Winning Together in Real Estate
A real estate investor's guide to mutual profit through smart negotiation
Real estate is a game of buyers and sellers.
If you learn how to negotiate win-win deals—you will unlock a lot of doors.
Access to better deals
Less cash and risk
More flexibility
Today I’m sharing the negotiation strategy I used to buy a distressed 80-unit apartment and unlock $125K NOI in the first year.
The Owner's Dilemma
A property owner found himself in a bind with 80 distressed units across five properties. Despite owning them, these properties weren't profitable. Moreover, he was cash-strapped and couldn't afford the necessary renovations.
My Challenge
As an investor, my objective was to enter this deal with minimal upfront cash. Reducing risk was my prime concern.
The Solution
With the owner's dilemma and my challenge in mind, I focused on formulating a strategy to restructure the entire property portfolio into a single deal, given that some properties had more equity than others.
Leveraging my expertise in real estate development, I approached this project as though it was a fresh build.
Reverse Engineering Approach
Drawing on my construction background, I estimated the repair costs at approximately $850,000.
I reimagined the debt structure, treating the deal as a single entity instead of separate buildings. I secured a loan at a fixed 3.7% rate for ten years, with the initial 18 months interest-only, intended for the reconstruction phase.
After completing the repairs, the properties’ appeal and unit quality improved, naturally increasing revenue while simultaneously reducing expenses. This disparity creation is referred to as the 'delta.'
Improvements boosted revenue by 10% in the first year and trimmed expenses by 15%, I generated an additional $125,000 in net operating income, amounting to $1.8M.
Ultimately, I reached an agreement with the owner for a 50/50 partnership, with no initial capital on my part.
How does the owner benefit?
Initially, the owner held five unprofitable buildings without the funds for required improvements.
His equity had been virtually wiped out due to inefficient operations.
How I addressed his issues
The debt restructuring and improvements not only restored the buildings but unlocked a significant 'delta.'
As a result, we now enjoy a regular cash flow and hold more equity than at the outset!
A common tale in business
Growth often necessitates letting go.
Many times, owners hinder their own progress because they struggle to delegate operations to those better equipped.
In our case, we created a win-win situation out of a potentially risky investment, proving that smart negotiation can lead to mutual benefits.
Whenever you're ready, there are 3 ways I can help you:
Real Estate Investor OS: Learn the exact strategies that helped me build a $20M real estate portfolio. This 2-hour course equips you with the tools you need to build financial freedom through real estate investing
Invest with Me at MAK Capital: learn how you can passively invest with me in commercial real estate. I find the deals, you collect a rent check. Schedule a call with my team
Subscribe to the MAK Podcast: each week I share actionable real estate, business, and personal finance tips on the MAK Podcast
👉 If you enjoyed this, share it with a friend and consider subscribing.