Why Clout is Important in Multifamily Investing
Clout, which is another fancy term for “influence,” is crucial to your success as a multifamily syndicator. It’s only a matter of using your clout appropriately to achieve your goals.
In my many years as a multifamily real estate investor, I can tell you that having great clout can bring a lot of opportunities to the table. Negotiations can be skewed towards your favor when you use your influence effectively. Allow me to share an experience I have had with a recent acquisition.
Clout at work
I was set to close a 267-unit apartment complex in Atlanta, with a price tag of $37,500 per unit. Thinking that I got a great deal, I planned for a $900,000 for the repair allowance in the underwriting. Then again, during the due diligence period, the seller was offered a higher amount by another buyer, at least $1.4 million more than what I had under contract. Obviously, this gave the seller a reason to back out of our arrangement.
Not wanting to let this deal evaporate before my eyes, I had consulted my attorney in Georgia and found out that I could tie up the property and prevent it from being sold within a five-year period as I had given $50,000 non-refundable money at signing the contract of purchase. And it had been cashed. It would have been the case of non-performance on the part of the seller.
In the middle of the due diligence period, I asked the seller if I could get a bigger discount since the property was rundown contrary to my earlier estimations. Eventually, we were able to obtain $450,000 in repair credit at closing. The seller was reluctant at first and it came to a point that an amendment was put into effect to increase the price of the property. The same thing happened: I stood my ground and told my broker that I needed the $450,000 to reposition the property.
At the end of the day, the seller gave in and agreed to close the deal fair and square.
So, you see, when it comes to acquiring multi-million properties, it’s wiser to stick to your guns rather than to hold back. To my mind, there’s always an opportunity to leverage a deal. With greater clout, it’s very much possible to steer a negotiation to your favor.
But how exactly can you build your clout?
1. Nurture your network
Don’t just make relationships for the sake of growing your social circle. Remember that relationships provide value to you and to others within your network. Whenever possible, engage people who are interested in your line of work. You will also need to build relationships with thought leaders. These are people who have a lot of knowledge about the world of multifamily apartment investing and they are also great sources of ideas which you can use to bolster your branding.
2. Grow your knowledge
When you learn more about acquiring a multifamily investment property, you begin to see the systems more clearly. You will be able to learn new negotiation techniques and navigate your way out of a potentially bad deal. Gaining more knowledge doesn’t need a lot of explaining, but people have different views from where to get such knowledge. In my case, I make it a habit to read daily and weekly news articles, publications, listen to interviews of top economic and commercial RE podcasts and read new books on real estate investing. That way, I get to uncover real-life experiences from real-life people; experiences which I can apply in multifamily property investing.
3. Hone your communication skills
Communication has to be the most important element in a real estate negotiation. It also goes without saying that being a great communicator provides you with even larger space to grow your clout. If you think you lack the verbal skills of a seasoned real estate investor, there’s always an opportunity for you to sharpen your abilities. It comes with practice and a dash of courage and confidence. Take it from someone who came from India with just $7 in his pocket and who had to struggle with the language barrier.
People could not understand me but my smile has won them over. It was difficult to muster the needed confidence and courage at first, but my thirst for knowledge enabled me to improve my speaking skills. I still have an accent whenever I talk to property managers and even to students at my Multifamily Investing Academy.
Nonetheless, I have gotten a lot better and I am able to share my insights clearly. This has allowed me to grow my clout as a result. So, on that note, it’s actually a great idea to join local a Toast Master Group in your town to learn new and effective communication skills. I did for 3 years and it has paid off very well.
Just remember to be persistent and open to new knowledge. It takes time, but you’ll get there eventually. You just need to motivate yourself continuously until you are able to enhance your clout.