The Serviced Accommodation strategy is hot right now and that means it’s very much on management company radars. Beware because many blocks don't allow serviced accommodation. By doing an extra layer of due diligence you can be sure you're sourcing the right deal that won’t come back to bite you. Mark shows you how. You'll learn:
Get the free resource that accompanies this segment. [thrive_2step id='3191'] Script For Speaking With Managing Agents To Find Out If SA Is Permitted.[/thrive_2step]
What you say about yourself and the service you offer isn’t a fraction as powerful as what someone else says about you. Getting other people to say you’re ‘great’ is called social proof. In this episode Brad shows you how to harness the power of this influence principle to close more deals. You'll learn:
Get the free resource that accompanies this segment. [thrive_2step id='3209']Video Testimonial Starter Pack.[/thrive_2step]
Mark: Okay so as we discussed earlier on it’s Oscar Berker’s question this week and to read the question verbatim it is, hi, guys. Just looking for advice on maintenance cover for landlords, what would you say is a fair limit for maintenance cover on a rent to rent?
So like I sort of briefly touched on earlier, this time of year is particularly problematic when it comes to maintaining rental properties. It rains a lot, it’s cold, we get freezing weather and those of you who remember a few years ago we had the worse wind on record where pipes were bursting all over the place. I was a letting agent at that point and it was an absolute nightmare. So it can become very, very costly.
Now, what you’ve also got to consider is the fact that when you take on these properties and there’s going to be a lot of things you need to consider when looking at agreeing a maintenance limit. Now, the beauty of rent to rent contract and sort of a as, well, you can choose what to discuss in terms of what your maintenance amount will cover. You can restrict certain things, you can add certain things. So one thing that we consider so we pay I believe our limit is 200 pounds a month and so we will cover anything up to 200 pounds a month and for any group of issues and not for any one particular problem but if the maintenance amount go over a combined total of 200 pounds – it’s either 200 or 250 per month, the landlord will then contribute.
Now, the reasoning behind that amount is that really anything up to 200-250 pounds will cover a boiler part. So generally the most expensive boiler parts to repair including labor will be round about 200-250 pounds. So if it goes above that it’s generally a much bigger problem or there’s been a series of problems that we shouldn’t be responsible for and for taking care of.
Now, some of you might be thinking, wow, 250 is a lot of money especially if for example your cash flowing, you know, on the 500 pounds a month and net cash flow but you can really get that up and down. So I know investors they only cover 50 pounds a month. Personally, I don’t think 50 pounds a month is enough because at the moment even up here in the North a contractors call out for you is generally between 30 -- well, a maintenance contractor, a handy man is round about 30-35 pounds just to go to the problem. So you’ll very quickly reach that 50 pounds limit.
So my recommendation would always be to go in somewhere in the region of sort of between 100-150 and 200-250. I think that’s probably a very safe limit and I think it’s fair. The landlord is going to be happy with that because they’ll probably look back and think that most things never really cost them much more than that on a monthly basis and it also stops you from having to go back with them forward getting permission like you would do if you’re a letting agent and I can tell you now from an edge point of view the worst part of dealing with any maintenance is having to go backwards and forwards with the landlord, arguing over 10 pounds here and 5 pounds there and asking for multiple quotes. You just want to be able as a rent to renter get that issue sorted, control of costings of it, get your own contractors to do it. The more you’re using them, the more – and just make sure that you’re factoring all those in.
And just before we finish another thing to also consider is the age of the property and certain things. So things like boilers, you just want to make sure that they’re not really old because really old things are going to have a lot of problems with them. So if you think it’s going to potentially be quite problematic you can maybe put in an allowance for that but you say with if there are a number of problems with that item before and over so many months and we have the right to replace it and get you to cover the cost of that. Something like that. But just factor all of those things in. Be fair but be sensible and you’ll find that landlords are more than happy to go ahead.
Mark: Hello and welcome everybody to this sessions of Sourcing with Mark. Now, what I wanted to do in this session is address one of the most popular strategies at the moment which is service accommodation. But what I wanted to do is address it from a sourcing company’s point of view. So when you’re sourcing service accommodation for your own portfolio, you may be more inclined to take on the risk that the management company don’t allow it and just wait and see with regards to when you get picked up. Now, if that’s the way that you choose to operate your business, that’s up to you, completely up to you. The risk is your own back.
