Ch. 4 Principles of Investment RE Brokerage Flashcards
What is the Broker Competency Model?
The third party consultants interviewing the top 5% of our most accomplished M&M agents to identify the characteristics and personal attributes that make them successful
What are the 4 most important aspects of the Broker Competency Model?
- The Incentive: Maximized Sales Opportunities and Results: Tenacious about Sales Goals. Defines a strategy for specializing, sets goals and consistently employs them. Accurately identifies unlikely or high risk sales situations and avoids or minimizes the time spent on them.
- The Interaction: Maximizes Relationships: Builds Influential Relationships. Manages Relationships Effectively. Understands when to persist and when to let go of an option, recommendation or strategy.
- The Approach: Maximizes Time and Impact: Works efficiently, manages time/energy. Creates time saving business systems. Uses teamwork for greater efficiency. Effectively probes and addresses clients needs.
- The Attributes: Is Perceptive, Energetic, Self-Motivated. Perceptively Balances Analysis and Intuition. Energetic, Enthusiastic, Self-Motivated. Faces the Facts about individual performance.
What is the M&M Brokerage Continuum?
The complete steps of how we should effectively run our business, from start to finish.
What are the steps of the Brokerage Continuum?
- Research
- Business Development Calls
- 1st Appointment
- 2nd Appointment
- Exclusive Listing
- Marketing
- Field of Offers
- Contract
- Due Diligence
- Remove Contingencies
- Closing
- Post Closing
What do agents need to know to effectively navigate the Brokerage Continuum?
- Why private parties Buy, Own, Continue to Operate and Sell Investment Real Estate.
- Current and Historical Economic Drivers in Local Markets. Rent Comps, Sales Comps, On Market Comps, Financing/Underwriting.
- How to Build and Use Complete Ownership Records and Segment Your Database. Tier 1: Institutions, Tier 2: Professionals, Tier 3: Mom & Pops.
- How to Ask Targeted Questions to Uncover, Clarify, Develop Needs: Implied Needs: Stated point of dissatisfaction, Explicit Needs: Client is willing to incur a cost or to alleviate.
Why do private parties: BUY
- Passive Cash Flow
- Make a Percentage Return
- Appreciation
- Add Value/Upside
- Tax Shelter- Write Offs/Depreciation
- Advantages of Using Other People’s Money
- Stable Investment (more so than stocks)
- Greater Return than Bonds
- More Passive than Other Businesses
- To Reposition
- Ancillary Feed (Development, Management)
- To Rehab
- To Use
- To Park Money
- Wholesale/Retail
16: Pay Down Principal
17: Wealth Preservation
18: Hedge Against Inflation
Why do private parties: HOLD
- Believe Values Will Keep rising- waiting for peak
- Earn management fees by holding the property
- Enjoyment/Something to Do
- Not enough equity to sell
- Nothing wrong
- Rents are low
- Easy to manage
- Bad selling or broker experience in past
- Property is debt free
- Low tax basis- don’t want to pay capital gains
- Great cash flow
- Don’t want the imposition or cost of selling
- Wants to refinance to acquire more
- Thinks it’s in the best interest of estate
- “No good deals out there”
- Emotional attachment to building (owner vs investor)
- They live in it
- Bad loan on property (prepayment penalties etc.)
Why do private parties: SELL
- Problem
- Price
- Change
- Opportunity.
Why do private parties SELL because of Problems:
- Management
- Cant fill vacancy
- Estate Issues
- Lack of Returns
- Building Deterioration
- Change in Market Conditions
- Low Depreciation
- Balance Portfolio
- To boost stability of income
- Need to pay down debt on other properties
- Property Management is too much stress
- Insurance/Rising expenses
- Health Reasons
- Divorce
- Partnership Problems
- Debt Balloon
- Demographic Shift in Neighborhood
- Stability of Income
- Growth of Income
- Functionally Obsolete
Why do private parties SELL because of OPPORTUNITY?
- Need money for another opportunity
- Re Leverage
- 1031 for growth
- Has repositioned
Why do private parties sell because: PROFIT?
Gets an Offer too GOOD to turn down
Why do private parties sell because of: CHANGE?
- Estate Planning
- Moving
- Consolidate Holdings
- Reposition to different type of Real Estate
Why do private parties sell because of: CHANGE?
- Estate Planning
- Moving
- Consolidate Holdings
- Reposition to Different Types of Real Estate
Why do Different Buyers Pay Different Prices for the Same piece of Real Estate?
- Different Underwriting
- Different sources/costs of equity or debt
- Different sources of income (fees)
- Different attitudes about risk/reward
- Different yield expectations
- Different goals and timeframes
- Different strategies
- Different degree of sophistication
- Different past experiences/future expectations
What are the advantages to working the List Side?
- Helps new agents learn about market
- Agents learn how to underwrite properly
- Create loyal client relationships- Rapport, Credibility, Trust
- Learn to represent third party investors
- Access to More and Better information
- Control over the Flow of Information
- Higher probability approach to closing deals
What are the advantages of working the BUY SIDE?
- No control ~ How to get control?
- Order taking vs. Advising
- Transactional vs. Relationship Based
- Client Cares about low costs/quick delivery vs highest level of service
- Functionary- Not a Facilitator
- You are Only as Good as the Deal
- Do a reverse second proposal
Should you work with one buyer and show them many deals or work on one deal with many buyers?
Typically better off finding what you believe to be high probability exclusive listing and targeting a specific buyer profile.
Not every buyer is worth your time to work with. In fact, the cast majority of people inquiring about deals will not buy anything for years. Spending days or weeks with a buyer who will never perform can destroy your career as a broker.
You need to be adept at assessing whether a buyer is serious about purchasing something.
What are effective ways to work deals?
- Pick a Deal and Working it
- Talk to the listing agent
- Target likely buyers
