Written by | Justin Sledd
Some commercial listings need to be marketed as plans and not just as properties. Take, for instance, the six-unit apartment building we sold for a group formed in the pre-2008 housing boom, that suddenly found its investment heading in the wrong direction (the dreaded negative cash flow). They’re just one of many and we’ve certainly figured out how to fix these.
The building had a few things going for it, including a good location with off-street parking. But it also had a bad roof and other structural issues stemming from deferred maintenance, along with low rental rates, lousy curb appeal and (not surprisingly) disgruntled tenants. To make matters worse, the existing mortgage was larger than an appropriate price tag for the property.
Some commercial real estate firms would shy (if not run) away from these types of listings; but we see them as opportunities—a chance to prove your expertise and abilities. It’s really a matter of knowing how to put together and market a turn-around plan for the investment—one that addresses construction needs, while shielding the seller from those costs and showing a way to immediate and sustainable cash flow for potential buyers.
So we went to work—first by adding the property to systems like the commercial MLS, LoopNet and Co-Star, but also by blasting out flyers to key members of the commercial real estate community, trying to get them to the table to discuss our ideas. That drummed up plenty of interest and even numerous showings, but no offers. So we drew on our connections by hitting the phones, until we finally drummed up the right investor who saw our vision. But that was just the beginning.
When physical inspections came up, our plan had to take on a little more detail. With this new information in hand, we had to illustrate where the price needed to be in order for the deal to pan out for both parties. It took two weeks of negotiations, but ultimately the sellers were able to net enough to move on with their lives, while the purchasers were able to follow through on a solid investment. And because we illustrated that we know how to make things work, that new investor has turned to us time and time again. That’s a good feeling.