use conventional means of a check or money order but you may decide it is easier to accept credit cards, electronic funds transfers, or on-line banking. These methods give you more immediate access to funds which helps you know quicker which tenants are past due and which tenants are current.

You want to make sure you always keep your rental properties separate from your personal records. It is also helpful to separate income by each property if you own multiple properties or if you are running a management company, then make sure you have accurate percentages with which to allocate the income and expenses to each property.

Documenting the Expenses Paid

It is beneficial to hire a good real estate tax advisor even if you do not own a large commercial property. The reason for this is that the real estate tax laws are various, complex and numerous. There are certain expenses that can be expensed immediately and other expenses that need to be capitalized and expensed over a longer period of time.

By owning commercial real estate you not only get to expense operating expenses such as payroll, management fees, repairs and maintenance, etc but you also have the ability to expense non-cash expenses such as depreciation and amortization. Depreciation reduces your current income but is recaptured at some point in the future. A good real estate tax advisor who is familiar with such items as cost segregations and 1031 exchanges will help minimize your expenses.

Documenting Security Deposits

A lot of novice property owners consider security deposits as income and therefore record it incorrectly on their financial statements. Security deposits are considered a future liability that is owed back to the tenant if they comply with all the terms of the lease agreement. If the tenant does not comply with the terms of the agreement then the security deposit may become income later, however this is normally not determined until the point where the tenant vacates or moves out.

Using Budgets and Managing your Cash flow

Just as in your personal life, it is important for you to use a budget on your commercial property as well. Budgets allow you to monitor the income and expenses on the property to make sure that you are operating in a positive cash flow situation or at least making the necessary steps to operate in a positive cash flow situation.

Budgets also give you an idea of how much money you need to set aside in order to cover any large expenditure such as repairs or rehab costs. Budgets will show you how long you will need to save up in order to be able to pay for this expenditure out of cash flow or how much you will need to finance in order to pay for this expenditure now.

Budgets are also helpful in comparing historical income and expenses to current income and expenses. If you have historically been paying $12,000 per year for insurance and now your premiums have jumped to $16,000; it is most likely time to shop your insurance with another provider.

Likewise, if your physical occupancy has remained the same but your income has decreased, you may have a property manager that is skimming off the top, the market may have dictated that you decrease your rental rate or you may have a high delinquency rate and need to do a better job screening potential tenants. Again, this is all information that your budget will help you analyze.

Recording your Accounting Manually vs. Using an Accounting Package

With today’s technology and the economical accounting packages that are available for small business owners, I would highly recommend that you use a computerized accounting system. A manual system not only makes it difficult to share information with other parties (your banker, accountant, broker) but it also can become a huge waste of time if there is ever a posting error and you have to re-calculate the numbers. Quicken, Peachtree and QuickBooks all work with spreadsheet programs such as Excel which will help make analysis and property tracking a lot simpler.

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Even in this strange economic climate, the fundamentals of the apartment market are solid. The national occupancy rate for apartments is in the low 90’s. Supply is still relatively low at 1% inventory overall. This means that, on a national basis, there is not a huge oversupply of units. Rental revenues continue to grow at 3-3.5%.

A lot of the positive trends you see in the apartment market are the opposite of what is happening in the home ownership market. People need a place to live and as people lose their homes to foreclosure, they are moving to the most obvious alternative which is apartment complexes.

The apartment market has also been strong for investors. The banks have continued to offer low interest rates and spreads.

Most investors feel comfortable investing in apartments so apartments have become the preferred product class for investment. Returns from alternative investments have not had as favorable returns on a national basis.

Also, the supply and demand of apartments is stable and therefore supports increasing rents and appreciation of value.

This is caused by:

• Development costs are expensive and sites are difficult to find
• With gas price and fuel costs increasing, construction costs are high
• In urban municipalities, it is difficult to get the density needed to give the investors economies of scale
• Because of the strength of the apartment market, investors have been willing to accept lower yields (cap rates), which has allowed prices to appreciate.

Historic Recessions in the Multifamily Market:

THE EARLY 80’S:

• Interest rates spiked to the high teens (15-19%)
• Properties with adjusted rates experienced foreclosure as investors felt the impact of negative cash flow

THE LATE 80’S:

• Congress changed depreciation rules
• Syndication investors were destroyed so there was a shortage of investment capital
• Savings and Loans went into default
• There was a high number of foreclosures and write-downs of loans

What Lies Ahead

As demand for apartment units increases, analysts are not sure the US apartment industry will be able to meet the demand. Land is scarce and construction costs are more expensive.

