6 Strategies to Negotiate for Your Investment Property

I don’t have to remind you how incredible of an investment real estate could be.

It’s lucrative, it’s predictable, and the barrier to entry is…

Expensive.

But if you equip yourself with a deep understanding of the local market, real estate, the human mind, and a decent wad of cash, you’ll start to see that investing in real estate isn’t as far-fetched for you as you think.

Let’s get into it.

What Do You Even Have to Negotiate?

The truth is, that even though real estate is one of the most profitable industries to invest in, there's a lot of competition for practically everything.

Given that you're reading this article, I'm going to assume that you're interested in investing in a property for rental income. In order to achieve this on a scale big enough to be able to live off of comfortably, you're going to need to master the art of negotiation.

Why? Because from the construction of the site, all the way to the renting out of it you’re going to have to deal with people. The persuasion of people to be specific. Knowing the ins and outs of not only the real estate game, but also the human psych can prove invaluable to your career as an investor.

Strategies to Negotiate Construction Costs for Your Investment Property

Without wasting any of your precious time, we’re going to outline the key strategies when it comes to successfully building a rental property.

Starting with…

Do Your Homework

This strategy is first for a reason, you absolutely must deeply understand your local market before you even consider building a property on the land.

What is the value of properties like this around the area? Who else is interested in buying this land and for how much? How much did the house across the street sell for last month? It’s things like these that you as an investor must be aware of.

Because if you’re not, you could end up finding yourself being taken advantage of by the opposite party in the negotiations, and neither of us want that to happen.

It’s also critical to get accurate prices for how much the project will cost, so you’re not met with any surprises during the entire operation. There are a lot of estimating companies out there to provide you a budget that suits your needs to the tee.

Investigate Your Site Thoroughly

This ties along with doing your homework, but instead of focusing on understanding the real estate investment aspect of it, we’re going to focus on the construction side.

Whether you’re building an investment property from scratch or buying it already built, it’s very likely that there is some construction work needed before the entire rental property is ready to start providing you income.

Make sure to investigate the future project site thoroughly, if it’s an old house that needs renovating, make sure you know exactly what’s needed (there are many takeoff services to help with that.) and how much the real price tag on the property is.

If it’s an empty lot, then you need an accurate preliminary budget and a strategy behind it before you build.

These may seem like obvious tactics but being a certified estimator myself I see new developers not do their homework and end up being hit with a lot of complications on what should have been a simple investment operation. Don’t let that be you, make an effective plan and execute on it.

Know Who You’re Talking To

This is a key factor in the entire investment property process. How much you’re actually spending to acquire the property.

First, let’s identify who you’re going to be dealing with.

Whether you’re building it from scratch, or pulling one of those buying then renovating cards, the main people you need to negotiate with are the contractors you hire for your work, and the real estate agents handling the buying/selling process.

As for the contractors completing whatever construction work is necessary, you mainly need to focus on hiring the best possible General Contractor that can do the job for you. Sure they’ll eat up a portion of your bank account, but the truth is that if you’re new to the game of building properties, you’re just not as well-equipped to manage construction projects as an experienced GC who has been doing the exact same thing for decades.

Real estate agents on the other hand, are expert negotiators (it’s their job) and as such, as a newcomer to the scene you might have some difficulty handling this. But not to fear, here are some key principles that you can apply to your negotiations that can get you to the exact price you’re looking for:

1. Strive for Win-Win

Negotiations don’t have to be all about you winning. Having a situation where both parties leave the table happy and satisfied should be the ultimate goal.

2. Focus on Knowledge and Authority

Come in prepared for anything.

Information + Correct Body Movement = Authoritative Negotiator

3. Ask Really Good Questions

Get to the bottom of what the other side of the table really wants for the property, ask revealing questions that expose what they want.

4. Listen and Build a Profile for Who You’re Talking To

After asking the right questions, listen to every single word they say in response. Build a mental list in your head of what they want and use it as ammo to give them the best deal possible.

5. Make Correct Gestures

As much as 90% of what’s communicated in a negotiation is nonverbal! To effectively display authority and dominance, make sure to follow this list.

Leaning forward in seat, keep arms and palms open, maintain friendly eye contact, place feet flat on floor, follow counterpart’s rhythm, smile, nodding, touch lips with index finger, tilt head slightly, and last but not least, stroking your chin.

6. Build Trust

Don’t get too caught up with yourself in the negotiation, serve the other person. Strive to make the situation a winner for them just as much as you. This genuine approach will get a lot of business done.

Know the Trend

What’s the trend around the property? Around the real estate market?

It’s important to be extensively caught up with the news and what’s going on around the housing market. You don’t want to be caught in a bad place, and since many prominent names in the industry predict a crash in 2020, this is critical right now.

Real estate is a long-term game, keep up to date with trends and ride the waves to your benefit to be successful.

Patience Leads to Satisfaction

During an actual negotiation, it can be very tempting to rush to conclusions to get a deal done.

Deploying patience can kill off those poor intentions, and plus, giving people time to think over what you said often leads to them rushing to a conclusion and accepting your terms.

People overthink a lot, and people are also very impatient, so capitalize this in your pitch that practically allows the opposite party to bend to your offer.

Go in With the Right Mindset

Have a specific goal in mind when coming to the table. What are you willing to pay to acquire the investment property? What are you willing to pay to build the investment property? Do you want to build and sell for a large one-time profit, or do you want to rent it out for a smaller, steady stream of income forever?

Know exactly what you want and get to know exactly what the other party wants and put in the effort to help everyone get as close to what they want as possible.

Before You Close the Deal…

Don’t be afraid to take a stand for what you want though, it’s important to serve the other party but don’t get taken advantage of. If you’re negotiating with someone acting selfishly or greedy, it’s better to cut it short.

This can save you a ton of stress and unnecessary drama revolving the pricing around the property.

Conclusion

The moral of the story is to be very aware of what you want out of the deal, and strive to get what you want, as well as try to give the other person what they want as well.

Negotiating for cheaper costs to acquire investment properties can be tough, but follow the principles outlined in this piece combined with your personal touch, and you will find success at the negotiating table.

I hope this piece brought you a ton of value, and if it did, I’d really appreciate if you left a comment and checked us out at our website.

Thank you, and good luck in your real estate journey.