When it comes to making a real estate deal, there are so many factors that go into it. It can seem overwhelming to a first time investor. Today we are going to go over building the relationship with the seller, talking through the sale process, and closing the deal. We will cover all the essential negotiation tactics for buying real estate from local sellers.
First, it’s important to know what’s going on in the local market where you are buying. Doing your due diligence will help you determine if it’s a buyer or seller's market and what kind of leverage you might have. Look at what’s happening with prices and rental rates for similar properties in the area so you have an idea of where the market is headed and what kind of return on your investment you can expect.
It’s also essential to get all the details of the financing aspect of any potential deal. Build a relationship with a trustworthy bank who can help you understand all the costs associated with financing and weigh those against any savings from obtaining better terms. Also, be sure to research any applicable regulations that may affect the loan terms or financing options. Find a loan officer who will answer all of your questions.
You should also familiarize yourself with the local zoning regulations and restrictions associated with a potential property before making an offer. Knowing what business types are allowed in the area can help you make decisions about whether or not this is a good investment opportunity for you. Large businesses moving into or out of the area can have a huge impact on your ability to rent out a property and what rental rates you can get.
Finally, it’s important to establish strong relationships with other people in the industry in your area such as attorneys, real estate agents, inspectors and contractors who might be needed during the process of making a deal and renting out your investment. Having trusted partners who understand your needs and provide great advice will make all the difference when it comes time to close on a deal.
It’s best to be aware of all possible costs, regulations and market conditions before making an offer. When you feel very comfortable and confident with the ins and outs of the deal, it will help ensure that you make the best real estate negotiator possible. Now let’s go over some of the steps and negotiation skills you will need for real estate investing.
Negotiating in real estate can be intimidating and it isn’t always easy to know the best tactics to use. However, by understanding the basics of negotiation and following a few key tips, you can become an effective negotiator and get the most out of any real estate transaction. Here are some of the top negotiating tactics for real estate investors:
1. Do Your Research – Before you even begin negotiations, make sure you fully understand all aspects of the property such as its location, condition, renovations needed, recent market trends and values of similar properties in the area. This knowledge will help arm you with facts when it comes time to negotiate with sellers or their agents.
2. Understand Market Values – It is important to understand the fair market value of any property you plan to purchase. Knowing this figure will help guide your negotiations and ensure that you make an offer that is appropriate for the market.
3. Be Prepared To Walk Away – Going into a negotiation with the mindset that you are prepared to walk away at any time can be helpful in maintaining your composure and getting what you want out of the deal. Remember, it’s not personal; it’s business so don’t be afraid to stand firm if necessary. At the same time, you want to flatter the seller and tell them what you like about the property and show enthusiasm to help them feel good about their ownership.
4. Set Your Limits – Before beginning negotiations, use my real estate investing calculator app to run the numbers on your expected return. Use it to decide how much you can pay for the property and set limits on how far you are willing to go in terms of concessions or repairs needed before closing. Having these numbers in mind will help make sure you don’t go outside of your budget or spend more than what is reasonable for the property.
5. Make The First Offer – Making the first offer can be advantageous because it sets the tone for further negotiations and gives you a baseline to work from. It also helps you avoid offering too much at the beginning, as well as having an inflated sense of what the property is worth.
By understanding these basic tips and using them when negotiating real estate transactions, you can set yourself up for success and get maximum return on your investments. Negotiation does not have to be intimidating; with practice and preparation, anyone can become a successful negotiator. Be sure to check out my other investing articles for more details on building your own incredible passive income with real estate.