One of the best strategies when investing in property is purchasing at a discount. You save money and create immediate equity. In most circumstances the asking price quoted by the selling agent will most likely be more than the owner is willing to take for their home with vendors expecting the price to come down as part of the negotiation process.
So how much should you offer when negotiating for your next investment property? Remember the real estate agent is working for the owners, not you, and will probably recommend you make an offer close to the asking price.
Unless you use a buyer’s agent to help facilitate the purchase on your behalf you have to rely on your own research and negotiation skills to get the best deal possible.
Here are five tips which will help you better negotiate any property deal.
1. Do your homework
Real estate investors need to become information-gathering experts when it comes to researching your next investment opportunity and negotiating the best possible price.
Some points you can research include:
– Rental yields
– Average house prices over the last 12 months
– Visit the local council or government department to check out the new infrastructure projects planned,
– Research as many houses as you can to obtain comparable sales both on the market and recently sold.
Any information you gather will be useful in negotiating a deal. Its now so affordable to access real data on a property, or even multiple properties and the street sales. You can now generate reports online for an affordable price which will give you ultimate negotiation power.
2. What costs can you line up to help discount the price?
Tallying up the defects of a property or negative selling points is a good way to help in convincing a seller to drop their price in the negotiation process. To use this strategy it is important to do your homework and have attention to detail.
Examples of costs to help you negotiate include:
– Maintenance issues that have caused leaks, collapses, etc
– Cosmetic issues such as peeling paint, old flooring, cracks in brickwork, unclean or poorly maintained areas
– Structural issues – these can be noticed if the floor or ceiling is sagging or appears damp
If you’re ready to make an offer, you could consider having a building inspection done for as little as $500. Imagine what you could negotiate with that information in your hand!
3. Sellers Motivation
Gather as much information about the vendor as possible. Discovering certain facts will make you more knowledgeable about the property and the vendor’s circumstances which may provide an opportunity to negotiate a lower price.
Some questions you should consider asking:
– Has the seller already commited elsewhere?
– Is the seller moving cities?
– Has the agent received any other offers for the property?
– Why are they selling?
– Is the price negotiable
It’s a good idea to find sellers who actually do need to sell their property and are therefore willing to enter into some negotiations about price or conditions of sale in order to close a deal.
4. Present documents to support your negotiation
There are certain documents you can collect to use as “evidence” to back up your negotiation strategy. This paperwork may work to convince even the most unrealistic sellers of the true market value of the property.
Examples of documents include:
– A valuation that supports the price you are offering
– Recent house sales in the area
– Defect reports on the house
5. Start Low & Set your limit
When making your first offer, always start by offering less than the asking price and allow yourself room to move up if needed but set your limit. Remember; when investing in property it is all about the numbers so if it doesn’t stack up be prepared to walk away.