Development in urban areas, where demand is more reliable, is inherently more expensive. Complexes are leaning towards mid-rises or high-rises versus garden-style.

Current rents with density allowances do not justify the cost of developing more apartment units. This will cause absorption to increase and put more pressure on rents to increase. These factors should cause increased value of apartments in the long-term.

Because of the overall financial climate, as investors we will need to accept LTV’s in the 70-75% range. The valuation, marketing, and management phase will be more critical than ever for banks. Banks will be looking for greater liquidity of the sponsors and stronger global debt coverage ratios.

Overall, the fundamentals of the apartment market are stable or improving in most markets, thereby demonstrating that the apartment market is not going through a recession, but merely a recalibration.

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First, look at the complexity of the transaction. If you are issuing a standard Letter of Intent (LOI) it is unnecessary to incur the costs to engage an attorney. However, when you are getting ready to go to a purchase contract you should definitely engage a commercial real estate attorney, because it is critical that your contract covers all the stipulations of your due diligence and closing requirements.

Next, look at how much risk is associated with the transaction. On an apartment lease, it is unnecessary to have an attorney draw up each lease for each new tenant that you get. In this case, you can use a standard lease that is drawn up one time by the attorney. When you are negotiating a ten year lease with a national tenant, it is important to dot your “i’s” and cross your “t’s”, so an attorney needs to be involved.

If you are initiating a standardized procedure which will be utilized over multiple projects, it makes sense to invest the money one time. This way you know legally you have it properly documented. I have done this to standardize my leases, my Letters of Intent and my construction contracts.

If you feel that your negotiations are becoming emotional, a commercial real estate attorney needs to be involved. An attorney can make it more mutual between the parties involved because they are looking at each point with no emotions. This is not only helpful when trying to resolve a dispute but it is also helpful when negotiating a lease or purchase contract.

Last, when timing is critical and dead lines need to be met, an attorney can make sure a seller is staying on course. We have experienced this when a seller drags their feet and we need something from them in order to present to a zoning committee. The attorney can legally force them to get it done. They can also make sure that you do not lose a deal or your earnest money. If you miss a closing date but are working toward the closing, the attorney can buy you some time so that you get the deal closed.

How do Attorney help Commercial Real Estate Investors?

First and most important, they help identify, negotiate and manage the risk. This is why it is ideal to find not only a commercial real estate attorney but also one whom invests in commercial real estate.

The attorney will help you draft and negotiate the contract. You would not think about performing heart surgery without the proper education and experience, yet many students try to document their own commercial transactions without the proper experience and without using an attorney.

Usually it ends up costing them because they lose their earnest money deposit or they spend more on due diligence expenses because they did not write the contract correctly. Next, attorneys will look at the facts and the laws objectively. Since they are not emotionally involved, they are able to ask the right questions.

Last, utilizing a commercial real estate attorney takes the worry out of the transaction. You know that you have the proper documentation in place and that you are protected by the law.

How do you find the right Attorney?

In order to find a good commercial real estate attorney, look into their reputation, by checking not only with their clients but also with their peers. Find out what their business relationships have been like. Ask other investors for a referral or ask your banker, accountant and network groups.

Also, verify what their cost is so you are paying for the level of service that you need. Donald Trump’s attorney may be the best in the country but is doesn’t make sense to pay his fee for a $250,000 transaction.

When you are in a situation where you are considering using a commercial real estate attorney, always weigh the risks versus the rewards and make sure that you ALWAYS use a commercial real estate attorney.In the multifamily housing market, you will want to look for buildings in good locations, with convenient access to highways and drive-by traffic, and which have a good unit size, mix and density of units. If by performing some deferred maintenance and improved curb appeal you can increase the amount of rental income, either increasing rents or decreasing vacancy, you will immediately have added value to the property and therefore increased your return on your investment.

You can easily pick up some value in this market as some investors overpaid and over-leveraged their properties and therefore were unable to perform routine maintenance since they did not have the cash flow. We can come in as investors and buy them out or buy them from the lending institutions, perform the needed maintenance and tenant up the property to bring the value up to a performing level.

