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Business Rule #14:
Perception Counts
December 17, 2004
(PAGE 5 of 6)
Earlier I mentioned those folks selling real estate courses, promising riches with no money down. Before you throw away that brand new course you just bought, no longer thinking that it’s possible to make such a deal, I’m here to tell you that it is…with a little luck, some perseverance, and a lot of positive perception.
I once bought an apartment complex on the West side of Chicago that was 28 units of sheer beauty. When I first saw it though, it was in need of major upkeep and some renovations. It was owned by a single gentleman from another country. When I asked to see the profit-and-loss statement, he threw up his hands and told me that the building only had four tenants, meaning that there wasn’t much to put on paper. He just couldn’t understand why he wasn’t able to keep tenants or attract new ones. So he just wanted out.
I met with him on a hot summer day in 2000 dressed in casual pants and a short-sleeved polo. The owner looked me up and down and let out a sigh. He took me to be a young, ambitious…nobody. He, nonetheless, humored me and walked me around the building to allow me to inspect it for any major flaws. Sure enough, all of these oversized units were empty. I also found out that he lived in one of the units, and that’s how he was able to secure financing for a building in such disrepair. That was all good news for me. It meant that I didn’t have to evict bad tenants to get in new ones who would pay higher rents. Since the units were empty, I could also start renovations immediately. Best of all, since the owner lived in the building, I could make him an offer that he couldn’t refuse.
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The owner wanted to deal right away and asked how much I could pay for such a building. I explained that I would first have to look everything over before making a formal offer. In addition, I told him that the building’s condition would play a major factor in my strategy of assuming the existing mortgage and getting seller financing on the down payment and the residual. He went nuts! He couldn’t believe that I was some kid who knew nothing about real estate wanting to make such a deal! It was preposterous! I smiled and knew that I had him right where I needed him to be. Here’s a rule of negotiation: never take anything personally or let anything get to you; you’re dead meat if you do.
Despite his patent eagerness to make a deal, I knew that I needed more in my corner; I needed to look “real” to this guy. Back in 2000, I was only buying small distressed properties—even if I was making great successes out of them! The truth though was that renovations took a lot out of my pockets, and I didn’t have the cash for this project on hand. I also wanted to demonstrate to the banks that I had the know-how to take a commercial property and turn it into a success.
So while the owner continued to show the property to other buyers, I was working my butt off to send the perception that The LaVelle Organization was the biggest thing going. How did I do it? I sent over a real-estate broker, who’s a friend of mine, to inspect the property for the sake of an “appraisal.” She introduced herself to the owner as a member of The LaVelle Organization, presenting him with a business card that had both her and the company’s name on it—something I purposefully hadn’t done. While she walked around the property, he apparently watched her in amazement, asking her all about this guy, LaVelle, and what he does. “How many other properties does his company own?” he asked. She just looked at him and smiled. This made the perception even grander and made the aura about me and my company even more mystical.
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Here’s a rule of negotiation: never take anything personally or let anything get to you; you’re dead meat if you do.
