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Welcome to the Self-Storage University Podcast, where you will learn the correct way to identify, evaluate, negotiate, perform due diligence on, renegotiate, finance, turn-around and operate self-storage facilities. And your host is a partner in one of the largest real estate portfolios in the U.S. with nearly $1 billion of holdings, Frank Rolfe.
We all procrastinate to some degree. I'm sure all of us at some point when we were in school put off writing that big paper until the very last minute and we regretted it because we had to stay up all night to get it done by the due date. But that's what procrastination is. You put off to tomorrow what you could or should do today. And in the world of self storage investing, there's probably nothing more frustrating than when you've done all the work, you've got the contract, you've signed the thing, but the seller doesn't. They keep procrastinating in signing the document. So what do you do to push them along? This is Frank Rolfe with The Self Storage University Podcast. We're gonna talk about some real life solutions to the procrastinating seller who won't sign your document.
Now, let's first analyze why a seller would do that. You probably didn't write that big term paper because it was boring and you didn't wanna do it, and you had many other things you'd rather do. So you kept saying, well, I'll work on it tomorrow. I'll work on it this weekend but you never did, because you didn't have any interest in it at all. Well, sellers they have their own reasons also to not sign that agreement. The first one is a negotiating issue because they're hoping for more money. So often they're not gonna sign it 'cause they're hoping you're gonna come back and offer them more money if they don't sign it. Kind of up the ante to get them to sign it. But also there may be other parties looking at that self-storage property, and they're waiting to see if they come in with a higher offer.
So sometimes it's not really procrastinating, they're thinking about it all the time. Wouldn't be that hard to pull it out and sign it and FedEx it off? But they are strategically withholding signing it. So that's not really procrastination, right? That's actually taking an active step. It's just not the step that you want. And then sometimes they're not gonna go in there and sign that agreement because they have seller's remorse. They're not really sure if they want to sell at all after all. They talked about it, you called them up or sent them a direct mail piece, or somehow or other got in touch with them and said, "Hey, I wanna buy your little self storage property." And at the time they said, "Oh, okay, yeah, I'll do that. You know, give me X." But now that you've offered them X, they're having second thoughts, they're having doubts, should they really sell it, should they not? Can they live without it? Is it a better investment than taking the cash? How will they redeploy the cash? All kinds of reasons for them to say, gosh, I don't know. And now I'm not so sure I wanna do it anymore.
And then finally you have some sellers that are not really procrastinating, they're actually doing all their homework like you didn't do in school. But the problem is they're talking to so many different experts and such 'cause they wanna be very, very careful. They're talking to their accountant, they're talking to an attorney, talking to their other family members, maybe talking to other self-storage property owners to get their opinion. But it's not like they're ignoring you. They know exactly that you want them to sign it, but they're holding back until they get all their data figured out. So then what do you do? How do you push someone forward in those three categories?
Well, the first thing you have to remember is this is typically mom and pop's biggest asset. If you're buying from a mom and pop seller, they probably own a stick build home and maybe some other items, but this is probably, if not the biggest asset they own, then typically the top two or top three. So it is a really big deal to them and they want to give it a lot of thought. This is not something you just knee-jerk react and do. This isn't something that's trivial to them. It's very, very important. So you have to accept that and understand that they're not going to just immediately sign that thing up and send it back to you.
Also, you got to be enthusiastic, 'cause enthusiasm is contagious. If you talk to many sellers and said, what do you remember about this buyer? What made you sign the agreement? They'll say, well, the guy was so excited about it. That buyer, she was just so enthused and it was contagious and made me excited about the property again. I'd lost interest in it over the years, and suddenly they were so excited. I was like, oh my gosh, you know, I need to sign this thing. It needs to be in the hands of a new steward who really cares about it and wants to push it forward. So enthusiasm is always key. You're not gonna get anyone off the mark by being dour, by being overly serious. Be excited about it. Because excitement really turns them on. Also, find things out there that are in their best interest to move forward. For example, there's been a lot of discussion about changing capital gains tax rates. Tell them, boy, we better get this thing going before they change those capital gains tax rates. That's something that fully appeals to the seller, not you. You're not selling it, you have no capital gains. Find other items like that that move them forward.
Another good one is to say, I've got this lender already teed up and so I think we need to get this thing signed up, I don't wanna lose out on this lender, they may change their mind, they may lose interest in it. So hey, let's get this thing signed quickly. Those are the types of levers that make sellers move forward, things that appeal to their best interest that do have a time clock on them. Now, here's some things you would never do though to try and get the seller to sign. Number one, create a false deadline. Never tell the seller, "Hey, you know what, if you don't sign this by Friday, then this deal's off." Those are fatal last words. Never throw something out as finality unless you're gonna back it up.
So if you truly aren't going to buy it if they don't respond by Friday, well I guess you can tell them that then 'cause you're just telling them the truth. But you know that's a lie. If they came back to you on Monday, you'd still do it. A week from Monday, you'd still do it. So don't put those kinds of things out there. It just insults them and makes them mad. Typically if you were to go to a seller and throw out a deadline and say, "Well, if you don't do this, then... " They'll just say, well, then forget it then. Nobody pushes me around. No one threatens me. I have no interest, get out of here. Now your bond is completely broken, you wasted all your time negotiating 'cause you didn't get it signed and you didn't get it signed 'cause you insulted them and made them mad, and that's never really a good idea.
The other item you should never do is simply to be too pushy because people don't like people who are pushy. So if you're worried that the guy is not signing because he is talking to somebody else about it, you're gonna have to run that risk. But you're gonna have to be pleasant and enthusiastic throughout the process. I've had many deals where I thought they were to go with somebody else. They said, oh gosh, no. You know, we're talking to several other parties. But if you made a good offer and if you're enthusiastic and positive and keep hanging in there, more than likely you're gonna win. Because in the world of real estate, it all comes back to the same thing, which is numbers. That other buyer, he can't finance it any better than you. They can't run it any better than you. No way they're gonna be able to pay more money than you.
Now, if you're looking at a property in a big urban market, sure, public storage or a REIT can definitely outbid you, no doubt about that. But do they really want to? A lot of these urban properties are so screwed up at this point, so underwater with the changes in cap rates and the flight of people in urban areas out into suburbs and exurbs, well, it's unlikely they're gonna have any interest in competing with you anyway. But you're probably not looking at buying those yourself. I'm not sure why you would, but if you're looking at something out there in a suburb or an exurb, you're just as strong a buyer as anybody else. No way public storage or others are gonna pop up on the scene saying, well, oh gosh, we really wanna buy this medium sized property out in the suburb. That's very unlikely. So don't be psyched out when they say, oh, I have other offers. That doesn't mean anything. Those people are using the same rules and regulations. They're playing with the same set of cards you are. So don't let it psyche you out. Just hang in there, be positive, be enthusiastic, stay in contact with them, and don't be too pushy. I've never seen anyone who got anywhere in the business by trying to push sellers around. It does not work.
And just remember they're gonna come to their final conclusion in their own good time. You do not know what's going on behind the scenes, they may have called their accountant. The accountant's on vacation, doesn't get back for two weeks. It doesn't mean they've lost interest, don't just assume because they don't get something back to you immediately means they're not really going to do it. They very well are going to do it, and in fact, they're gonna do it tomorrow, the very day before you were gonna call them again to bug them. So just hang in there and typically all things work out. This is Frank Rolfe with The Self Storage University Podcast. Hope you enjoyed this, talk to you again soon.