First offer in 18 months

[grossreal]

hi dazzling
keep you head up
they don't all come thru
with your skill and you know what you want you will find it.
I must admit on these types of deals when they don't come thru they are a real kick in the teeth and you try to see what or how the deal went wrong.
I find its best to move to the next very quickly but thats me.
look on the other side of the coin thou and when the do there are alot more satifying that does wain as the project goes thru and you want to try again for the next one.
its the way we are.
si ya

 

[Dazz]

Hmmm....lessons, yes I think there are a few.

The successful bidder just went to the open market and raised 100M, so to plonk down 11M cash was a drop in the bucket for them. My Banker told me that after helping them raise the funds.....hmmmm....not happy Jan. Pretty peeved off continually getting donked on the head by larger players in the market....especially when they simply go and ask 100 or 1,000 other people to chip in and help them. Paddling the canoe on your own going up against them feels nigh on hopeless. Perhaps there is a lesson right there ??

Instead of pushing the limit with these bigger fish, perhaps we should just be looking for props half the size, and simply come over the top of all of the bidders and knock them on the head. Dunno. Our philosophy has always been to extend ourselves to our limit every time we go. Leverage and all that. The theory was that as you get up into the good stuff, hopefully the competition thins out and you get to deal one on one with the Vendor. We are finding there are just as many hungry investors at the 10M purchase price as there are at the 1M and 100K level. That doesn't quite make sense to us, but it's true.

The wife bought a bottle of bubbly in anticipation of a celebration.....it tasted bitter sweet as we licked our wounds (nothing stops us from indulging in champers).

Very difficult to compete with large companies who intrinsically value the place more - especially if they are neighbours and can simply smash down the fence and spread their operation out. Maybe we should be targeting the neighbours of our existing industrial props ??

In terms of getting closer, I think their might be some merit in approaching the Vendors directly, to chop out all of this advertising and nonsense with agents playing their little secretive games. Just two men talking, shaking hands and agreeing terms and conditions - one willing to sell and one willing to buy.....nobody else is required.

OK, better go back to work.

I'm finding I'm too busy at work to concentrate on making real money. It's very frustrating.

 

[Pete]

Some good ideas, there. And interesting that there are still lots of buyers in the bigger markets ATM.

This might be silly, but anyway. What if you went to the neighbours early on and said you were a property investor and would be interested in buying the place and renting it to them? They can concentrate on their business and not tie up capital with property.

 

[Dazz]

What if you went to the neighbours early on and said you were a property investor and would be interested in buying the place and renting it to them? They can concentrate on their business and not tie up capital with property.

Yes Pete - that was our main tactic with this one....but it can backfire royally.

It can backfire when the owner is absent (overseas or interstate) and doesn't know it's for sale in the first place. This happened with us with our second one. The neighbour was desparate to buy it, owning both blocks either side, and desparately wanted to link up the three sites....but didn't know it was for sale. No sign out front, no newspaper adds...just internet listing. Being 75 years old, he was never going to find out. When the Vendor told him he had sold it to us for 780K, he said to the Vendor "I would have paid you 900K cash on the nose"....

We started haggling about conditions after the Vendor signed it, and he tried to back out of the deal so he could sell to his neighbour....so there went our leverage on that one....he left 80 tonnes of rubbish and we were left with having to pick it all up, but for 120K it was well paid work.

So naturally I approached the 75 yr old neighbour and asked if he wanted to rent it, happy for him to pull down the fences and link up all 3 sites and consolidate his business. His only reply was "stick it up your ****, I never rent". So to this day he conducts his business disjointedly, having to go around our property - which has subsequently been leased out for 15 years....so he missed his one and only opportunity big time.


I agree in principle that companies definitely don't like tying up capital on properties when they can get a far better return on their business endeavours.....but as i said before, some of the grumpy old men I compete against won't have a bar of renting.

 

[gooram]

I'd be interested to know where the site was if you care to divulge this info Dazzling?

