6 Steps to Masterful Real Estate Negotiation (to Land the Very Best Deals!)
Let me start with a real life story. I bought a house for $15,000 dollars, and perhaps no other investor would have looked at it, because it was painted with graffiti and looked rather messy. Here’s the thing, though — the property was located in an area of Australia where the average price of a house in is nowadays around a million dollars. So, you can understand that buying this house made me famous as the guy who bought the cheapest house in Australia. But the story doesn’t end there. I also managed to sell the house at an approximate value of $75,000 dollars. That was when the media got really interested, and if you Google right now for the cheapest house in Australia, you’ll still see top posts talking about this story.
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However, this blog post is not about how I got my hands on this property, but it is about the most important skill I put to use to get it: my negotiation skills. But unlike what most people make the mistake of thinking, negotiation isn’t just about going out there dressed in a black suit and tie and talking smoothly — it is much more. It involves a lot of background work, and that’s what we’ll go through today.
6 Steps to Masterful Real Estate Negotiation (to Land the Very Best Deals!)
Step #1: Network.
The first, foremost, and most important thing to get started on is to network in the markets. In real estate, your network equals your net worth. My journey into real estate to where I stand right now happened through a lot of networking. I quit schooling at the age of 14, so I had little formal education. But I’m a pushy go-getter kind of guy, which got me places. From that point on, I grew, mostly by asking questions of people who were where I wanted to be. I found out who was best in the market and networked with them.
I recommend you to do the same. Copy the best, and don’t waste your time on reinventing the wheel. So get out into the market and network with everyone relevant to your line of work. Network with other investors, wholesalers, potential house sellers, real estate agents, and even regular people you might meet on the street. Make sure you are perceived as the approachable, go-to real estate guy.
Step #2: Do your homework.
No one becomes a real estate expert overnight, so do your research before you venture into the market. This gives you an upper hand in negotiations because you will appear as a well-informed and thorough negotiator. Do as much background research as possible. Familiarize yourself with the numbers, especially those who are relevant to your area. Be a market expert in the markets you are looking to invest in.
This means that you have to know what is on sale, what is likely to come up for sale and what houses have already been sold. You have to know about the ones that got sold, along with the values they sold for. You must also know what foreclosures sold for and what the average selling prices are for a one-bedroom apartment or a three-bedroom one, both furnished and unfurnished. Find out who the main players in the market are. This would include the property management companies and the individual real estate agents.
Step #3: Submit deals daily.
Armed with all your information, get into the market and submit offers on a daily basis. Here’s a phrase you need to remember: “Throw a lot of crap at the walls, and some is bound to stick.”
With my turnkey company, we have bought over 30 properties from Craigslist in 2014. We submit offers as soon as we see a good property. If you are willing to use Craigslist, I recommend that you quote less for your proposals. So if a property is going for $100K, submit your proposal for $50K. Sellers may say you’ve lost your mind, which is just part of the process!
However, just like the “cheapest house of Australia” deal, one time out of 100, there’ll be a desperate seller, and that’s when you know you’ve gotten a good deal. These low-ball offers can work out to become game-changers for you. Also, if you aren’t a company but you are a single investor, I still believe that you should submit low ball offers daily, weekly, and monthly. I’m sure you’ll eventually snag a bargain deal.
Step #4: Take all emotion out of your decisions.
While you submit offers daily, there will be many occasions when you come across a house that really appeals to you, mainly because it’s a nice-looking property. But remember, you cannot buy a house based on emotions. So, just because a house looks pretty doesn’t mean it is going to be profitable.
Another aspect that I’d like to stress here is reality TV shows — and why I hate them so much. Real estate is not a pretty business; on the contrary it is a fairly ugly one, but real estate shows make them seem otherwise. In the real market, you lose money every day, but what is more important is that you make more than you lose. So don’t fall for the real estate show delusions — don’t buy properties based on their looks rather buy them based on numbers. Base your decision on comparable sales, potential profits, region, etc., as these parameters will help take away emotions from your decisions. This is of extreme importance, especially during negotiation.
Desperation is another emotion that shows up regularly with investors. When you’re out there negotiating, don’t show any signs of desperation, even if it means the world to you. If you put yourself in a vulnerable position and show you are desperate to sell or buy a property, you’ll be playing a losing game from the get-go. If you are desperate, you become an easy target. Instead, choose to walk away if people try to put you in a corner. Over time, there have been many deals where I have chosen to walk away, even if the amount was as small as $50. This will make you appear a tough negotiator, and people will soon start sending you deals. So, remember this. Once people know that they can’t mess with you, they’ll respect you more, they’ll be back, and they’ll send better deals your way. Makes sure to put your money where your mouth is and perform when you say you will.
Step #5: Make yourself sound big.
When I started working in real estate, I was just 23 years old. People would ask me questions I couldn’t answer. I learned to speak with confidence very early. I also learned that even if you don’t have a single transaction under your belt, you should still go around calling real estate agents and home sellers. Speak with confidence and conviction even if you do not have much experience in real estate.
Step #6: Keep a level head.
Finally, here are some more things to keep in mind. While negotiating, never react too strongly to a situation. Stay calm and collected, and respond in a diplomatic way. Once your network knows who you are and what you do, you won’t have to look for deals anymore. More deals will come your way, making you feel like a kid at a candy store. But here too, I recommend that you choose with care.
Instead of buying properties in different cities where other players are involved, stick to one city. To make this more effective, I recommend that you stick to one kind of market. So, I’d rather become big in one market and become well known in that market than venture into another market. You can’t have a foothold in every single market, so stay put and become an expert in one before venturing into another. Also, remember to have thick skin. Real estate tends to bring you face to face with a range of people, so accept the GRONK people as steps to the way of learning. And most importantly, remember to love what you do. Your whole life should revolve around it. And when you focus on all these little steps, the seemingly big skill of negotiations will come automatically and effortlessly to you.
Investors: Have any tips for negotiating great real estate deals you’d add to this list?
Leave your comments below, and let’s chat!