As a property investor, what do you do when you find an interesting property?
If you’re like most people, you’re thinking of two possible options.
If the price is right, you look into buying the property. And if it’s not, you move on.
However, you should know that the numbers you see on the offer sheet don’t have to be final. In fact, it’s very common for buyers and sellers to negotiate both the price and the terms.
Make no mistake, mastering the art of negotiation can add to your bottom line and get you closer to a high-performing portfolio.
With that in mind, here are some of the best tips to follow.
Like many things in life, negotiation boils down to preparation. Without the right data, how can you know if you’re getting a good deal? If you’re trusting every word in an ad or uttered by agent, you’re probably not getting the best deal.
You need to do your own research and see if the deal is really worth your time. Whatever time and effort you put into it will likely pay off.
You may have heard that you can take shortcuts and use a platform that crunches all the numbers for you. There are a bunch of them online, and they can help simplify your research.
However, this isn’t the best way to prepare for a negotiation. By doing everything manually, you can get additional details that may paint a more accurate picture of the property’s worth.
If you take your time and study diligently, you can become an expert in the area you want to invest in. By the time you get to the negotiation, the other party will know they can’t trick you into buying anything unsuitable for your strategy and goals.
This is a useful hack if you’re just starting out. As a newbie, why go head-to-head with an expert agent when you can find one who won’t be as hard to crack?
Here’s the thing…
Some agents are masters at selling. But that doesn’t mean you should buy from them. Remember that a seller’s agent works in the interests of the seller or vendor, not yours.
Sure, you might run into an honest agent who’s open to negotiation. More commonly though, you’ll be dealing with expert salespeople who’ll try to push through the sale, regardless of whether you’re happy or not. Because of this, you might be better off dealing with a crappy agent.
But, how do you find one?
The first sign is a property listing with poor photos. The agent took the photos on their own, instead of hiring a professional. While not 100% foolproof, this likely means that the agent isn’t very good at their job.
You can also find websites that rank agents. While most visitors will focus on the best agent, you should take the opposite approach. In dealing with a below-average agent, you can at least practice your negotiation skills until you gain more knowledge and confidence. Plus, you never know – you might score a great deal.
Most purchases are emotional. But when it comes to something as big as an investment property, you want to shut your emotions down as much as you possibly can. Otherwise, you might forfeit a lot of your negotiating power.
Worse yet, you could get carried away by a property that doesn’t fit your strategy. You might fall in love with the property, so much that you sacrifice your desired results just so you can have it.
To avoid this, remember your reason for buying the property. Don’t imagine yourself living there or focus on things you personally like.
Instead, do your feasibility study and stick to facts and numbers. You’re buying for either rental or resale. Either way, you’re buying for someone else and not yourself. Think about what the market wants and it might just reward you with the returns you’re after.
When you approach a negotiation, the key is to show the other side that you’re holding the power. You need to stand your ground until you get what you need.
You should never let an agent or vendor constrain you to any timeframe. They do this to create a sense of urgency and make you agree to unfavourable terms.
To avoid this, set your own timeframe and let the offer sit.
You can inform the agent of your final offer and its validity period. If you get into a back and forth, it’s probably time to step away, at least until you’ve cooled down. Know your limits and inform the other party, without allowing them to sway you.
All of this might be a bit tough at first. But remember that there are tons of good deals out there. It’s better to wait than to agree to something that will cost you in the long run.
A negotiation can get tough. You might feel compelled to throw in the towel just so you can get it over with. However, this is rarely a good idea.
Don’t be afraid to say what you want and do everything in your power to get it. That’s what the other party is likely doing, so don’t let them force you into a deal you’re not comfortable with. Do your research, find out exactly what you need, and don’t make any compromises that can hurt you down the line.