The Best Way To Find Property Development Deals. Hello everyone, I hope you are well. In today’s post, I will be sharing a guest post from property development expert Ritchie Clapson CEng MIStructE of propertyCEO. Ritchie will be sharing the best way to find property development deals. One of the most important jobs for any developer, whether they’re new or experienced, is finding a property or piece of land to develop in the first place. There are quite a few places you could be looking. But which is the most effective, and how can you ensure you’ll find the best deals?
The Best Way To Find Property Development Deals
Finding the right property or land to develop is the most critical task for any property developer. With the by-to-let model becoming a less attractive route to profits, many landlords are looking to switch to small-scale property development. Being new to the sector could mean not being sure where to look for development opportunities. Places like auction houses, property listings, direct-to-vendor, and commercial estate agents should all be on your list; you can find fantastic deals using any of these sources. But which approach would be the best way of bagging a profitable project?
The Armchair Approach
Many new developers choose, perhaps unsurprisingly, to adopt the armchair approach. After all, all this internet-age stuff means we don’t need to leave the comfort of our living rooms to find property deals. We can sit comfortably at home in our pyjamas, poring over the delights of the various commercial property web portals.
And if we register our details and set up a few searches, then every new property hitting the market that meets our selected criteria will automatically hit our inbox. How good is that? Maybe this deal-finding malarkey is a lot easier than you thought it was.
But, as you might expect, this logic has a flaw. Yes, it is possible to find some cracking deals using online portals. But the problem is, this is where lots of other new would-be developers will also be looking for deals. There’s an army of pyjama-clad sofa-surfers trawling Rightmove Commercial, looking for their first development deal.
And if you’re one of them, you’ll have a lot of competition. But here’s a fact that many of your competitors won’t know:
- The best deals never make it onto the internet.
They stay firmly ‘off-market’, and if you visit glued to your laptop screen, you’re not going to get a whiff of any of them.
Now, in this context, when I say off-market, I don’t mean that these properties aren’t for sale, nor that commercial agents aren’t involved – quite the opposite. Commercial estate agents are hands-down the best source of opportunities for developers.
Still, you’ll need to intercept these opportunities after the agent has secured them before they advertise them to all and sundry. But hold on, those same agents will be putting their properties on the internet, so won’t I get an alert in my inbox? In many instances, the answer will be ‘no’. Let me explain why.
The Default Way
This is the default way for an agent to sell a property (commercial or residential):
- A client is secured, and instruction is taken.
- Someone from the office visits the site, measuring up and taking photos.
- This information is used to create a pdf document.
- This pdf is emailed to the agent’s database; the information is added to the agent’s website and to the property portals to find a buyer.
The goal is to draw interest from a large number of potential buyers. Perhaps a couple will decide to make an offer, one of which (after some negotiation) will eventually be accepted, and things will then proceed to the next stage.
The problem with this process is that while it works, it’s pretty labour-intensive, plus it can take a while to come off. From the agent’s perspective, a more attractive approach is a little different. Instead of mobilising Ashley, they’ll rummage through their little black book and dig out the phone numbers of a handful of ‘hot buyers’ that they know will be interested in the property.
The conversation will go something like this;
“I’ve just taken on an instruction that might be right up your street. We’ve not yet put it on the market. If interested, I could meet you later today to look around. At this stage, I’m only talking to a handful of my best buyers – what do you think? Would you be interested?”
You can see how this might work for both the agent and the vendor. There’s no measuring up or taking photos and no marketing other than a handful of phone calls. Only a few viewings are carried out within twenty-four hours, involving people the agent knows are likely to be interested in buying the property. And if they sell it, the agent gets their commission more quickly and incurs fewer costs, plus the vendor gets a reasonable price and a quick sale.
The Hot Buyers
Of course, if they don’t sell the property, it ends up on the portals as fodder for those hordes of pyjama-clad newbies. In other words, if you’re looking exclusively online, you only see the deals that the ‘hot buyers’ didn’t want. And fighting for the scraps is not where you ideally want to be.
At this point, I often detect a sarcastic look on the face of the uninitiated. That’s typical, they’ll think: it sounds like the commercial agents give all the best deals to their mates; what chance have I got? But agents are in business to make money and to deliver the best outcome for their client, the vendor. They probably didn’t go into business to do favours for their pals. Hot buyers give agents the best solution, so why wouldn’t they be their first port of call?
The question, then, is how do you become a hot buyer? Like many aspects of property development, the key lies in building personal relationships.
There are a few points to consider:
The agent will need to view you as a strong potential buyer; you’re not going to get a call purely because you’ve asked nicely. This means you’ll need to do the groundwork necessary to prove yourself worthy of being contacted.
there isn’t usually a computer-generated list that spews out of their laptop, which tells the agent which hot buyers would be interested in any particular deal. It usually falls to the agent to rack their brains and come up with their mental list of buyers who might be interested. It follows, then, that to be a hot buyer, you need to be at the forefront of their mind and not just sitting on a mailing list.
adding you to their list of hot buyers is no’ cost’ to the agent. If they were to call five hot buyers, it’s no big deal for them to add a sixth to the list. In theory, it gives them an additional chance of getting a sale.
Here’s A Common Challenge That Occurs To Many New Developers
They’ll meet with an agent and reflect afterwards that it went well. The agent seemed very friendly, said they were confident they would be able to send them lots of deals and promised to stay in touch. And sure enough, the developer gets a steady stream of emails every week, making them aware of new instructions. Months go by, and the emails keep coming. Job done, the developer might think.
The agent sees lots of new developers, and not surprisingly, they are usually pretty pleasant to them from the outset. There may even be lots of smiling involved. And agents are also very adept at adding people to their mailing list. So the aspiring developer will not only get smiled at, but they’ll also receive regular emails of new properties as they come onto the book. While they may now think they’re in a prime position to receive the next great deal. The agent probably forgot they even existed within 24 hours of meeting them.
Here’s The Point
Hot buyers aren’t people that meet an agent once and then sit silently on a mailing list; hot buyers are the ones that regularly call the agent every few weeks to stay in touch and try and build a relationship. They’ll invite them out for coffee or lunch and make a point of creating rapport.
In short, they’ll make it easy for the agent to remember them when the right deal comes up. Are they ‘mate’? No, just a developer who’s made an effort to build a friendly yet professional relationship with them.
Now, not all agents will fill you with the joys of Spring. Some can come across as a little dismissive, while others can take a lot of warming up, and here I suggest you cut them a little slack.
Put Yourself In Their Place
They see many potential buyers, and most won’t buy any deals from them. As a result, the default approach for some agents can be to assume that every new buyer they meet is more than likely to be a waste of time rather than adopt a more ‘glass half complete approach.
This shouldn’t deter you, as it’s their first defence line. You need to differentiate yourself from the competition. Where other developers might write that agent off as an unlikely source of deals. You should persist and try to earn a place on their list.
Of course, you will almost certainly come across some agents who remain frostily impervious to your charms, but that’s ok – there are plenty more fish in the sea. Just remember to keep smiling.
I hope you enjoyed that.
ABOUT THE AUTHOR
Ritchie Clapson CEng MIStructE is a veteran property developer of almost 40 years and co-founder of propertyCEO. A nationwide property development training company that helps people create a successful property development business in their spare time. It uses students’ existing life skills while teaching them the property, business, and mindset knowledge they need to undertake small-scale developments successfully. Emphasising utilising existing permitted development rights to minimise risk and maximise returns.