When investing in real estate properties, there’s a lot of important information you’re going to need to know. These can range from learning basic real estate legal topics to profit projections to making a comparable market analysis. Of course, not every deal is going to work out, for one reason or another. But that’s why it pays to learn real estate investing negotiation skills, basic real estate legal topics, and learning how to create an investment bird-dog team that finds winning properties for you. You need to be ready when the right moment arises.
You really have to be constantly learning in order to make it in real estate investing. I’ll be presenting more and more topics on the topic of real estate investing adding to the topics covered here. Right now I’ve presented important topics for you to consider when investing in real estate, whether you’re going to be flipping or holding on to them as income-producing property. Read the following points, write some notes for yourself, and think about some ways you can apply these strategies to your real estate investments.
Always do the numbers before you even look at the property. Why waste your time looking at a home that won’t even give you a profit? This doesn’t mean to write up a detailed statement on the possible real estate investment. But have a general idea of how much you’re willing to pay for this house before going into any type of negotiation.
Never put down or insult someone’s home. Always remember that this person is currently living there – they don’t want to hear that it look like a broken down shack! If you’re carrying a checklist while crossing off items and groaning and shaking your head, sellers will get very upset with you and will not negotiate with you. They may even throw you out of the property! Be complimentary about the house – including furnishings and any additions they’ve done. Ask questions about nice features in the house in order to keep the vibe positive and create a bond with the sellers. There are going to be so many other people trying to make the house seem like a slum in order to have the sellers drop the price – if you do the opposite, the sellers will drop the price lower for you on their own because they trust you and want to negotiate with you!
Always assess the investor demand of the property. Are there other real estate investors also looking at the home? Have there been other offers? This plays a huge role on the amount of offers and counter-offers you can make. If let’s say you ask the seller to make the first move on naming a price to sell the property for. The owner comes back with a number just below what you’re willing to pay for it. If there’s low demand, make a low-ball offer – and be prepared for multiple counter-offers. If there are multiple investors looking at the property, or this is a brand-new property on the market, you may want to make your offer right around what the seller asks for. If it makes sense in the numbers and you know you can make a profit, then go for it! Sometimes we fail to act on prime real estate investment opportunities because we need “to run the numbers one more time” and while you’re doing that, another real estate investor has snatched up this profit goldmine. Don’t hesitate, act. If the deal is that good and you’re absolutely sure it’s a good investment, then sign an agreement right there on the spot!
Never be the first to state a price for the property. Of course as a real estate investor you’re going to be interested in almost anything as long as it has the right price and terms. Let the seller make a selling price offer first. Whoever speaks first loses! Let’s say you’re looking to buy a residential property. The seller asks you how much money you would be willing to pay for the property. You respond by asking the owner how much he’s looking to get for the house. “I don’t want to bicker back and forth, but I would just like to know what you’d consider a fair price.” or “What price do you need for home?” or even better “I don’t know, I mean I like the house, what would you consider to be a fair price for the home?” Play the fool. Pretend you’re not as smart as you really are and you come out on top. If you come out as a know-it-all, “Well my calculations state this house should have a market value of $956,709.30 due to the square feet size relative to the comparable recent sales on the market”, they’re not going to negotiate with you. Let’s say you’re desperate on time and the seller refuses to state a solid price. Quote them a price range, “I would be willing to pay between $100,000 and $120,000.” Let’s say they say that they wanted to get more money, but maybe they can go somewhere on the upper range of that ($120,000). Here’s a tactic: Look at something in the house again, pretend you didn’t notice something positive the first time you checked, and that indeed you can go higher (ex. $125,000). Have them sign the contract on the spot.
It’s generally not worth your time to sue in order to fulfill a contract. You’re usually better off dealing directly with the issue and not going through the legal system. You’ll waste a lot of time and a lot of money. Of course if you have to sue, then you have to sue – but many times this can be avoided with some quality negotiation. Let’s say there’s a divorce settlement between an ex-husband and ex-wife. You’re buying the property from the ex-husband. However, the settlement says that the ex-husband receives title to the home once he pays the ex-wife $7,500. However, he’s never paid this sum and the ex-wife has never asked for it. So you’ve gotten the ex-husband to sign it. You’ve contacted the ex-wife but she doesn’t want to sign it, even if you give her the $7,500, because she thinks he’s selling the house for too little to you. Prepare a letter to the ex-wife saying what you’re willing to give her (the $7500) but put a time-limit on the offer, let’s say 4 days – otherwise she doesn’t receive the $7,500. Try your hardest to get this person on the phone. Talk to them like a friend, ask about the home. Tell them you’re prepared and willing to pay that $7500 and that it’s your best offer. Get this person to like you and trust you as much as possible. Tell this person about some of the nice features in the home. Talk for 30-45 minutes if possible so you can get to know each other. Get this person to call you back the next day with a decision if they don’t make a positive decision that moment. If you get them on the phone and they say I’m going to have to reject this deal, tell them just think it over tonight and change this subject back to the home and build rapport with them. If it’s not a positive decision always make sure to get them to think about it and tell them some benefits to them agreeing with what you’d like them to do. Remember it’s about how it benefits them, not benefits you.
Create a web of people who refer sellers to you of potential real estate investments. If you close a deal that they found for you, offer them cash – perhaps a check for $500 upon closing. This will bring better and better deals for you and enough referrals of quality investments that you’ll have a stack of potential quality investments to look at.
If you’re working by referral and you get the name and number of a potential seller, always tell them how you got their name and number. Drop names they will be familiar with. “Hi, may I speak with Nancy please? Hi Nancy, this is Michael Emilio, our mutual friend Richard Patrick told me you may be interested in selling your home?”
