Tips For Negotiating When Purchasing Investment Property
When purchasing investment property it’s important to negotiate to get the best price. Here are some of my tips of how to successfully negotiate.
Something a lot of people ask me about is how they can be better at negotiating when it comes to investing in property.
Hey, my name is Ryan from OnProperty.com.au and I wanted to make this quick video sitting in my car – we actually have 3 car seats that fit in the back of this little Jazz, and I am actually shopping for a new car. We are looking for a car that is slightly bigger. We are quite happy with this small one. We love how cheap it is to run and everything like that, however, we were umming and oohing about getting a second car and decided to get one when my son broke his arm.
My wife had to quickly take him to the hospital; we realized we only had one car so how was I going to take her stuff to the hospital, go and visit, etc. Luckily we had an uncle who lives near us, super helpful. Thanks, uncle Al! He brought us his car and we borrowed that. What we realized in that moment, we need another car. Now, what does this have to do with negotiation? Do not worry, I am getting to it. Now, I am about to go and look at a car. I am about 15 to 20 minutes early so I have time to make this video. I am looking at this car, which is selling for $8,000.
It is a Toyota Avensis. I think it has 230,000 Ks or something like that, my wife was telling me. So not super expensive but this is a 7-seater car. After this, about one hour later, I am going to look at another Toyota Avensis that has done about 30,000 Ks less. I think it is just under 200,000Ks and it is on sale for $7,500. Both of them are silver and both of them are basically the same car. I do not know much about cars so I will get them mechanically checked if I am interested in buying them.
The reason that I said this is that when it comes to negotiating when it comes to trying to get the best deal from someone, I am obviously going to be doing some negotiating when it comes to these cars. It is so much easier to negotiate and to get a good deal when you have other options on the table. Now, we currently have a car – you can see me, I am in it. So our need to get a second car is not extremely high. We would like to have one but hey, if it takes a few months to get it then that is fine. So in terms of the pressure from my end, there is very low pressure there.
I am also looking at 2 cars that are exactly the same, very close in terms of price range. But I could take or leave either. I am not really worried about it. So when I am negotiating with either of these parties, then I am in a position where I can say, “Well, look. I have another car on the table. Here is what I am willing to offer. Here is what I think it is worth,” and if they accepted or not, then that is fine because I have another option in the wings that I could go after. And if none will work out then I can wait a few months and continue to look at cars throughout that time.
A lot of people think when they are negotiating that there is this one deal and they want to get the absolute best offer on this one deal. But I think given property investing and given what you are doing – you are trying to find a property that is going to move you towards your financial goals. Given that, yet very rarely is it just one property that you need to get this perfect deal on in order for you to live the life that you want or achieve the financial outcomes that you want.
We live in a country where there are hundreds of thousands – where there are millions of different properties out there and there is going to be more than one property that is going to be suitable for you and your needs.
So, having a disassociation with the result, being okay to let it go if it needs to be let go, that puts you in what I believe is the best position to negotiate. Now, it does not mean that you are always going to win. It does not mean that you always come to terms with things. Even when I bought this car, you can kind of see on the rim here how it is like a light blue color. Let me just open the car and you can see externally that it is like this light blue color right here. Originally we wanted a black car because I think black is really sexy and we were looking at this car that was black; the same sort of car, similar kilometers to this, blah blah.
It was all fine, all good. But the only issue was that the guy was asking too much money for what we thought it was worth and what we could get. I think I paid $6,200 for this car and he was asking about $8,000 or something. And when we were negotiating I was willing to spend up to $7,000 but he was only willing to go to like $7,500 or something like that. And for me, it was outside of my budget but for him, he obviously thought it was worth it even if the car has been on the market for months.
I do not know what he was thinking but we had to walk away from that one and in hindsight, I am fine with that. I wish that we had a black car. That would have been great but this car has been fine. It has been a really good car and especially for the amount of money that we spent on it. We got it checked and mechanically it was perfect so we are really happy with it.
I give that example to say to you that sometimes things do not work out. Sometimes you do not get the deal that you want. However, there is another deal around the corner that is going to do the same thing. This car has served the same purpose. It is not as sexy as the black; however, it is in great mechanical condition – probably better than what the black one was from my limited amount of knowledge and so in terms of servicing and everything, it has been really cheap so really, this car has probably been better.
So when it comes to negotiating, when you are thinking about negotiating, try and have more than one option in the wings. Try disassociating yourself from the result. If I get this property, great. If I do not get it on the terms that I need to make this a viable financial investment that is absolutely fine.
There are other properties in the wings that I can go out there and find. And that takes effort – to find those properties and to have enough in the works that you can do that but it is very valuable and something that you should keep in mind when negotiating. Something that is really good and I think that this is something that makes buyer’s agents so good as well because they are not investing their own money.
They are investing their clients’ money. Like Ben, who is the buyer’s agent I work with, he is doing multiple properties every single month because he works with about 5 to 7 people a month, I think. And so he is doing multiple properties every month; if he does not get this one property for this one client, there is another property around the corner. And so a buyer’s agent, it is not his money.