 

[grossreal]

hi dazzling
there is another way of doing it.
just like the others do
put a group of investors together and then buy the site
if the numbers add up then finding investors is not that difficult it just depends where you look.
it does require very different mind set.
instead of me saying what can I invest in.
I say whats the return and work thru the figures until I get to what its costings at this value
and then if I need assistance I give a return
if then while the project is going thru its process and I need less the some fall off as I don't need as much.
It is good to see you in this market but you will at some stage need this assistance or you will always find those sites that you can't fund ( or you think you can't fund).
interesting that your banker was funding the other side I find this in alot of deals hense I send to lots of bankers so they don't know your game plan.
the idea of the oppositon is to keep all other players close to them
so they know what you are doing but they don't tell you what they are doing.
its chess and a very interesting game at that.
for me the best way is to use a real estate that you organise to negotiate the deal and mandate them and in the mandate they get paid by the vendor, the person you want the best deal from ( great).

next thing you need to do is put up a commercial deposit.
last one was 10k but could be 25k and get the vendor to accept that this is a commercial contract to purchase the property at a value.
get that and you are set.
why
if they back down on the terms that you agreed you hit them for break of a commercial contract( big bickies) as soon as you smell the other group comming in send in a letter from your barrister saying the costs of breaking the commercial contract mine was 17mil (the vendor has a heart attack and comes back to talking to you and only you)( it does get them moving mine was about 20min from the email sent)( even if your barrister says its got no legs it get them back on track).
document everything phone calls,emails,and time line them.
if the vendor does stay on track send it to them and say this is there copy so if and when we go to court they have a copy.
in the end they use there solicitor to finalise the deal.
if you get to this stage you are home and hosed and no matter who turns up at the door they are not taking you out.
use all the tools in your tool box and if your missing a few.
maybe time to add a few.
I know you can play hardball you just need to let go of the reins a little and get a few people over there that can put these deals together.
price is not an issue in these deals( its secondary) its who and what can work with the vendors.
it like shelling a pearl all people can do it
its just some are good at finding them and shelling correctly.
I'm no good at pearling not sure if I'm good at dealing
just trying.
my.002

 

[JIT]

grossreal,

When you put up a commercial deposit and sign a commercial contract, what price do you put on the contract?

Do you literally mean, you say you will 'purchase the property at a value' and not specify the actual value??

Is this in order to force the vendor to negotiate with you only, not other interested parties, until the point you both agree on a price, and exact terms???

I might be way off track here...

If this is so, why would the vendor agree to doing this and 'lock' himself into dealing with you only???

Or, do you sign this commerical contract after you have agreed on a price and terms...but then, isn't the deal all done and finished, subject to further due diligence?

Or, do you initially agree to a price/terms, then do the due diligence, then negotiate down the price and change the terms???

Bit confused here, please clarify...

GSJ

 

[grossreal]

hi gsp
once you have negotiated a deal usually under commercial law the deal is done thats not the case with real estate so people think so I take it back to a commercial deal.
once a commercial deposit is in place then by default a commercial contract has been entered into and you send an email to say the same so nobody can say they didn't know.
this deposit comes in after a deal is done the trouble is that when dealing in these numbers the sharks start swimming around and its not unusual to get a call saying I have this offer can you beat it.if you go 200k more you can buy it.
similar to a dutch auction and thats the last thing you want.
with regards to
Or, do you initially agree to a price/terms, then do the due diligence, then negotiate down the price and change the terms.
I continue to change the deal in my favour until I put the deposit down and is a couple of cases
when I put the deposit down
so I am putting this down if you will do this.
you need to get the vendor in your corner keep him there get him to do the deal you want
keep everyone else well away and shake hands and do the deal.
you specify a value very low if need be and work up from there once you have a deal then the deposit comes into play and the mind games start.

 

[JIT]

Negotiation

Yep, I think I follow what you're saying.

Agree on a deal with certain price/terms. Put down a commercial deposit and hence commercial contract. Tie up the deal and make the vendor deal here on in with you and you only. If other buyers start making offers, then tell the vendor he may be breaching a commercial contract, that could cost him a lot in legal fees. The point here is to bring him back to the negotiating table, with you only. Then continue further due diligence and negotiations to bring the deal to the outcome you want.

Great stuff. Like going into a boxing ring!

GSJ

 

[redwing]

Anyone in Perth have an idea whats happening with the IKEA site after they move opposite INALOO shops..thats one BIG site

 

[grossreal]

hi gsp
very similar and a very good example as it is just like a boxing ring