There is a force in deal making that is more powerful than money. And that force is “bonding”. In this Self-Storage University podcast we’re going to explore bonding from its origins to how to create it and how to harness it to make amazing self-storage deals possible. If you want to put together storage deals at low prices and with seller financing, then you should be extremely interested in this topic. In fact, bonding with the seller – more than any other activity – has been the catalyst to some of the best storage deals of all time.
Episode 15: The Power of Bonding In Attaining Great Storage Deals Transcript
Webster's Dictionary defines bonding as "The formation of a close relationship through frequent or constant association." This is Frank Rolfe, the Self Storage University Podcast. Bonding is, in fact, one of the most important ingredients in any self-storage deal. If you're looking for a really good price or really attractive seller financing, the only way you're going to obtain that is through bonding. Let me give you a true story. So, I was trying to buy a property. Wasn't really getting anywhere with it. So I offered to go out to lunch with the person who owned the property. They had already said they wouldn't sell it. We were just going out just pretty much just to talk about life. During the course of that lunch, I heard the entire story of that person's life from beginning to end. I sat there, thoughtfully. I nodded. I listened, and at the end, they had changed their mind.
And in fact, would now agree to sell it to me. And later, they agreed to go ahead not only to sell it to me but to also carry the financing on it. Here's another story. Another seller had a property, wanted to buy it. Wasn't progressing at all. Wasn't really going anywhere. Now, this person lived far away, but they were traveling through the city I lived in, and we suggested we get together when they were in town. So they showed up at my door and proceeded to live with me for a few days. Not exactly what you would anticipate from a business thing. I put them up in a hotel. But they spent every waking hour with myself, my wife, and my daughter. And at the end of that multi-day experience said that they had decided that we were the right people to sell the property to.
And once again, at a really good price and carried seller financing. Here's the wildest story. There was a guy back in Dallas named George Lucas. He was a big land speculator. He owned lots of land all around Dallas-Fort Worth, but he obtained it in a most unusual fashion. What they would do is, he and his parents before him would wait for the periodic recessions, depressions that plague America. And during those periods of time, he would not go after properties that had been foreclosed on that were small-dollar, that you could go down and bid on it at the courthouse steps. Instead, what he was shooting for were cases, or he had researched the amount of the loan on big properties. And he would try and outbid the bank for them, figuring nobody else had the money to do that. Kind of a interesting niche.
So, in other words, he would look for a property that was valued at $2 million, but [inaudible 00:03:03] been the mortgage paid down for so many years. It might be down to $700,000 of remaining note, and he show up and bid 701,000 knowing the bank would only bid in their loan amount of 700,000. So one day, he was out there doing one of these auctions along Interstate 20 Southeast of Dallas. And it was coming up time for the auction, and he was there, and the auctioneer was there, but the bank had not shown up. Then they saw a guy walking across the field from the other side of the property. It's a big undeveloped track with chest-high weeds. The guy was walking up from the other side. As he approached them, they thought, well, that must be the bank. And in fact, it wasn't. It was someone who lived in a shack behind the property. And this person just came over to see why the guys were meeting, and more importantly, so he could look at George Lucas's Jaguar automobile that he had parked on the frontage road.
So, after they looked at the car for a while and the bank never showed up, Lucas told the auctioneer, "Well, you have to start the auction. That's the law." So the auctioneer started the auction, Lucas bid $10,000. Bear in mind that Lucas had intended to bid half a million, but he bid $10,000, to which there was no other bid. So then he turned to the guy that had wandered through the field has said to him, "Why don't you bid?" And the guy said, "Well, I don't even know what you're bidding for, and beyond that, I have no money." Lucas said, "Well, I think you should bid $10,001." The guy said, "I don't know. What are you talking about?" He said, "Just say 10,001, just humor me." So the guy said 10,001. So Lucas said, "Okay, I can't compete with this guy." And that was the end of the auction. Lucas then loaned him the $10,001 and gave him a business card saying, if he ever got the money back, to pay him back. The guy then took this giant property valued at a million dollars.
He was able to borrow against it, even though he had no credit at all, 50 grand. And with the $50,000, he paid Lucas back the 10,000, and he built a small barbecue restaurant with the other 40,000 that is still in operation today. So what's the point of that story? Why would George Lucas do that? Here, he was going to buy the property worth a million for only $10,000 and let he... and yet he let another guy do it. Why would you do that? Well, it's because he liked the guy. It's also because Lucas had cancer. In fact, he had stage four cancer at that point. He died not too long after that. But what's at issue here is that there's [inaudible 00:05:24] things in life more important than just money. So for an older seller who is looking to not only sell the property. But they want to feel like something good came of it.
