Peter Conti’s story is proof the American dream is alive and well. In 1990, Peter was an auto mechanic. He liked the job, but it didn’t allow the lifestyle he envisioned for himself. Thus, he decided to start investing in real estate mentor.
That decision paid off in a big way. In the intervening years, Peter has invested in all different types of properties all across the U.S. They include apartments, single-family homes, and shopping centers.
Today, Peter is primarily a commercial real estate investor, and he’s based in Annapolis. He also founded an informational company called Real Estate 101, through which he and his team mentor industry newcomers.
Here are a few of the strategies that have propelled Peter into the real estate stratosphere.
Peter notes that many real estate investors get bogged down by formulas. When they find a deal, they overanalyze it. They apply the cap rate formula, a series of net operating income conversions, and so forth. As a result, no deal looks good to them, and they end up going a year or two without investing in anything.
Peter takes a more commonsense approach to investments. He typically visits sellers and asks them why they’re selling, especially if a property is still making money. Then he carefully studies their responses.
In particular, Peter examines social cues like tones of voice. That way, he can see if buyers seem to be hiding something. Indeed, from such a discussion, he gets a sense of a property’s upside and potential pitfalls.
In some cases, an emergency or tragedy compels someone to sell a profitable property. Peter has met sellers who were facing bankruptcy, contending with severe medical issues, and grieving for lost loved ones. In those situations, Peter provided some solace; his investments helped people to move forward with their lives.
Peter also seeks out “lazy landlords.” They own successful properties — so successful they’re financially set for life. And they don’t want to keep renovating, overseeing maintenance, and doing all the other work of being an apartment owner. Thus, they’re willing to sell their profitable properties.
Whatever the motives for selling may be, once Peter becomes interested in a deal, he negotiates with the owner carefully. The end goal is always the same: terms that are attractive to the seller and to him.
For a commercial real estate investor, relationships aren’t just important in making deals. They’ll also help you find those deals in the first place. Local and national real estate experts can provide valuable leads. A couple of them might even mentor you over time.
However, to get the best tips and leads, you must build relationships. It takes time and effort.
Introduce yourself to industry insiders. Tell them what you’re looking for in properties and what you’re avoiding. Also, provide clear feedback whenever someone sends you a lead.
Peter uses this example: Imagine you’re a commercial real estate investor, and you’re looking for a multifamily residence that’s half full and requires renovations. Once you buy it and upgrade it, you can raise rents and add tenants.
Next, imagine someone sends you a lead about a multifamily property that’s fully leased and fully renovated. Instead of ignoring that lead, contact the person who sent it. Thank that individual, and politely reiterate that you’re looking for more upside potential. That pro can then be on the lookout for such deals.
You might think that someone who’s thrived in real estate for decades would be a bold and aggressive risk-taker. But most of the time, Peter is conservative. He’s careful with his investments and eager to minimize any downside.
For one thing, Peter finances his deals creatively. At the outset, he invests little of his own money or his investors’ money. Instead, he might keep the previous financing structure in place. Or he may locate a new investor, someone who’s willing to accept a year or two of financial risk.
Another financing option is a master lease. In essence, with this arrangement, you lease the apartment complex at first, paying a certain amount to the owner each month. You also agree to take care of the management duties and promise to buy the property at some point. And, with a master lease, there are penalties if the seller defaults or if the buyer refuses later on to purchase the property.
With such strategies, Peter has the freedom to walk away from a deal while suffering minimal financial losses.
Peter has another way of being cautious: He rarely if ever buys a property unless someone has owned it for 15 years or longer. After all, if a person has held onto it for that length of time, it’s almost certainly capable of generating reliable profits. And it’s less likely to come with major problems.
If there’s one big takeaway here, it’s that it helps to sit down with a real estate owner and talk when you’d like to buy a property. When it comes to a deal, an honest and respectful back-and-forth usually leads to the best outcome. The two of you could explain what you want and need from the deal. Then you could spend time working out all the details.
By contrast, if you just give someone a sales pitch and reach an agreement quickly, it’s more likely to fall apart. A fast negotiation can make an owner suspicious. Over the next few days, this person might wonder: Why did the buyer accept the deal so fast? Were the terms unfavorable to me? Those doubts could make the owner withdraw from the deal in order to seek other offers.
There’s one more rule Peter Conti always follows: Whether he’s buying real estate or starting to mentor an industry newbie, he does so with eagerness and passion. Of course, given his profound love for his profession, there’s probably no other way he could do it.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.