No matter what your preferred property type, location is always the key when choosing a property to Renovate, Redevelop and Reposition. In the warehouse and office market you may find properties that have ideal locations but are functionally obsolescent. By performing a complete tear down or adding in new features such as wireless internet, the viability and marketability of the building can be significantly improved.

This is still a good time to invest in commercial real estate, you just have to use the strategies taught to you at the Commercial Property Academy to be sure you are not overpaying and that you have evaluated the viability of the property you are buying.

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Although the initial purchase and financial support of the non-performing property can be scary during the lease-up phase, upon repositioning, the returns can be very rewarding either through cash flow or refinance.
The hold period of these assets can be a critical component to your investment strategy.

Some investors make minimal improvements and then place the asset immediately back on the market looking for the immediate yet often smaller return on their investment. Others plan to hold the asset long-term until the property has maximized its optimal market value. In this case, the investor either then sells the property or refinances, pulling out any available equity for investments in other projects.

In the retail market, often investors are able to change the facade of the property, change the tenant mix and reposition a non-performing property into a highly lucrative investment.

This has been the strategy of NY-based Coventry Real Estate Advisors and OH-based Developers Diversified Realty. They look for retail properties where the mall format isn’t efficient. They look for tenants that can offer convenience and competitively priced products and services.

By changing the tenant mix they have changed the target market and have turned non- or underperforming mall properties into successful, high-valued retail centers by attracting more high-quality tenants who will add increased viability over the previous mall tenants.

In the multifamily housing market, you will want to look for buildings in good locations, with convenient access to highways and drive-by traffic, and which have a good unit size, mix and density of units. If by performing some deferred maintenance and improved curb appeal you can increase the amount of rental income, either increasing rents or decreasing vacancy, you will immediately have added value to the property and therefore increased your return on your investment.

You can easily pick up some value in this market as some investors overpaid and over-leveraged their properties and therefore were unable to perform routine maintenance since they did not have the cash flow. We can come in as investors and buy them out or buy them from the lending institutions, perform the needed maintenance and tenant up the property to bring the value up to a performing level.

No matter what your preferred property type, location is always the key when choosing a property to Renovate, Redevelop and Reposition. In the warehouse and office market you may find properties that have ideal locations but are functionally obsolescent.

By performing a complete tear down or adding in new features such as wireless internet, the viability and marketability of the building can be significantly improved.

This is still a good time to invest in commercial real estate, you just have to use the strategies taught to you at the Commercial Property Academy to be sure you are not overpaying and that you have evaluated the viability of the property you are buying.

Want to learn more? Go Here: http://www.commercialacademy.com

Under maintained

Properties that have been poorly maintained offer us a tremendous opportunity in the current economic climate.  In this scenario we try to focus on strong locations and properties that will need primarily cosmetic and perhaps utility upgrades.  We will usually want to avoid properties with major structural problems unless we intend to demolish them all together.  This is a guideline however not a hard and fast rule.  When we improve the utility, and the cosmetic appearance of a property, we change its perception with in the marketplace.  Once we have changed public perception, we can reposition the property and re-tenant with higher quality tenants and improved rental rates.  These changes will bring substantial value and cash flow to the project.  It is however essential that before we invest in these changes that we verify that there is demand within the marketplace.

Under managed

Properties that suffer from poor management will usually have elements of many of the categories (Under maintained, under performing, under utilized and under marketed)  Properties that are under managed will also frequently contain substandard tenants, either with respect to credit worthiness or if dealing in retail a poor tenant mix.  Keep in mind that under-managed properties will also come with a much less reliable historic operating statement.  It is therefore critically important that your due diligence take on a much higher level of scrutiny.

We will be able to  make gains in many areas with respect to turning a poorly managed property around. These properties can be some of the easiest to turn and the biggest profit makers.  A word of caution.  Many properties in rough areas suffer from poor management.  Keep in mind that in crime ridden areas the existence of poor management may be a related condition caused by the challenges that simply could not be overcome.  If you feel you have the skills to handle this type of investment challenge then you can be well paid for doing so, and if you get good at it, there is no shortage of opportunities, however remember that if you are not successful you may be stuck with the property for a very long time.