And if they like you, they're more interested in doing it to help you. And they're even interested in carrying the paper, knowing you may have trouble getting financing. So, how do you get bonding? If bonding is so powerful, then how do you obtain it? Well, the first thing you have to do is you have to spend time with the seller. You can't do bonding from afar. You can't do bonding with email. So for a lot of millennials and people who look at a lot of communication these days as being all done online, that won't work for bonding. Bonding has to be done either in person or by phone. And when you bond with somebody, the first part is you'd have no control. And that is whether they really align with you and like you. So sad to say you could go in and meet with a bunch of different people, 10 different people, and you might bond with three or four of them.
And then you might have two or three that didn't hate you on general principle and another two or three that are kind of lukewarm. So the first ingredient you don't have a lot of control over. They'll have to like you. Now, it helps a whole lot if you're likable. So if you have a good friendly spirit and like people, that will certainly help you to be liked, that's for sure. But the next thing you have to be as a really good listener. So if you want to bond with somebody, you want to listen. And here's the best opening line of all time, it's, how did you come to own this self-storage property? Because the answer to that will do great things. It will set you off on a bonding path. And additionally, you'll learn a lot about the property, which will become very valuable to you later if you go ahead and buy it.
So just engage them in conversation, get them talking. You don't want to be talking for bonding. You want them to be talking for bonding, and you just be a listener. Additionally, in every interaction, you do with them, after that conversation where you bond, you've got to make sure that they think that you think that they are a VIP. So if they're going to be wanting to meet with you on a certain day and time, you got to make sure you're available. If you promise to be there on a certain day or time that you need to be there early because, at that point, they're still forming if they really like you or if they don't. And also, if they can trust you or not. Because if you want to get seller financing, they have to trust you to feel confident you'll make the payments.
But if you're a good listener, and if you either meet in person or by phone and spend plenty of time with the seller, then more than likely, you're going to be able to obtain bonding. And so what happens when you get bonding? There's two parts of bonding that are hugely attractive as a buyer. The first, a lower price because the seller will not drive as hard to bargain when they like you. So that makes complete sense, right. So if basically, if they think you're a good person, then they're more than likely going to want to help you because they want to help a good person out. So that's the first item. The other one is seller financing. So much of real estate is possible to be done through seller financing. But people don't really understand that or push for it. So most sellers, if they were to sell or finance today, would get an interest rate of four or 5%.
They can only get 1% in a CED, and bear in mind they would have a first lien collateral position on a property that is far better than anything they will get at A.G. Edwards, just a sheet of paper if they were to go out, buy a junk bond from John Deere or something like that. Nothing that's worth anything. In this case, if don't pay, they would get the property back, which they can then operate, or they can resell. So when you figure that the seller can get four or five times more income from [inaudible 00:09:07] than his other options and much more safely at that. It makes complete sense that they would sell or finance, but they won't unless they bond with you. They will not do it unless they like you because they, again, want to think that they're helping you. But equally importantly, that they can trust you.
Now, can you bond with everyone? No, you really can't. You can bond with moms and pops. It's really hard to bond with big companies. Big companies are much more impersonal. Also, they often have debt, which eliminates the ability for them to sell or finance. And it's just an attitudinal thing. They're always looking for the highest price. They're not normally looking to help people. So if you're going to bond, you need to be talking into original mom and pop owners of the storage facility. Often they're the original builders. Those are the people you can really bond with. They're typically from the Greatest Generation, or what's called the Silent Generation. The Silent Generation are those born between 1930 and 1945. The Greatest Generation, the generation before them. The folks who fought at World War II, that's the typical age category. But it doesn't always have to be that way. You can bond with younger people as well.
So bonding is a very, very powerful tool when you're out there trying to get deals and forge great deals. Deals that have excellent pricing, excellent seller financing. Typically, about the best thing you can do is learn to bond. And it's so incredibly easy. It's such a powerful, powerful force, but one that we all have available to us. Regardless of how much capital we have, regardless of our age. So if you really want to do great deals, think about doing some great bonding. This is Frank Rolfe, the Self Storage University Podcast. Hope you enjoyed this, talk to you again soon.