But as a sourcing business, as a business that provides deals to other investors, we really have to be taking the current state of affairs very seriously and the fact that management companies are now switching on to giving permission and so the least hold forbidding short term let, holiday let service accommodation so this Sourcing with Mark is going to be very specifically related to city centre flat, lease hold flats and for those of you that’s sourcing those of course if you are sourcing houses, free hold interest there’s no sort of free holder so to speak then this doesn’t apply. So just to be very clear this Sourcing with Mark is directly related to those of you who are sourcing as a business and sourcing city centre flats to use as service accommodation.
Now, the reason I wanted to do this is we actually did a lot of research quite recently with regards to speaking with management companies and finding out exactly which blocks we focus particularly on leads and find out which blocks and leads gave permission for the lease holders to run their apartments as holiday let[?] so short term lets service accommodation and we were very surprised about how few permitted.
Now, of course if they don’t permit it and we package in solid deal based on service accommodation that investor takes that deal on and then the management company come along and say, oh, no, you can’t do that. You have to – you’re not allowed to let it as a service accommodation. You’re going to have to let as a single let and the numbers have all been based around service accommodation. You’re going to have sold that investor the deal. What’s that investor likely to do? They are likely to come back at you and ask for their money back. The property owner, the flat owner is going to get that property back as well. It’s going to become a big mess and it’s just not something personally I think we should be doing as a sourcing business.
So what I want to do now is we’ve addressed the issue so the issue is sourcing properties for service accommodation in blocks that do not permit it. So what I’m going to do now is go through exactly how I would recommend you find these apartments then how I would approach these apartments and hopefully that’s going to give us a much safer, ethical environment for sources who are packaging deals to investors and of course for those of you who are investors who are looking to buy package deals from sources, you can do the extra checks just to make sure that the permissions have been granted and you’re getting a deal that isn’t going to be sort of pulled from you at the last minute because we’re going to get permission from the management company.
So the first thing you’re going to need to do is you’re going to need to make a list of the blocks of apartments in your city of choice. So Manchester for example, make a list of all the blocks of city centre apartments in Manchester. We’re then going to find out who the management company for each of these apartments is.
Now, there’s a few ways of doing this. You can just Google the name of the apartment block and then management company and see if it comes up. You can also visit the blocks. You can go down to the block and generally in the common areas usually in the foyer, the lobby, the will-be details of who that management company is so you’ll get their contact details and you can phone them directly. Or what you can also do is have a look and see which estate agent, letting agents or marketing properties in that block inevitably you will generally find that there is at least one apartment being marketed in that block for sale or to rent because that’s the nature of city centre flats and you can ask that agent who the management company is. So they’ve got no issues with telling you who the management company is because it doesn’t affect them whatsoever. If they get a bit asking questions you can just say that you’re interested in buying one and you need to know the management companies details and you can’t get a hold of that at the moment and they’ll tell you.
Now, when you then get the contact details of the management company, what we need to do is we need to identify if the lease permits short term letting. So short term rentals. Now what this means is really it’s non AST rentals. So anything sort of one day, one week, a couple of weeks, we’re going to make sure that the lease permits that. Now, the lease may already permit that anyway which will be in the lease terms. So the management agent may be able to tell you that straight away or what they may have to do is get permission from the free holder and to find out whether they would permit that in their block. So you need to ask that question.
Now, the way to ask that question this week’s content upgrades is a script for speaking with management agents but I’ll just quickly run through it. Really, what you want to be doing is saying, I’m a property investor. I specialize in short term lettings. I specialize in short term lets. I’m looking at buying a couple of apartments in your block but before I do that I need to check to make sure that you are allowed to do this under the terms of the lease. Could you please let me know? And the agent will either say I’ll have to check. Most of them will say I have to check because they don’t know the lease inside out which is fair enough and some of them will just say immediately no because they’ve probably been asked this before and they already know the answer and some of them will say yes. Yes, there is and what you need to do then is specifically get them to e-mail you the section of the lease that confirms permission to let the property out on the basis that we’re asking. So there’s usually an excerpt that they can copy from the lease that they can send through to you or ask them to send a copy of the lease. They won’t often sent that but they will send excerpts or make sure you get an e-mail confirming from their company e-mail address that that block permits at service accommodation.
