Negotiating is probably the most difficult single aspect of any business model to master, simply because it requires the subjective prediction and interpretation of another person’s idiosyncratic tendencies. Unless you are psychic, understanding and anticipating what people are thinking can be an extremely tall order (especially for the inexperienced negotiator).  One of the most common modes of negotiating disaster is when one party allows itself to be bullied into an unfair contract.  This does not necessarily mean the opposing party is mean or nasty, it simply means they are exerting negotiating force where it does not belong (like a bully fighting in school).  Especially considering the poor state of our economy, people (sellers in particular, who have been backed into a financial corner by current market conditions) look to save every penny they can.  There is a whole class of sellers out there who wield the confidence, savvy, and fuzzy ethical boundaries required to bully a buyer, even in this recently-unprecedented buyer’s market.

The best way to protect yourself in any negotiation is to be prepared.  While you can’t necessarily prepare for your opponent’s strategies or behavioral tendencies, you can certainly be knowledgeable about the facts.  That means knowing exactly what the property in question is worth, in the current market.  Don’t let the seller tell you about how much he paid just five years ago, and about all the improvements he’s made since then.  The fact is, it’s a bad time to sell, and you—the buyer—hold the chips.  Don’t get fooled into paying more just because the seller had to pay more.  Whether you are an experienced investor or this is your first purchase, it is essential to hire a professional inspector and appraiser, in an effort to be as informed and prepared as possible going into your negotiations.  If the seller tries to high-ball you, you can site the deficiencies uncovered by the home inspection or the lower appraised value on the home (both official accounts and strong support).

If a seller is bullying you in this kind of market, it should be treated as nothing more than a bluff.  Stick to your guns and don’t overpay.  The seller is either a smart negotiator (and will reduce the price eventually, knowing that he holds very little leverage), or is incredibly stupid (and should be avoided on the fields of real estate battle in the first place).  Either way, in the current market there are far too many listed options available with motivated sellers, for buyers to be getting taken to the bank by bully sellers.

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http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

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Investing in real estate—especially for those who are relatively new to the business—can be exhilarating. It is fun, exciting, nerve-racking, tense, sometimes joyful, and often bitterly disappointing. During a buyers’ market like the current one, this gauntlet of emotions shifts toward the joy and excitement side, and away from the anxiety-producing side of tension and disappointment. Great, right? The problem is—again, especially for rookies—is allowing yourself to be swept away by the fun and excitement of finding good deals everywhere you look, and forgetting why you ever worried in the first place. Too many buyers are too relaxed these days—they see a low price, they walk through the property, and they buy—only to discover later that real estate investing is still a very risky business, in any economy.

The key to reducing risk is enhancing preparation. In real estate investment, that’s easy; all the steps are laid out for you. All you have to do is not skimp or cut corners. Never pass on an opportunity to walk through the property (and never buy without being given that opportunity!), because it will offer invaluable insight as to the condition, livability, and atmosphere of the home that you could never get from a conversation or brochure. A walk through will give you a sense of the previous owner’s maintenance of the property, of what realistically needs to be done, and even what you may want to do that’s not been done before. The walk-through is your chance to meet, greet, and familiarize yourself with the property’s identity—an interview.

If the walk-through is the interview, then the inspection is the cavity search. The walk-through, while essential, is absolutely not a substitute for a proper inspection. Furthermore, a seller’s assurance that the home has been inspected (and even the inspection report itself) is absolutely not a substitute for conducting a proper home inspection (even an additional one!). An inspection, conducted by a licensed professional of your choosing (it’s important for every investor to have inspectors and other professionals that they know and trust), will provide detailed information about the guts of the home. What works, what doesn’t? What could use some repairs or updates, what will require those repairs in the future, and what absolutely needs repairs or updates immediately? Is the property up to codes and standards? Are there any features of the property that make it vulnerable or susceptible? And crucially, what will be the cost of making the repairs, improvements, updates, and modifications called for by both the buyer and the inspector?

Your walk-through will give you a sense (a gut feeling “yes” or “no”), and the inspection will provide the evidence to support or refute your feeling. The former is largely emotional and a function of perception, while the latter is strictly business. How feasible is this project going to be? Will you profit from your transaction? Too many investors, at ease perhaps due to the favorable market conditions for buyers, walk in to a property, love what they see, are floored by the low price, and simply buy it. No inspection. While some of these buyer’s may be thrilled, others may soon discover that they’ve overlooked a costly issue. Failing to properly inspect a home (or walk through it carefully) before investing is a gamble that’s simply not worth taking.

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http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.

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In real estate wholesaling, finding your buyers is the most important step.  However, once you have your buyers, you need to market your property to them.  Marketing involves work: it is not simply showing a picture and talking up the location.  Marketing requires due diligence because in wholesaling, you are generally working with buyers who are experienced with real estate.  They are looking for facts and figures, and unless you can give them that information, you are wasting their time.

The presentation of your property to a potential buyer is very important.  In your presentation, you should know the general market data of the area.  This includes the average rents, average holding time of a house, the gross rent multiplier, and the actual after repair market value of the house.  If you’re dealing with a buyer who generally deals with properties out of town, this data will be more useful and help develop a level of trust. The presentation should also include data specific to the property you are selling.  If it needs rehabilitation, you should have some general bids from contractors (this is also especially useful for an out of town buyer, as they don’t know which contractors to use).  You should have the property inspected and include the highlights from their reports, such as any plumbing, electrical or infestation issues.  It’s also important to have cash flow data, which includes the management fees and any other expenses that make up the total expense of owning the property.  These facts and figures will help an experienced real estate buyer know if the property is a good deal and they can make a quick, informed decision.  They will appreciate your work and will likely agree to look at other properties you own.  Before you know it, voila! They are an active buyer who repeatedly buys from you.  Treat all your buyers with professionalism and show them the work you’ve done to research the market and the property, and you can build a reputation that allows you to wholesale properties in minutes.

The effort involved in locating buyers, properties and marketing is substantial.  Of course, if you wholesale a few properties now and then it is not as labor-intensive, but you must make sure your buyer-list is up to date.   Wholesaling can be a rewarding experience after you’ve completed a successful sale, but in order to get there, remember to line up your buyer first then market your property.

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http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

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