Real estate investing comes with a lot of ups and downs, and negotiating is one of the main up-and-downs. Negotiation is a necessary part of real estate investment, but it’s not always easy for new investors. That’s why you need some good negotiation tips to help you make the best deal possible when the opportunity arises. Negation can be scary for anyone, but with practice and preparation, it doesn’t have to be difficult. Whether you are buying an apartment to rent out or looking for a commercial property to renovate and flip, you will encounter negotiation opportunities throughout your real estate investing career. Keeping these tips in mind while negotiating will make the process easier and result in better deals for you.
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Know your limits and stick to them
First, be sure you know your limits. If a seller is asking $150,000 for a property you think is worth $100,000, it doesn’t make sense to pay the full amount. You should be sure you have enough cash to complete the deal before making an offer. If you don’t have enough money ready, you won’t be able to walk away. Similarly, make sure you are able to handle the property’s cash flow. If you are buying a rental property and the seller won’t budge on the price, you may have to walk away. You can’t buy a property you can’t afford.
Don’t be afraid to walk away
Sometimes, even if you really want the deal, you will just have to walk away. This happens a lot in commercial deals, for example. If you make an offer on a piece of commercial property, the seller may counter with an offer that’s just too high. At that point, you have to decide if you are willing to walk away. If not, you have to decide if you are willing to go higher on your offer. In a residential deal, you may want the property so badly that you are willing to pay more than it is worth. If you are, that’s great, but if you are not, you should not feel bad about walking away.
Estimate repair costs before negotiating
In a commercial deal, you may want to consider estimating repair costs before negotiating. If you are buying a property and you know it needs new windows, for example, you can include that in your offer. The seller may want to accept your lower offer so they don’t have to find the money to replace the windows themselves. In a residential deal, you can do the same thing. If there are things that need to be fixed before the property is livable, you can negotiate them into your offer. This is a great way to get a lower price on a property.
Assume the worst and be ready for it
When you are negotiating, it’s important to assume the worst. For example, if you are buying a house, you may want a 10-year roof warranty. If you assume the roof will last 15 years, you may think you are being conservative. But the seller may assume it will last only 10. Based on that assumption, they may add a 10-year roof warranty to the deal. This means you will be protected for the full 10 years, and the seller won’t have to pay for a replacement. Don’t assume the seller will do the same for you. Negotiate for the longest and best warranty you can get, or assume the worst and be ready for a shorter warranty.
Negotiate everything, even if you don’t want it
If you are buying a property and the seller has a landscaping service, for example, you may want to add it to the deal. But maybe you don’t have any use for a landscaping service. In this case, it would be silly to negotiate for something you don’t even want. That would just inflate the price of the deal. However, you should still negotiate for everything you can get. This is called “asking for everything and hoping they give you something.” If the seller wants to close the deal, they will likely give you something, even if it’s something you don’t want.
Be courteous but firm
Real estate negotiations may be a competitive sport, but that doesn’t mean you have to be a jerk about it. It’s important to be firm in your offer, but you don’t have to be rude about it. In fact, being rude could cost you the deal. If you are rude, the seller may be offended enough to stick to their price (or raise it) just because they want to spite you. Remember that negotiation is a two-way street. The seller wants to sell as much as you want to buy. Being firm but polite will put both parties in a better mood to make a deal.
Summing up
Negotiation is a necessary part of real estate investing. If you are too quick to accept the seller’s price, you could miss out on better deals. Negotiation can be scary, but with practice and these tips, you can make it easier. Keep in mind that negotiation is a two-way street. The seller wants to sell as much as you want to buy. Keeping these tips in mind while negotiating will make the process easier and result in better deals for you.
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