So once we’ve got the confirmation of the blocks that permits service accommodation what we’re going to have to do is write a very specifically targeted direct mail letter. Now, remember in most city center flats they’re already owned by investors so a lot of them are going to be tenanted so we’re going to have to make sure that we include tenants within the direct mail letter and what we want to do is if we get the tenants, we want to offer the tenants an incentive to move out and pass our details onto the landlord, well, pass our details onto the landlord first of course and then if a deal happens to move out.
Now, the best way we find as an incentive for tenants is that the only reason the city centre flat tenant would move out would probably be to move into a house. So if they’re going to move into a house they’re going to need a new deposit so the best incentive you could probably offer is a deposit to move into a new house which could be anything depending on where in the country you are but anything up to 1000 pounds would be enough in my opinion but remember service accommodation deal that had all the due diligence carried out that we’ve just gone through. It’s perfectly legitimate, it’s legal, it’s proper, it’s going to be withdrawn. The service accommodation is going to run perfectly. It’s a city centre flat. You’ve done your numbers. An investor is going to pay a very healthy fee for that. So just make sure you do all that properly, you will get a good fee and that will include the incentive for the tenant to move out and then send a letter to every single apartment in that block. You can find out how many apartments are in the block simply by putting the post code into something like Mouseprice and Mouseprice will tell you the total number of apartments in that block and one top tip just be careful some blocks stretch over multiple post code so just make sure that there are at multiple post codes. If there are, check them and then send your letters and then as you send those letters you’re going to get a response back, you’re going to get a response back from the owners and you’re going to get a response back from the tenants but you already know that the block permits service accommodation so you’re already one step ahead of the game and you’re in a much stronger point, place to negotiate.
So hopefully you find that useful and it’s all about ethical sourcing. We’re massive advocates of ethical sourcing and providing excellent deals to our investors that aren’t quoted by potential dodginess so if you’re sourcing for a business and you’re looking for service accommodation, take those points into consideration and you will have much better deals, you’ll be able to charge much better fees and investors are always going to come back to you for more deals because they know you’d take it to the next level for due diligence.
So as always, hope you enjoyed it and happy sourcing.
Brad: Hello and welcome to In the Lab with Brad. This episode how to harness the persuasive power of social proof to close more property deals. Now, imagine a scenario where you’ve just had a meeting or a call with the landlord or a home owner. The conversation went well. You’ve got a good feeling that this is a deal so you agree to speak in a few days. You call, there’s no answer. You leave a message, there’s no call back. Should or shouldn’t you call again? You think to yourself. So you give it another shot. Again, no answer so you leave a message. A few days later still no callback. If only you could speak with them again and try to convince them that you have their best interest at heart that you genuinely want to help and that you can really make their life a whole lot better than it currently is.
Now, at this stage most sources would make a note to follow up in a couple of weeks and leave it at that and that’s great and you should absolutely do that. But there’s much more that can be done in the mean time to convince the vendor or the landlord that what you are offering is right for them and it’s probably the way that you can do that is probably one of the most powerful forms of marketing that there is. It’s called social proof.
Now, let me explain. The concept of social proof has been around since the start of time but in marketing and sales it was popularized when Dr. Robert Cialdini named it as one of his six principles of persuasion in his book called Influence: The Psychology of Persuasion. That book is like a marketer’s bible. It’s a fantastic book for anyone looking to learn about the psychology behind why people do and behave the way that they do.
Now, there’s some incredibly powerful concepts and ideas in that book. I highly recommend reading it. Now, if you don’t have time to read it there’s a great 11-minute video, YouTube video and I’ll give you the link to that and it summarizes the six principles in a really kind of quite engaging kind of animated video.
