November 14, 2014 – LIVE from Denver’s Cherry Creek neighborhood, this the Kyle Malnati Radio Show where multifamily matters! People might say that I’m not a complex guy, but I sell apartment complexes! I am your host, Kyle Malnati, and I’m excited to talk to you about real estate today. Thanks for joining us today and for tuning in.
War, the song we started this episode with, is an iconic song from the 1970s by a musician named Edwin Starr. That song became very popular as an anti-war protest song and what we would like to use it for today in our show is to talk about how apartment buildings in Denver are getting bidding wars by multiple buyers submitting contracts, a lot of times these contracts are over the list price. My team, my business partner Greg Johnson and myself, have specialized in creating these bidding wars for our clients. We wrote a blog post about this on our website denverapartmentbuildingsforsale.com and we talked about bidding wars, and how war is good for sellers in Denver. After I presented at a multi-family seminar, a client of mine, who’s opinion I value very much, complemented Greg and myself by saying “our brokerage team is a marketing machine.” The truth is, I believe that it is our responsibility as a brokerage company to be amazing, relentless marketers on behalf of our clients. What that means to me is my goal is to achieve the highest price possible when I am contracted my a seller to list their building for sale. Not only are we looking for the highest price possible, we are looking for the highest price possible from the most qualified buyer, in the fastest time frame possible. Over the past few years, we have earned a great reputation of selling our listings above list price.
The inspiration for this vlog that we are doing today stems from these bidding wars, but also comes from a kind of snarky email I got from another investor in Denver that said specifically, “As I told you before, I am not interested in a bidding war. So I don’t see how I can do business with you.” This quote came directly from an email I received from someone who was clearly frustrated about the fact that we drive a lot of interest to our inventory of apartment buildings whenever we list them. I really take this as a compliment, in a highly competitive market I simply can’t make sense of sellers that want to negotiate directly with a buyer off the market. Don’t get me wrong the goal is not to get every Peter, Paul, and Mary over to the building. We don’t want to get every single person over to the building just for the sake of having a bunch of warm bodies around, we want to get the most qualified people. There is a dedicated balance between kind of this feeling of a public auction and this well designed plan of attack that brings as many qualified and experienced buyers to the table to generate the highest offer possible.
Well, we practice what we preach, and I can go over a number of different examples this year where we created bidding wars and elevated the purchase price way over the asking price. Our strategy here is not to under-price a property, but to price it appropriately in the market place. If the market place is just slightly above where the property is priced, our goal is to get the listing price just right, to where there is plenty of interested buyers circling. What happens, as a result of a getting enough interested buyers circling, is it shoots the price well above the listing price.
A good example of this is a building we sold in Cheesman Park, 27-units that sold for $170,000 over list price. I have never experienced the level of interest that we had with this property in my entire career. That would be something that hopefully I match again, but we did eleven tours with well-qualified investors on the first day showing the property, and we received ten offers that same day.
The next example of a bidding war we experienced was when we received $70,000 over list price for a building we sold in Congress Park. We got multiple offers, and we parlayed the multiple offers into this “call for offers” environment where everyone had to submit their bids before the designated deadline. As a result of this process, we got $70,000 over our list price for that investor.
Another example of a building we sold over the list price, was a smaller building located in Cheesman Park that sold for $45,000 over list price. Within the same week, we received five offers that were all either at or above the listing price.
In another instance this year, we sold a building in Congress Park well over the list price, at $40,000 above the list price. We received three competitive offers for this building and went under contract within two days. This building happened to be sold by Greg and myself on behalf of a residential Realtor. We have a lot of different clients, and that particular client chose to list the building with us because she knew that we dominate central Denver apartment buildings, especially when it comes to 10-110 unit apartment buildings. I pride myself on becoming the Realtor’s Realtor, as I have a lot of clients who are real estate brokers.
At any rate, the whole point of this set of information is if you own an apartment building, if you own any investment, if you own a stick of gum, wouldn’t you want to have the most amount of qualified buyers to know that you have that piece of real estate for sale? I would! I tell you what, if I was a real estate client and I knew someone was trying to hide my listing or pocket it, and not expose it to the open market, and not get competitive bids, I would be really upset.
So we try to have a lot of fun here with statistics about buildings that we have sold in 2014, these are all active sales of ours in this article that we wrote on our blog called “War, What is it Good For?” and that is a tribute to Edwin Starr’s 1970s song War.
I’d like to take a moment now to give some inspiration, this is something we are doing regularly on the Kyle Malnati Show. I have a quote from John Maxwell, the heralded author, he says, “Successful and unsuccessful people do not vary greatly in their abilities. They vary in their desires to reach their potential.” As you’re sitting here listening to this show, hopefully this can be talked about in the frame of the apartment building investment, but what areas of your life do you feel that you have got tons of potential, but maybe you are lacking that desire? Maybe you are in a situation where you say, “you know what I’ve always wanted to do this” but it is kind of just a dream because you do not have that desire behind it.
Well, that is where I come in as an apartment broker, a lot of people come to me initially thinking that they are going to buy an apartment building because it will give them good cash flow, and maybe an income source. But the reality of “why” or the purpose of why people buy an apartment building is freedom. It is absolutely freedom, freedom from the man, you don’t have to go back to work if you own enough apartment buildings that can sustain your lifestyle. Freedom for retirement, you can retire with dignity, and as I think of that quote by John Maxwell it all comes down to desire. We can reach our highest potential if we have that desire behind us, and that is really the difference between success and not achieving success.
Tying back to the article we wrote related to bidding wars, our desire for our sellers is to achieve the highest price possible. When I am hired to sell an apartment building, I might be contracted for six months, and usually we sell the building before the six months is over, but it is a fairly small amount of time relative to the amount of time the owner has owned the building. Actually, I was at Stewart Title yesterday, I feel like I live here some weeks, closing a 12-unit, center hallway building in West Washington Park. The owners of this building bought it in 2001, right after September 11th, and they owned it for thirteen years before selling it. I had only been involved in the building for about three and a half months from start to finish. What I am getting to here is my desire is to achieve the highest price possible for those sellers because it is there right to have the most qualified person working for them, that is going to get them the highest price possible because my three months is a very small period of time compared to their thirteen years of hard work and effort. When you work with someone like myself, a high-octane Realtor, that’s what I promise to you.
Again, I would like to thank our sponsor Stewart Title for providing us the space for our video and podcast. What we will do next time is we will talk about different things in the apartment market that you can do to prepare yourself for 2015. Thanks again for listening and watching the Kyle Malnati Show, we’ll see you around the neighborhood!
Yesterday’s show was about Bidding Wars. We wrote an article a few weeks ago, that is on our blog, called “War, what is it good for?” (http://kmalnati.wordpress.com/2014/11/03/war-what-is-it-good-for/)
~Kyle Malnati, Partner/Shareholder
Madison Commercial Properties
Madison & Company Properties
1221 S. Clarkson St. #300, Denver, CO 80210