Learning to Negotiate Better is Essential for Every Real Estate Investor

Learning to Negotiate Better is Essential for Every Real Estate Investor

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Investing in real estate involves a lot of deals. You’re responsible for finding and buying a property. Then, securing financing to purchase the property. From there, it’s about negotiating contracts to make necessary repairs or upgrades. Finally, you’ll be convincing tenants to sign long-term leases. Every step requires a new deal, which means one thing: Negotiating.

Table of Contents - Learning to Negotiate Better is Essential for Every Real Estate Investor

Because there are so many deals involved in the real estate investing process, good negotiating skills are essential. Deal-making is an art-form. If you’re not comfortable aggressively negotiating your mortgage rate or working with a seller to move the sale price of a property down, you’ll need to brush up on these skills.

Thankfully, deal-making isn’t an inherent skill. It’s possible to hone your negotiating skills to provide yourselves with better real estate investment outcomes. While improving your negotiating abilities does take time and effort, it’s always a worthwhile endeavour.

Negotiating tips for investors

While every negotiation will look a little different, there are a few golden rules to follow as you approach your next transaction:

Let the other party speak first

You should never make the first offer. Instead, let the other party establish the baseline for the negotiation. For example, they may set the tone by introducing a price lower than you originally anticipated. This will let you drive an even harder deal, improving your profitability on the investment in the long-run. If you introduce a higher offer right off the bat, the opposing party will know you have money to spend.

Listen more than you speak

Get comfortable with long periods of awkward silence. While these periods may be unsettling, they’re important to your negotiating strategy. If the opposing party makes a counter-offer, don’t open your mouth right away. Instead, let a long period of silence fill the air. Doing so might cause the other party to introduce a more favourable offer in an attempt to “break the ice.”

Get as much information as possible

When you’re negotiating, information is your most valuable asset. While money is certainly important, it will rarely win you a negotiation in its own right. Instead, you should emphasize the information you know, and leverage it to secure a better deal. For instance, you might be able to offer a more favourable closing date than an opposing bidder. The seller might select your lower offer to take advantage of the superior closing date.

Punish concession requests

Whenever an opposing negotiating party offers a concession, you should penalize them. If a party asks for you to cover closing costs, for instance, you could introduce a “waiting period,” by telling them you need to think it over, and you’ll call them back later in the week. Every time the opposing party reaches for a concession, think of a new way to penalize them. It helps prevent pushback and establishes your authority as the “leader” in negotiations.

Resistance isn’t a bad thing

Chances are, after a long negotiating period, you’re going to feel burned out and exhausted. This feeling is good. If a negotiation goes smoothly, you or the opposing party are likely going to feel some serious regret later on down the road. If a transaction occurs without a little bit of tension and friction, you probably didn’t push the other party nearly as hard as you should have.

Enter without an ego

People who fancy themselves as expert negotiators are often more interested in feeling like they “won” a negotiation, as opposed to securing a better financial outcome. Every time you go to the negotiating table, leave your ego at the door and focus strictly on the financials. If you can get a better deal by stroking the ego of your opponent, so be it. Try to let them win as many Pyrrhic victories as possible.

Secure the best deals

While negotiation skills are significant, they’re not the only thing that will determine whether you’re getting a good real estate deal. Here are a few other things you can do to ensure you’re getting the best possible deal when you acquire or sell an asset:

Ask the seller to pay closing costs

When you’re acquiring a new piece of real estate, you should never pay the closing costs. Always ask the seller to pay the closing costs. Most motivated sellers are eager to close the transaction and will be more than willing to eat these expenses. This can save you thousands of dollars on every transaction you make.

Try to keep as many extras as you can negotiate

If there’s a nice refrigerator and brand-new laundry appliances in the home or multifamily building you’re buying, make sure they stay there. You have nothing to lose by asking to keep appliances, furniture and other extras on the property. You might keep these assets in the building after closing the deal, or you could sell or auction them off at a later date.

Buy during an off-peak time

Another way to minimize the amount of money you spend on each real estate transaction is purchasing properties during off-peak seasons. Most home sales occur in the spring and summer, even in regions where winter weather isn’t a moving factor. Shopping for your investment property in fall and winter can save you a significant amount of money.

Find the right lending product

Getting a good deal on the property itself is only half the battle. Once you’ve selected a property you want to purchase, you’ll have to find a lending product to finance your acquisition. Find a mortgage with a low-interest rate and low fees. Remember, it’s also acceptable to try and negotiate the terms of your mortgage, as well.

Your ability to find good deals and drive a hard bargain will determine whether you’re a profitable real estate investor. You have to identify ways you can minimize your expenses and optimize your profit potential. Once you become comfortable negotiating, you’ll quickly realize it’s the key to success in many situations on the road to becoming wealthy.

Real-Estate Negotiation Strategies & Tips 101


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Scott Dillingham

Scott Dillingham

I have been investing and lending to real estate investors for nearly 10 years now. After thousands of successful deals between flips, rent to owns, student properties and commercial assets I have developed a deep knowledge of real estate investments and have a passion of sharing this information with the world! If your looking for a lender who specializes in rental property financing you're going to want to connect with me at team@lendcity.ca.