Real Estate Genius Investment Software Blog

By Joseph McKellen

As a real estate investor, just about everything you do involves some negotiation. No matter how big or small the investment, you will have to negotiate to get the deal you want. In fact, it’s virtually impossible to be a successful investor unless you can negotiate competently in many different situations. Fortunately, it’s a skill anyone can become better at with practice.

Negotiation, not battle

Some investors go into negotiations with a confrontational attitude, aiming to squeeze every last penny and every single concession from the other person involved. You can summarize their approach as “I win, you lose.” The problem with this attitude is that real estate investing is all about relationships and reputation.

If you treat other people as obstacles in the way of your profits, then you will alienate individuals who could help you down the road. If you look at investing as a battle, you’ll destroy relationships that could be valuable to you. And you will certainly get a reputation as a nasty person to deal with.

Your long-term success as an investor depends on building strong relationships and earning a trustworthy reputation. Everyone prefers to work with someone they respect and like. Whether you’re dealing with a lender, a real estate agent, a buyer, or a seller, you want that person to feel good about working with you.

Here are some principles to follow every time you sit down to negotiate with someone.

Decide what you want and write it down

Set your objectives for the real estate deal - and make them reasonable. This includes deciding on your top (or bottom) price and any terms you want, such as your preferred closing date, repairs that must be made, financing conditions, etc. Keep those objectives firmly in mind when you’re talking to the other party.

At the same time, decide which terms you are prepared to compromise on, and which terms you absolutely must have. For example, you may be somewhat flexible on price if you get the financing arrangement you want.

Work towards an “I win - you win” deal

In a successful negotiation, both sides leave with something they wanted or needed. The key point is that what you want and what your opponent wants are probably different things. Figure out what the other person needs to get from the deal in order to be satisfied with it. Use your problem-solving skills to come up with an arrangement that suits both parties, where both parties can feel they got what they needed.

Be prepared to walk away

When you’re negotiating a real estate deal, remember that you are free to walk away at any time. This freedom gives you more power in a negotiation. Leave your emotions out of the process and don’t get too attached to a piece of real estate. Know that if you don’t acquire this particular investment property, another great investment will come along. It always does.

If the negotiations aren’t producing the results you want, you can stop the discussions. And this applies even if you’ve been negotiating for a while. End the discussion in a pleasant way - no need to be antagonistic. Express that you’d like to do business, but the deal on the table is simply unworkable for you. Always leave open the possibility of future negotiations if the other person comes up with a fresh idea.

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By James Orr

You have looked at 6 (maybe 12 deals) and you are finding it near impossible to make them cash flow based on collecting a reasonable rent and getting 30 year fixed rate financing.

Take a deep breath. This is one of the most common problems for real estate investors and what I believe to be one of the things that discourage many people away from starting a lucrative real estate investing business. There is hope though.

First, unless you happen to be lucky enough to live in or near a city that has a low income area where you can still buy “rental houses” where the values are about 100 times the monthly rent, you need to realize that finding these deals is like the Easter Egg hunts you had as a kid. You got to look at a lot of deals to find that special one that will work.

How many will you need to look at? It can vary, but I do not think that looking at 100 is out of the range of possibility.

What?! So, I need to look at 100 houses to find one that will work? Yes, you might need to look at 100 houses, making better distinctions about what might work and what will not work to find a good deal.

You may also find that putting out marketing to find motivated sellers makes finding these types of houses easier rather than just looking at houses that are for sale by owner or listed with a real estate agent.

Buying houses at a discount and/or with good terms can significantly improve your ability to make a house cash flow, especially if the interest rate on the terms you can get from a seller is much better than the current rate you could get from a bank or lender.

What if you have some houses that are very close, but none that will have positive cash flow? First, keep looking. Second, there are some ways to ethically increase the amount a tenant pays you in rent which could make a negative cash flow house a positive cash flow house.

For example, if instead of just renting the house, you sell the house on a rent-to-own, you can get payments that are on par with what your actual mortgage, taxes and insurance expenses are because they need to be able to pay your actual mortgage, taxes and insurance payments to afford that house.

When you interview your potential buyer, you explain that market rent is $1,000 (or whatever it is), but that if they have $10,000 to put down toward purchasing the house their mortgage payment with taxes and insurance would be $1,400 (or whatever it is).

You tell them they need to pay the $1,400 but that you will credit the $400 above market rent toward the purchase of the house when they do go out and get their own loan and buy the house from you. In the meantime, they rent with the payment that resembles your mortgage payment.

James Orr is a professional real estate investor and marketing expert.

You can subscribe to his real estate e-newsletter and access audio downloads, articles, marketing materials and educational real estate videos at his Real Estate Investing blog.

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