Everybody tells you something to the effect of: “If you want to establish a competitive advantage you have to have an edge.” The problem with this, of course, is how do I “get an edge” while still staying legal?
Today, I am going to give you one small mindset shift that will give you an extremely competitive advantage when it comes to talking with sellers. But you are going to have to read this article in it’s entirety to truly understand the impact of what I am about to tell you.
I’m about to tell you how this very mindset led into my latest triplex deal, but before we get into that, let me tell you about another way you can adjust your thinking for non-real estate transactions.
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One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
The Reason Jon Didn’t Sell His Bronco For Top Dollar
You see, my neighbor Jon and I are great friends. We share an alley together in the middle of the city and it’s on a very steep hill. Therefore, together we occupy a little kingdom and we do our best to have as much fun as possible.
We are both self-described rednecks who enjoy urban living. I have a burning barrel and some animal traps where I catch squirrels, possums, (any kind of wild animal I can really) and He has a collection of Ford Bronco’s. We also are in the middle of building a zip-line, which of course is an insane amount of fun!
Anyway, we are outside this cold Sunday morning and he’s telling me he is selling one of old Bronco’s that isn’t running.
Full Disclosure: I’m not a car guy at all, but Jon is a Ford Bronco nut, so I’ve learned a lot about this. In-case you didn’t know Ford Bronco’s (especially the big-box style) are in very high demand.
I said, “Out of all the people who wanted it did you just choose the highest bidder?” and he responded (with evil eyes), “Hell no! Most of the jerks just wanted to scrap it for parts. Hell I couldn’t do that! I sold it to a kid in high school who is going to rebuild the old thing back to its former glory!”
Now that’s what I’m talking about!
As a banker and real estate investor it’s easy for me to just focus on whatever the spreadsheet is telling me in terms of analyzing a deal. All the while, sellers (especially motivated sellers) have an intrinsic desire for whatever type of property they are selling, and usually money is not the highest priority, despite what they are telling you.
How You Can Leverage This For Real Estate
Find out the true intent on why they are selling! This is very hard when dealing with real estate agents…but not impossible. I suspect this is one of the reasons Ben Leybovich requires that he meets face to face with his sellers.
My latest triplex deals was a great deal (I think) and I’m very excited about it. It was a very cordial conversation without dealing with third-parties. Everything went fine and smooth until closing time…
I’m not the best reader of people’s minds but I could tell something was bothering this lady and she was about to tear-up. Instead of asking her to gush out her feelings I simply told her she was welcome to visit the property anytime, just give me 24-hours notice. Her eyes shot-up and she smiled and said, “Thank you.”
You see, this property had been in her family’s possession for multiple generations. She needed to sell for reasons I’m not going to get into, but the important part is that there was a non-financial reason that was potentially blocking this sale.
Do Not Be Ignorant To This!
It’s way too easy to get locked into spreadsheets and jump in the BP forums and start debating on that 2% rule. (Note: I disagree with the 2% rule because I rarely see people calculating their returns correctly using this rule. The vast majority of people who talk about the 2% rule forget maintenance expenses. I’ll just be up-front and honest and say I think the “rule” is meaningless)
Instead of just focusing on the cheapest price and wearing down sellers – focus on their non-financial goals. Focus on their goals as a person. By doing this, you will win over their trust which is far more powerful when negotiating than arguing or intimidation.
Do you see it now?
Share your thoughts and comments below!