Just like any other industry, real estate is a highly contested sector. The only way for professionals to get ahead is to negotiate for better deals.
Multifamily investors, in particular, will have to work extra hard to find lucrative deals. In terms of finding the right properties with the best cap rates and net operating income or NOI, negotiation is everything. One thing’s for sure, properties with high market values are often difficult to acquire.
I know for sure that first-time investors encounter difficulties along the way, and negotiations are usually the most tedious of these. Making an offer to buy multifamily properties is far different from when you are opting to purchase single-family properties.
Quite often, you will be lucky enough to arrive at a contract price that’s close to best. Most of the time, you don’t get your terms approved at all, the reason being you didn’t negotiate the deal well.
Apparently, it’s difficult to get inside the head of a seller. However, using the right tactics, it’s still possible to steer a negotiation towards a favorable conclusion. It’s only a matter of becoming an effective negotiator using these fundamentals. I have found a way to try to work with only listing brokers as they know the temperature/motivation of the sellers and by making them your broker also, there is no vacuum in between. This results in better negotiations.
Stick to your goal
A good negotiator is someone who never lets go of a goal. If you want to buy an apartment complex for a good price, it helps to focus on steering the discussion towards your target price. By thinking about your goal, you are able to come up with clear strategies on how to get a seller to agree with your offer.
To do that, you can create a flowchart that allows you to anticipate a seller’s responses and come back with effective counter-offers that lead up to a surefire sale.
Do your research
Prior to meeting with a seller to discuss terms, you will need to conduct serious research online on the property as well as the real estate market itself. Research is all about precision, so make sure you gather all the intelligence you need for coming up with irresistible proposals.
You can simply research about property prices in the area and make comparisons. Then, try to determine if the community is an emerging market. You can get demographic data from city officials as well as other real estate investors. Finally, you can do a simple drive by along the street where the property is located. Take notes of the amenities that are available on the outside as these can be a factor that explains why the property is expensive.
Offer inspections
Considering the fact that you’re buying the property, sellers will make sure to get a higher sales price. To protect your interest, you as a buyer will have to focus on protecting your investment from the onset.
So, before agreeing to the terms on the contract, you need to bring up the issue of conducting property inspections. This should involve inspecting all rental units within the apartment complex and not just a handful of rooms. You may also want to negotiate with a seller whether or not you should offer an agreeable financing option. This is to ensure that the transaction and sale go smoothly.
Be positive
As always, I tell my students to be optimistic and confident as they negotiate with a seller. It’s hard at first. When I started investing in multifamily, I was not a good communicator. Eventually, I realized that I can achieve a lot more if I learned how to improve my communication skills. So, I spent time training myself until I became more confident.
In just a few years’ time, I was able to improve the way I talk. I owed it all to my positive attitude for helping me establish numerous syndications in my 12-year career in syndication and 35 years of investing in real estate. An optimistic outlook can do wonders, so if you’re out purchasing multifamily properties, don’t forget to smile!