Learn How To Ensure You Strike A Great Bargain When You Buy
Culled from www.smartnigerianinvestor.com
The success of your real estate investment needs a few key ingredients to fall into place. Success is in terms of a healthy return on investment. One of the factors is a good purchase price. Being able to buy a property below the fair market price leaves a margin that will greatly enhance your chance of ultimately earning a good return on your investment. Buying at a good price is, to a large extent, a function of your negotiating skills. Interestingly, without being an expert, you can learn a few things about how to approach your property price negotiations. Learning these basic ‘tricks’ will ensure you come out smiling each time you buy. Here are our tried steps:
1. Get All The Key Facts About The Property
You need to be familiar with the property you wish to buy and should arm yourself with its main features. Outline basic facts like the size (in terms of total space and details of number and sizes of rooms), available facilities, type of title, outstanding lease period, any title issues that may require further work to regularise, etc. Also, if there are outstanding statutory charges (examples: unpaid tenement rates, water rates, utility bills, title perfection fees), details and value should be ascertained, as these can amount to a substantial sum. Are there existing tenants whose tenancy is yet to expire? They have a legal right which may require further negotiation and settlement to extinguish, if you want them out of the property. Work out a likely cost implication. You also know that nothing is ever perfect, so the property will definitely have some downsides, just as it has upsides that attracted your interest. Itemise both.
2. Decide Your Top Naira/ Dollar Amount For The Property
You must be firm in your mind as to your top price limit for the property. This is not a magic figure but one that is based on a careful evaluation. You need some market research to determine what value equivalent property is currently commanding. What are rents like, should you let out the property (you are looking at a reasonable rate of return and if you know the likely rent, you can determine a price that will provide the ROI you are targeting)? You also need a valuation, preferably a professional valuation by a property valuer. If the property will require improvements (minor improvements, yes; major, watch it!), determine how much this will cost: get professional opinion, if necessary. Factor this, plus the total value of unpaid obligations on the property, into your price structure to determine the limit of cash disbursement you can commit to.
3. Be Accompanied When At The Negotiation Table
When you finally get down to it, have somebody with you at the negotiation. Firstly, this provides you an immediate witness to the discussions (property matters are tricky and you need to be careful). Also he can help fill in some gaps in the course of the negotiation. He can also help note important points, allowing you to focus on the important discussion which could mean a lot of money gained or lost.
4. Do A Lot Of Listening
Firstly, you may think everything about the property is in order, but if you do a lot of listening while the owner(s) struggle to extract a good price from you, a number of things may be said which will be an eye-opener. You want a good price, but more importantly, you want a clean transaction. Hear them out, because a lot gets revealed, inadvertently, when people talk. If nothing untoward comes up, you will at least monitor their pulse to know the level of desperation for the money (you will sense the urgency even if not spelt out), you will identify their needs and concerns (yours is to show you can meet those needs) and you may possibly sense how many contenders there are for the property.
5. Paint The Whole Picture
Their focus will be on the money they expect and the supposed benefit of the property. Show them a total picture, using all the facts you have diligently gathered. More importantly, make them aware that you know the problems and additional costs that are inherent in the purchase, which you will necessarily bear, unless they accept to shoulder them (usually, they need the whole money and will not accept any incursion). Show that you have done a lot of work to decide on your offer, based on all the facts. Never show any desperation: there will always be some other property.
6. Stick To Your Top Naira For The Property
I suggest you don’t bid multiple times. Having set your limit price, one bid below it may just do it. After all, your top price is already a market-beater and a figure below it will be a special bonus. It’s good to give the sense that you really know what you want to pay (and don’t you?). If you are eventually forced to move up to your pre-set price, that should just be it. Stick to your price. Remember you carefully arrived at this figure as your price for a winning deal. Stay with it, but you can show other benefits that may be there in dealing with you. Are there projects that will benefit the owner(s) or their neighbourhood? Employment opportunities? Improvements that can enhance the value of other property they own in the area, etc? Most times, if you creatively use other benefit propositions instead of upping the price, you will still win.
Negotiation needs some mental toughness which you must cultivate. It could cost you a few otherwise good deals, but if you set your rules for your investments and take a long-term view, your chances of eventual success are much higher. The bottom line is to know what you want and play according to your own rules. Happy and successful negotiations!
