Go to tertiary market Find a product type that’s profitable to build Check zoning code and figure out the zoning that allows for that product type Reach out to every property zoned for that use but currently operating as a different use Buy, profit // THREAD // (View Tweet)
This takes the “off-market property” strategy one step further The issue with most off-market strategies is that the owner actually has some idea of the value of the property For example, most owners know approximately what a multifamily property should be worth in the area (View Tweet)
That’s because of three reasons They can base the value off the in-place cashflow They can base the value off comps (and there’s always a ton of multifamily comps) They can call up a broker to tell them what the value should be (and the broker will actually know) (View Tweet)
This isn’t to say you can’t get multifamily properties for a discount off-market (you absolutely can) Just that it’s harder to get a steep discount on them because the market for them is so transparent (View Tweet)
The brilliance of the strategy above, however, is that the market becomes a black hole when you switch allowed zoning uses (ex from industrial to self storage) It works so well because the owner legitimately has no idea what the value of their land should be once you change uses (View Tweet)
The valuation methods used above no longer work The owner can’t base the new value off the in-place cashflow because the cashflow obviously changes when you change uses There are barely any comps for switching uses and the ones that exist are almost impossible to look up (View Tweet)
Anyone can look up a multi sale, how many unsophisticated owners can look at sales in their market and ascertain which properties have switched uses? My guess is literally zero Brokers (especially in tertiary markets) have no clue how to value a property when you switch uses (View Tweet)
so the off-market seller can’t even go to them for advice For example, a property I prospected off-market is currently operating as 3,000 SF owner-occupied industrial facility But it sits on 10 acres and can accommodate ~200k SF of self-storage. The owner had no idea (View Tweet)
I don’t reveal to the owner what I’d be building So, in order to value the property correctly, a broker needs to understand storage is the highest and best use, know exactly how much SF can be built, know how much it’ll cost to build and know what market rate and new NOI will be (View Tweet)
I know for a fact zero brokers in my market are capable of that analysis So the off-market owner has no one he can turn to to provide him a correct valuation for the property This means he’s shooting completely in the dark, which means more profit for you (View Tweet)
The hit rate on off-market deals is obviously incredibly low but when you hit on an off-market deal with a changing use, you can pick it up for a very steep discount Often a 50%+ discount because the owner truly has no idea about the actual value (View Tweet)
Very manual process, but when you hit big on a deal like this, you hit really big These are the deals that can retire you early Hit on just 3-5 of these deals in your entire life & you’ll be sitting on a beach drinking mojitos wondering what to do with all your money (View Tweet)
To learn more acquisition strategies like this, join the Real Estate God University https://t.co/Q73ZMOghit (View Tweet)