Now, the basic idea behind the principle of social proof is that people will do things that they see other people doing. So it relies on people sense of safety and numbers in effect. For example, let’s say that you’re looking at a place to have dinner. You see two Italian restaurants side by side. One is full of people chatting, drinking wining and eating pizza. The others half full. Which one are you going to choose to eat in? The busier one of course, why? Because it’s already busy.
Now, there’s a famous quote by P.T. Barnum who was a circus showman that really sums this up and he says, nothing draws a crowd quite like a crowd. So social proof doesn’t manifest itself in restaurants only of course. Online retailers like Amazon harness the power of social proof really effectively. You’ll often see little messages pop up on the product listing saying something like six people bought this XYZ product in the last 12 hours. User reviews provide other perspective customers with approval ratings for products that they’re looking at.
You’ll also see under product listings people who bought this also bought this. Again, the wisdom of the crowd kind of coming into play there. You’ll often hear brands like McDonald’s boasting of serving 2 billion burgers. So you’ll see social proof is everywhere.
Now, critically people are particularly susceptible to this principle of social proof when they’re feeling uncertain about a decision that needs to be made. So let’s think back to our vendor and landlord.
The meeting went well. They’ve got the problem that you successfully diagnosed. They accepted that you could solve it for them which would make their life better so why no call back? Well, you haven’t done enough to persuade them to work with you. They’re feeling uncertain and unsure they’re actually picking up the phone and calling you with their yes let’s go for it, let’s do this. So sure of calling them every day and trying to speak direct on the phone to convince them which to be honest is likely to do more harm than good. How can you convince them that you’re the right choice?
Well, as I say one very powerful way social proof manifest itself is in testimonials. Now, there are actually two kind of testimonials if you like. There’s a testimonial on case studies and these really are the two powerful ways that you can harness social proof to convince them persuade. So get these right and you’ll almost become a magnet for sellers and landlords. But not all testimonials and case studies are created equal. The power of great testimonials lies in their delivery and the message.
Now, straight text or message of a simple paragraph can be kind of long and it’s actually weak so deep down the view it doesn’t really believe what’s written. It holds no influence over them. Just think on a website you’ll see little paragraph of a testimonial with a name, first name and an initial for a surname. It’s weak, it holds no influence. To really harness the power of social proof, you need video testimonials.
Now, before you start thinking to yourself, "Video you need to get a whole camera crew in and you need to kind of production number on it", you don’t at all. You really need a camera phone, a tripod, a decent mic and some basic editing software and critically some good questions to ask. So what you’re trying to do is capture the positive thoughts and energy of a previous vendor or a landlord that you’ve helped successfully. You’ll do this by asking them a series of is known as open ended questions. Questions that elicit a positive response whereby they tell their story of working with you.
So just to be clear here, you aren’t asking them for a testimonial. You’re asking them to share their experience with you which you will film. Now, in order to get the type of content – so in order to get the type of content you need to make the most powerful testimony and case study video. The questions you ask are absolutely critical. You need to ask what are known as I mentioned before open ended questions. So question like how did you feel when you realized you didn’t need to sell your property in order to get the hassles of your investment property off your plate?
So good open ended questions gives you the opportunity to dig much deeper and get more content reaction and feedback from the person that you’re filming. This makes for a much more compelling testimonial once you’ve edited that all together and it’s on your website for example or an e-mail.
Now, on the flip side close ended questions just elicit single word answers like yes or no. Now, taking this approach ensures that you give yourself the best chance of creating a video testimonial that not only convinces people to work with you but they actually find interesting and informative to watch as well. So it becomes the lead generator as well. So to support this testimonial tactic I’ve prepared a free download resource for you. In it you’ll find links to what you need to get videos done on your mobile. Now that includes a tripod. So you’ve got your phone already, a tripod, something that holds the phone in place, a lapel mic and some basic editing software as well and most importantly I’ve included there for you a list of open ended questions to ask the vendor or the landlord which is really going to help you kind of get a flow in the conversation, get them to really draw out the type of information that is going to be compelling to watch and convincing and influential to any new landlord or vendor that’s watching it.
So you can grab that at goliathsourcingacademy.com/session14.