Under marketed

Properties which are under marketed will have vacancy of course, but may also have a less than ideal tenant mix.  Marketing of a property is very specific skill that requires patience, salesmanship, persistence, and a clear understanding of your target market.  No single talent is more important to turning a property around than successful marketing.  When done properly you will experience the quickest gains in appreciation, cash flow and overall property value through you sustained marketing gains.

If you will hone your skills at identifying these types of opportunities and apply the specific principles necessary for creating success with them while communicating with your platinum coaching representative, you will find success and huge profits are more a matter of follow through and the consistent action of proper evaluation than any other single element.

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Under Valued

Undervalued property is typically made up of properties that have fallen out of investor favor.  These types of properties tend to fall into this category on a cyclical basis due to changes in the capital and investment markets.  They become undervalued often times due to the lack of availability of favorable financing terms.  

In today’s market an example of under valued properties would be condominiums or condominium conversions, specifically in the areas of South Florida, Las Vegas, or the Carolinas where many developers were counting on a lot of movement from second home buyers.  Mislead initially brisk sales, aggressive developers and lenders contributed to overbuilding in these markets.

This happened because the sales of units where largely to investors looking to profit by reselling, not from the actual end user. As a result many of the investors find themselves in the very undesirable position of facing the choices of continuing to watch rapidly declining values while waiting for a market recovery that is not coming any time soon, selling at a loss to stop the bleeding, having the lender call the loan, owning unfinished units or worst of all owning within projects that have never broken ground and likely never will.

We will profit by being there to pick up the pieces when the lenders come to terms with their poor investment decisions and realize that the must take the loss and get on with the business of lending money, not managing properties or developments.  We can also profit when the investor gets tired of the red ink, and gives up on the property or at least on the idea that they have any true equity in the project.

There are many other under valued market segments beside the example sited above.  Under valuing is not simply a property type issue either.  It could be based on geographic concerns, physical composition or usage limitations, or many other factors, but those are for another discussion

Under Utilized

This type of investment gains its value added elements by having an inferior use.  We are talking about the principle of “highest and best use”.  Highest and best use is a concept very common in the commercial real estate world. Highest and best use attempts to evaluate which type structure would serve the current market needs the best.  An example of this could be demonstrated by looking at the history of a piece of raw undeveloped land.

Let’s establish that a particular parcel was used for agriculture in early 1900’s, as time moved forward by the 1960’s the parcel became desirable by the local municipal government for the construction of a roadway project.  This caused a subdivision of the property.  Upon subdividing the parcel, a corner location became ideal for a grocery market and shops for merchants.  As moving forward as we moved to present day, the shops become less valuable because many super stores and category killers such as Lowes or Home Depot have moved into the area chasing the shop keepers out of business and the local grocer folded under competition of the super market that offered a wider variety, and better pricing due to greater volume of merchandise sales.

Today a new developer is looking to put a gas station, convenience mart, and car wash on this well traveled corner currently occupied mostly vacant shops with to little selection and inadequate parking.  The developer is attempting to capitalize on the change of use to meet the demands of the current market area.

Under Performing

Under performing properties are traditionally suffering from significant vacancy.  When a property is experiencing substantial vacancy, its value declines because it is not generating the income necessary to reach its market potential.  The reasons for the vacancy can vary widely.

Some of the many reasons will be correctable, such as inappropriate rental rates or unfavorable leases for the marketplace, while others will not be easily corrected for example, an inferior location, or an obsolete building layout just to name a few.  A proper evaluation of the factors contributing to the lack of performance is essential before moving forward with an investment decision.  This type of opportunity gains its potential in direct relation to our ability and skills in restoring performance to the occupancy and rent roll. (To be Continued…)

This is the lead principle that has driven my success in this industry while I have watched thousands come and go.  Some came for quick profits and left when they thought the markets had changed and moved on to other investments, but most took a beating because they always looked to external forces to generate their returns.  When things shifted, as they always will, they got trapped in unprofitable deals that were over valued and over leveraged.

The billions of dollars that is about to be lost in the real estate markets over the course of the next 18 to 24 months will cause unrecoverable damage to many investors, financiers and lending institutions.  Some know this is coming, but most are blind to the reality that we are in the eye of the storm.  Temporary rate cuts by the Federal Reserve are on the way and they will continue for a period of time, but this is a band-aid on a severed limb, too little, too late.  The bleeding has begun and for many this will be fatal.

