More on this book
Kindle Notes & Highlights
sit down with the sellers and talk about what is important to them. You know what you are willing to pay. Now is the time to see if you can get an idea of why they are selling.
Ask the sellers, “Why are you selling such a nice house?” Then listen. Write down on a blank sheet of paper what reason you think you heard them say is important to them. Then show it to them to see if you heard them correctly.
Let the Seller Make the First “Offer” When you are trying to get the best price, you want the other party to set his highest price first—before you make an offer. This will provide you with the most you will have to pay for a property. Sometimes it is a great price, and you won’t have to negotiate. Typically, this number is close to a retail price or even higher.
As the buyer, your offer should be at a low enough price or with such good terms that you will be very happy if the seller accepts. If you are not at least a little embarrassed by your first offer, you are offering too much.
make your first offer below what you need to buy the house for to make a profit.
NEVER, NEVER, NEVER try to think for the seller. Make your first offer an offer that you know will make you money and see how she responds.
The seller needs to accept it or make a counteroffer now (or within a few hours). Never give sellers several days to think it over.
Sellers are more likely to accept an offer that they understand, gives them instant or near-instant gratification, and requires them to do little work.
Sellers need to know how much money they are going to get and when they are going to get it. Be as specific and clear as possible on these two points.
Walk through the house before you close to make sure that it is in the same condition as it was when you inspected it. If there is additional damage, you can renegotiate the price to compensate for it.
Sellers will often accept lower offers that close sooner. They are selling because they need money now. If they could wait, they could sell for more.
1. Identify a potential bargain purchase; ask questions. 2. Write down the one urgent problem you can solve for the seller. 3. Establish the fair market value, give or take 5 percent. 4. Research the market rent and likely net income the property will produce. 5. State your minimum acceptable profit on this house. 6. Formulate an offer that solves the seller’s one urgent problem. 7. Make the offer. Insist on either an acceptance or a counteroffer. (Remember: Don’t tell me what you won’t do; tell me what you will do.) 8. Make another offer based on any new
...more
This highlight has been truncated due to consecutive passage length restrictions.
Negotiating has a bad reputation. It is not the art of taking advantage of someone else. It is the art of putting a deal together.
Unless both parties to a negotiation receive some benefit, the deal generally will fall apart, with one party failing to perform as agreed.
You Win/I Lose Sometimes it is wise to lose a negotiation. I had a long-term tenant call me to ask if I would pay for half the cost of the paint if he would provide the labor to repaint the interior of several rooms. I said no, that I would not pay for half the paint—I would pay for it all if the tenant would use my favorite color, antique white. I often “lose” negotiations with good customers that I could easily win, because by losing I enhance our long-term relationship, and that relationship is often very profitable.
Many of my tenants have been referred to me by other tenants. This is not because I am a pushover but because I deliver a good house at a fair price, and I’m predictable in how I respond to tenant requests.
McDonald’s has built a billion-dollar business not because its food is the cheapest or even the tastiest, but because its food is predictable. You know what you are going to get. I have built my tenant management business using the same principle. Fair and predictable. No surprises. It works.
One of the best negotiators I know is Jim Napier.
You may think that this seems funny, but during actual negotiations for a major purchase, such as a house, it is very exciting—and it is easy to raise your own bid. It generally happens when the other party just does not respond to your offer.
Silence can be a powerful tool. If you offer the sellers a price for their house and they simply don’t respond, what is your reaction?
Avoid negotiating with people you find to be dishonest. Even if they agree to a deal, they will not honor their agreement. They will either refuse to close, or they will start negotiating all over again.
If a seller is ready to make you a great deal on his property, stop negotiating! Don’t ask for anything more; just accept his offer. To do this, you need to be ready to buy.
How can you convince agents to call you when they find a good deal? Use the carrot-and-stick approach. The carrot: Tell the agent that if she brings you a listing that meets your criteria, you always will make an offer.
Buying and holding a house for a long-term profit requires less skill, because time is on your side. You can buy a house at a retail price, and if you hold it long enough, you will make a profit. The longer you hold a property in a good location, the more money you will make.
To qualify as a good long-term investment, a house should be well designed, well built, be in a neighborhood that will attract long-term tenants, and appreciate at an above-average rate.
Start keeping a journal. Every time you buy a house, write down in your journal the following points: • Why you thought that this house would be a good deal • How you came up with your first offer • How the buyer responded to the offer • What the offer was that was accepted • What you would offer if you could start over
A long-term investor can wait patiently for a strong market, keeping a house rented until the time is right to sell, and harvest a large profit.
Many businesses have inventory that can spoil (like food), go out of style (like shoes), or be stolen. Your inventory is appreciating, won’t go out of style, and it’s hard to steal.
A tenant who pays on time 2. A tenant who takes care of the property 3. A tenant who stays forever 4. A tenant who never calls
buy the best location you can afford. The best-located houses will appreciate the most and be easiest to rent.
When I buy a house that I intend to rent, I always introduce myself to the neighbors and give them my name and phone number. I tell them that if a tenant causes them any kind of problem, I want to hear from them and that I will do everything I can to take care of it.
Before you begin to rent a house, write down the rent, the deposit, and the amount of income that a tenant would need to afford your house. Typically, a tenant can afford to pay between 30 and 40 percent of her income as rent.
The only money that helps you as a landlord is money you have left after the tenant moves out. The bigger the security deposit you have, the more the tenant will want it back, and the more cooperative that tenant will be.
When the Rental Market Is Soft, Lower Your Rent, Not Your Standards
Questions are a good sign. Tenants who have no questions and are anxious to sign are desperate for a house.
Give the Keys, a Copy of the Rental Agreement, and an Inspection Sheet to Tenants Only After the Full Deposit and Rent Have Been Paid Do not let tenants begin to move in until they have paid you all that they owe you.
Have a System to Remind You When the Agreement Expires Plan to renew and evaluate the monthly rent prior to the expiration date.
Set your goal to have your average tenant stay at least three years, and you will be a happy and successful landlord.
Not every tenant will be a great tenant, but when you get one, take good care of him with reasonable rent raises and prompt responses to normal maintenance problems.
You will spend most of your money as a landlord when you have tenant turnover. Do what you can to minimize it.
A good property manager does not have to think a lot. He just needs to have a good set of policies and procedures and then follow them. If you find yourself making up a new answer for every tenant question, then you need to think through your policies, write them down, and be consistent with all your tenants.
Most improvements you make only increase the value of a house by a fraction of what you spend.
Whenever I find myself with a losing property, I am aggressive about selling it. I’d rather take a loss today and be free to pursue another opportunity than try to squeeze a few more dollars out of a losing investment. It may be a loser because of bad financing, or bad construction, or bad neighbors. Unless I can fix it quickly and at a cost that makes sense, I sell and buy another, better property.
Buy value. Buy investments that have real value, and buy them at a bargain price. Buy a house you know the value of and that will produce income, and buy it when you can make a good deal.
Sell losers as soon as possible. When you make a mistake admit it, recognize why it happened, get rid of it, and learn from the experience.
Treat others as you would like to be treated. You can make a lot of money buying, renting, and selling houses without ever making any-one angry. When you treat people well, they will send their friends your way.
