You have heard of a BFF, but how about a BFI?
If you have been reading my column for the last six months or so you already know that the real estate market in Florida is on the upswing: Prices are 17% over last year, there is only one third the inventory of available homes compared to a year ago and money is still cheap to borrow. Indeed, the Baby Boomers are shopping AND buying. What you may not know is that the commercial and investment part of the business is also extremely busy. Our commercial division is blessed with more buyers with “Cents” than deals that make “Sense”.
The commercial market always lags behind residential sales, this was true on the down side and now it’s true on the upside. At Market America Realty Commercial Group it is our job to identify commercial opportunities, distill all the available data, and determine which projects are attractive to our investors. We do this not with a BFF (Best Friend Forever; and no not BFI (Best Friend Indefinitely) , but a Basis for Interest summary a BFI.
A BFI document is an executive summary of a potential acquisition that will very succinctly indicate WHY a client should be interested in the project. A BFI has the same objective of a good resume. A good resume will, in the first paragraph, get the HR Director to read the rest of the resume, and once he reads the rest of the resume, he wants to see the candidate for more details and substantiation; same with a BFI. (To see an outline of a BFI Click Here)
To get a good BFI opening statement may take weeks of analysis of a project. It is the opening statement that carries all the meat of the presentation. Here is an example:
To acquire an off market 200+ unit broken condominium project in Lee County, Florida for $30 million dollars ($23 million purchase price, $5 million in improvements and $2 in carry cost) that will provide a three year return of 96% based on available financing.
The “off market” tells the buyer the deal has not been shopped. The “broken condo” tells him it’s probably banked owned. “Available Financing” tells him that this can be a leveraged deal. Now he is going to want to read the rest of the document to flesh out the details.
In our commercial group we do a few BFI’s per week for our qualified investors (Qualified = we have Proof of Funding; we have a commission agreement in place; and we have personal knowledge of the investors objectives).
Based on knowing the objectives of a various clients we make unsolicited bids. We identify exit strategies (What does our client do once we buy it to get out of the deal) and if we think the exits strategy is solid, we then know what to offer on the entry. Because we make unsolicited bids we get paid by the buyer and most often we also make money on the exit and hold (property management and sell out).
The BFI may refer to CAP rates (Capitalization Rates), IRR (Internal Rates of Return). LTV ( Loan to Values) and may include absorption studies, BOVs (Broker Opinions of Value), and Market Analysis. The BFI will not include all that detail, but those studies have to be done in order to distill the information presented in just a few pages. This is why we require proof of funds and a commitment from the client before we can perform all this work.
BFI’s are normally done for larger projects but there are also tools we use for single family home and smaller investments as well. We will do an Evaluator Report which in a few pages will summarize all the pertinent data about a potential acquisition. To see Evaluator Report Sample click here or email me at GFous@marketamericareatly.com. I love the simplicity of this report and thingk you will as well.
Bottom line is that there are opportunities in today’s market. Analysis and knowledge are still critical and so is the use of a knowledgeable profession real estate agency and agent. You not only need the answers to your questions, you need to know the right questions to ask.
Let us know if we can help you.