Now before you think I am all doom and gloom, I want you to understand that nothing could be further from the truth.  We are a tremendously resilient nation and our creativity and work ethic are second to none no matter what you may be reading or seeing on your television.

As Creative Commercial real estate investors, we are one of the primary groups that will be there to take the mess and turn it around by creating opportunity, Jobs, bringing stability, rebuilding confidence and in the process gaining tremendous wealth for ourselves and those we work with. We will do this just like we did after the Energy Crisis in the 1970’s, the Savings and Loan implosion of the 1980’s, the Internet Tech Bubble of the 1990’s, the devastation of the terror attacks of 9/11 or what will come after this real estate and currency crisis

You see, I believe in taking charge and making things come together.  This puts the responsibility for success or failure squarely on our shoulders.  While many may fear this business model, if you will stare down your initial fears without blinking, you will be handsomely rewarded with the confidence of knowing that no matter what you face, you can handle the challenge, create the wealth and freedom you deserve while others are hitting the panic button or being swept away with the tide of the storm.

Forcing appreciation is just that, taking charge of what is in front of you and making positive results occur through our direct intervention.  To explain, FORCING APPRECIATION is the concept of identifying a property or a piece of land that is at present in one of seven categories that allow us to cause an immediate change in value to occur.

When we identify which of the Seven Categories the potential investment property we are evaluating falls into we can choose specific tools and strategies that will allow us to succeed when others are failing.

We will break down each of these strategies on an individual basis so we can begin to identify what it will take to pursue each strategy.  (To Be Continued…)

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The first thing you must do is get mentally prepared to win. You must visualize the success you want out of the negotiations.

Next, make sure you do your research. The last thing you want to happen is for you to lose your edge because you don’t have the facts to back up the terms you are working towards.

Always remain positive about the path you are looking to take. Negotiations are a little like playing poker. You have to let the other party think that you are holding five aces or a royal flush.

1. Communication is the key. Make sure you present a clear argument that is logical and easy to back up with facts and supporting documents or information. This is why we suggest that you show your opportunity evaluator to both the bank and the seller. You are showing seller why you are only willing to pay a certain price. In the case of the bank, you are showing them where the property can perform with just a few minor changes to the management.

2. Make sure you stay true to your beliefs but still present it in a polite and diplomatic matter. No seller wants to be disrespected. They will choose not to sell you the property out of principal even if you can negotiate the price.

3. Make sure you show the pros and cons of each point. You can be clear in your mind about the outcome you desire as long as you understand the need to compromise. There really is such a thing as a “win-win” situation.

4. Remain open minded through out the whole process. If the person you are negotiating with feels that you are only concerned with the issues that affect you and not them, they will not be inclined to give a little on their issues.

5. Look for a clear and permanent solution. Temporary solutions or delaying some points of the negotiations until later will not help you come to resolution. This will only draw out the deal for a longer period of time. Eventually you will have to come to a resolution. I have found the longer the time period the less chance the resolution turns out the way you wanted it to.

6. Make sure that you keep the negotiations focused on the issues and not the people involved. If you allow emotions to get involved in the negotiations then you are bound for failure. Focusing on emotions will lead you off track and will take your mind off the matte at hand. The goal is to come to an amiable solution not to prove who is right and who is wrong.

7. Never use force, threats, manipulation, deception or extortion. Using these tactics is completely unethical and will come back to bite you in the future.

8. Make sure you respect everyone’s time and schedule. If you commit to a time period in the negotiations then you need to work diligently to meet that commitment. Agreeing to points that you know you can not meet does nothing but hurt your credibility. As soon as you realize you can not meet a commitment you need to let the other parties know and also let them know what you need in order so that you can meet the commitment. Credibility will go a long way in your negotiation process.

9. Make sure that you aim for the outcome you want as a whole. It doesn’t matter how many battles you have won if you lose the war. Same goes for negotiations.

10. You must always know when to push your issues, when to compromise and when to walk away. Know which points you are willing to negotiate on and which are deal breakers before you go into the negotiations. This way you will know when to walk away without wasting your time.

Remember that negotiating starts in humans at a very early age. As babies you negotiate for a bottle and to be changed and held. As teenagers we negotiate for the use of the car, to stay out past curfew and for spending cash. Either sub-consciously or consciously we do what we can to get what we want in life. If you really look at it, all of our lives are about negotiating.