One of KJF Partners’ Core Values is:

“We are driven by our personal commitment to create value for our investors, tenants, teammates and brokers.”

To serve our broker partners, we send occasional emails that focus on lessons learned through our brokerage experience or observations from our current role on the principal side of the business.

Brokerage is a very challenging business so thoroughly understanding your Buyer’s acquisition criteria will help you close a higher percentage of your deals.

Every Buyer has purchase requirements:

KJF Partners is a family partnership that buys QSR properties with short-term leases (generally five years or less) or QSR deals that are vacant or dark. We generally buy in MSAs with at least 500,000 people or in markets where we know talented, full-time leasing brokers. We want the MSA to be large enough that tenant expansion/growth is predictable within a reasonable time frame. This is important because we know that all of our deals will eventually require re-tenanting. We like to see traffic counts of 20,000 (ideally 25,000) cars per day or more and residential density of a minimum of 7,000 people in a one-mile radius or 20,000 people within a 5-minute drive. We don’t care whether the current tenant is Mac’s Burger Bar or McDonald’s. We assume we’ll have to replace the tenant, so we don’t care much about the current occupant. We do care about future demand for the building and what a future tenant will pay us to occupy the space. We have other criteria, of course, but I’m only sharing ours to help make a point.

Every buyer has their own criteria for evaluating a deal, and if you don’t know what those criteria are, you are operating at a disadvantage that can, and will, reduce your effectiveness. Conversely, having a thorough understanding of those criteria, and why they are important, can help you better serve your client(s) and improve your closing percentage. One of the difficulties you’ll face is that, although a buyer has buying criteria, they may not actually know what is truly important to them and, more importantly, why it’s important to them. Your job is to help them understand what their real criteria are.

Ask, Ask, Ask.

The best way to truly understand what’s important (to your buyer) is to continue to ask questions so that you, and your buyer, discover the key items they are looking for. The following are some questions that may help you get there:

• Why are you looking to buy right now? Tell me more about those time requirements.

• Tell me about the last one, two, or three deals you’ve purchased? What attracted you to them? How have those properties performed so far? Do you worry about anything related to those deals now that you own them? What? Why? Why? Why?

• How long do you typically own the properties you purchase? Why?

• What initially attracts you to a deal and causes you to evaluate it more deeply? What factors are included in your “deeper” evaluation? Why?

• What key factors caused you to close escrow on the last couple of deals you purchased? Of those things, what was most important to you? Why? Second most important? Why?

• After owning your last purchased property, did you find that it lived up to those expectations? How? Or, if it didn’t, where did it fall short? How can you avoid that in the future?

• Which properties in your portfolio are your best assets? What makes them your best assets? Did you realize those things when you initially evaluated the property?

• Which assets in your portfolio are your least favorites or do you worry about? What is it about each of those properties that makes them less desirable? What would you have had to learn or know to have avoided those purchases or problems? (These questions could also lead to a future sale but, that’s another topic)

• Based on your experiences, what do you believe will make the next purchase be an asset that you value for the long term? Build the criteria with your client and continue to challenge and refine it.

• Add your own questions to the mix until you are both very clear about what is essential and what must be avoided.

First, use your own words and vary your angle of approach to keep the conversation interesting. Second, don’t be surprised if you discover that a buyer who says they want an 8% cap single-tenant deal actually values the well-located 5% cap McDonald’s that they own above all their other deals. You may learn that they are fearful of losing a tenant and having to face re-tenanting scenarios. In today’s market, an 8% cap single tenant deal will have some risk and/or work associated with it. Help your client understand the potential results of their own expectations.

Some buyers have very short attention spans, and you may be asking yourself, “how can I get someone to open up and give me the time to truly understand what’s important to them?” Honestly, one thorough conversation that reveals a buyer’s true requirements will take far less time than evaluating even a single deal that ultimately doesn’t work out. Help your clients see the value of explaining what’s important to them or answering the questions that will help you both gain that understanding. If your buyer won’t invest the time to gain clarity, you should be cautious about the amount of time you spend with them.

If you are primarily a listing agent, qualifying potential buyers by asking the right questions will help you identify the buyer that has the highest likelihood of closing on time and at the offered price. That is certainly a great way to serve your client, the Seller.

Whether you work on the list side or buy side of transactions, understanding the buyer’s real requirements and motivations will make your job easier and increase your likelihood of success.

Good luck and Happy Hunting!

Joe

If you would like to review additional This Principal’s Perspective topics, the link below will take you to the blog section of our website:

https://www.kjfpartners.com/newsletters

PS: If you have subjects that you’d like to see become future topics for This Principal’s Perspective, hit reply and let me know what your thoughts are.

Joe Faris

KJF Partners, Inc.

Cell Phone: 949-275-5038

Email: [email protected]

Website: www.kjfpartners.com