Who’s got the upper hand when buying an investment property? Buyers want the best price and sellers want the highest price. But where do you both meet? And how do you reach a settlement?
Both want to close the deal, so negotiations are inevitable. But how exactly should you negotiate when buying an investment property? Read through this blog for our top real estate negotiation tips when buying an investment property.
Be Familiar with the Market and Do Your Research
How many times have you heard that “information is power”? The same applies to real estate investing. Doing your research is very important when buying an investment property. You should never take things at face value. Furthermore, familiarize yourself with terms like asking price, closing costs, home appraisal, inspection, etc, when negotiating to buy an investment property.
Moreover, because it’s a seller’s market in the US, real estate market forces are not working to your advantage. Buyers in today’s real estate market don’t have much room to breathe, and sellers usually have the upper hand. This is why it’s more difficult to negotiate in a seller’s market, and specifically why you have to gain an advantage – usually by having the right information.
To optimize your real estate research, use Mashvisor. Mashvisor allows you to gain insights on investment properties in different cities and neighborhoods. Our rental property calculator provides information on traditional and Airbnb average expected rental income, cash on cash return, cap rate, occupancy rate, optimal neighborhood and strategies, among other information. Make sure to check out Mashvisor’s numerous features when buying an investment property to gain an advantage information wise.
Check Your Finances
Before you make an offer, you need to figure out how you’re financing your investment property. To be able to negotiate your best, know how much money you are capable of investing, and what profits you’ll be able to generate when buying an investment property. This will give you an idea of how much you can bargain with the seller. Make your offer as appealing as you can but still leave room to increase it. This will help you maintain a strong position when negotiating and will give you the flexibility to do so.
Above anything, you need to make sure you have sufficient funds to buy an investment property. If you’re just starting out in real estate investing, it can be a little challenging, but there are numerous ways to save money to make money in real estate. Make sure to make saving a priority, budget carefully, and cut back on your expenses wherever you can. It sounds easier said than done, but making small changes can pay off in the long run.
Consider Consulting with a Real Estate Agent
If you’re buying an investment property and just starting out in real estate, definitely consider the help of a real estate agent. Real estate agents have years of experience in the field and can give you expert advice and real estate negotiation tips. Agents speak and negotiate with many buyers and sellers in their line of work, so make sure to take advantage of their knowledge and experience.
Communication is very important in real estate negotiation. And again, because of the fact that it’s a seller’s market, there’s not much room to be ambiguous or unclear. Make your offer clear and make your general stance clear. You don’t want the seller to be guessing what you mean or guessing about your offer. Make what you want from this deal clear and precise. Apart from direct communication, try to pick up non-verbal cues that the seller may be projecting. You can tell, for example, whether he/she likes your offer by noticing facial expression or body language. Good communication can make buying an investment property a much smoother and easier process, so practice it well!
Don’t Get Hung Up on Small Things
Some things are not worth getting hung up on. Don’t miss out on a great real estate investment deal because you’re negotiating a few thousand dollars or thinking the property décor is not nice. If you’ve figured out your finances, you should have an idea of the interest you need to pay and you can weigh out how much you can modify and adjust accordingly.
Another tip that we can offer is that you should leave your ego aside. This may sound like a no-brainer, but some real estate investors risk losing a whole deal just because they want the last concession. So don’t put yourself in that position altogether when you’re buying an investment property. And unless the home you’re buying is your own, don’t get emotional or too caught up in minor details.
Move Quickly and Swiftly
Timing is key when it comes to real estate negotiation when buying an investment property, especially when buying an investment property in a seller’s market. And it’s tricky: if you act too fast, you may not get everything you want out of this deal. But at the same time, if you wait too long, the property can fly off the housing market.
Also keep in mind that when you’re negotiating, you don’t want the process to end too soon. You want more friction between you and the seller, to a certain extent. You want to make sure that you get the most out of the negotiation process, rather than settle too quickly. At the same time, you don’t want to stall for too long and lose the real estate investment deal. After all, you’re often not in a favorable position. If your offer isn’t appealing to the seller, there are other buyers willing to jump in at the same opportunity.
All in All
Real estate negotiation when buying an investment property can be strenuous and frustrating at times. Even so, remember that both you and the seller want to get the most out of the deal. The seller is not an ‘enemy’ of yours, nor is he/she working against you. So try to work together during the negotiation period to reach an arrangement that you’re both happy with.