He knows there are other properties that are going to be suitable for his client and so that puts him in a perfect position to negotiate. So I think this is why buyer’s agents do so well and I think we do ourselves good if we took a lesson out of the buyer’s agents’ books and thought, “Okay. This is how I am going to negotiate. Disassociate myself, give myself lots of options.
And so, I hope that this video has encouraged you. I hope that it has given you some insight into negotiation. I used to be in sales and had a budget of like $8 million a year. I did not think I was the best at negotiating but there were some tight situations where I thought I did really well. But I think this experience – going to buy a car right now, is one of the best learnings and the best ways that I can describe exactly how you can think about negotiating when it comes to property.
Alright, so I just left the mechanic at the second car and no good. It went down to $7,100. I just had to get a mechanic to check it out and it was basically not worth purchasing for me. It is not bad but not great and so I am in a negotiating position where the lady was not really willing to go down from $8,000.
She wanted it to be really close to that. I have this car that I was happy with but now I am not and now I am looking at the one that is $8,000. And truthfully I am willing to pay $8,000 but I am going to try and negotiate it down and so I keep the things close to my chest. I let them know I am still interested in this one; do not let her know that I had a mechanic out to see this one already.
I let her know I am still tossing out between the two but I am more interested in hers and so hopefully we can get it for like $7,500 or something like that. But truthfully, I am willing to pay $8,000 to have this car and I think when you go into negotiation, it is important to know what you are willing to pay for something and what you are going to be happy with because at the end of the day that is what really matters; you walking away feeling like you are happy with the purchase that you made. So, I am willing to pay $8,000.
I would rather pay $7,500. Hopefully, I get a mechanic out to see hers some time this week otherwise on the weekend or next week and we will go from there. I will keep you guys updated.
I just want to give you an update on the final negotiations of the car. The last bit of video I had, I just had a mechanic go out to see the cheaper car – that was $7,100 and it turned out to not be the best car and I have decided against going with it. So now, I was in a situation where I did not have as much freedom to negotiate. There was a car that I wanted that was $8,000. I did not want the other one anymore.
I did not really let her know that but went back and forth in terms of negotiations. I think I said I was willing to pay $8,000 for the car but I did not want to let her know that.
Well, basically first let me just let you know the outcome, which is if we spin around here we can see that this is actually my house. So we have purchased the car, this is a Toyota Avensis and I got it for $7,750. Now, in the perfect world, I would have paid less than that and I would have got probably $7,500 is where I wanted to land on that. However, given the circumstances of the seller, she was quite emotional.
She had purchased this car due to the passing of her brother. She had received an inheritance and used it to buy the car. And it also had something to do with her dad so she was very emotionally attached to the car and we got to the point where we were negotiating and she was at $7,750. I was at $7,700 and I said, “Look, I am happy for $7,700,” and she said, “Look, I am only going to sell it for $7,750,” and I said, “Okay. Well, I am probably not interested at that price but let me go and talk to my wife,” and she said, “Fine. I would not sell for any less than $7,750.” So we reached a stalemate there where it was only $50 difference but neither of us would budge but I kind of let the door open saying I will talk to my wife and let her know.
I came back and said, “Look, I am happy to do $7,750.” I went around, I got a mechanic to look at it and everything was fine and happy days and I purchased the car and drove home with it.
So, in terms of negotiation I did not have as much power as I would have liked. We were looking at other cars, different types of cars. And so we were happy to let it go if we had to. But when you are negotiating and there was $50 difference between what I was offering and what she was willing to pay, there is no point getting emotional feeling you are in the right, they are in the wrong and therefore you are not going to give them the extra $50 because I do remember I was willing to pay $8,000 for this car and so we negotiated down and I was happy with the deal that I got.
So at the end of the day, as long as you are happy with your purchase regardless of how the negotiations go, you need to know your financial position; what you are willing to pay for this to be a good deal for you. And as long as you get that, even if the negotiations do not go as well as you would have liked like it did with this car, at least you get what you want and you are happy with it, the mechanic shook it over and he basically said there is nothing wrong with this car and so I was really happy with the purchase.
And so when it comes to negotiating, my tips are basically have a lot of options on the table because that makes it easier to leave one if it is not the right thing. It also makes it easier to negotiate as well. And also, do not let them know that something falls through like the second car fell through. I did not let her know that. However, at the end, she was only willing to sell for what she was willing to sell for. So my final tip is as long as the numbers stack up, as long as you are happy with the purchase even if the negotiations do not go as well as you like, why not go ahead with it if it is going to make you happy, if it is what you want and it all stacks up.
I hope, I wish you the best in your negotiations. I was very happy with mine. If you need with assessing the cash flow of your property when you are doing the negotiations, you need to see how that affects the cash flow then I have a great online cash flow calculator that you can use on your phone, on your computer, whatever.
Go ahead and go to PropertyTools.com.au that allows you to punch in different numbers that you are getting, different purchase price, different rental estimate, and different interest rates, all of that sort of stuff and you can see how it affects the cash flow of your property. And so when you are negotiating and they give you a different price, just like I said, I need to go talk to my wife; you can say I need to go and do my numbers. You can go to PropertyTools.com.au, punch the numbers in over there and then come back and continue to negotiate.
I wish you the best in your negotiation. If you need that tool again, go to PropertyTools.com.au and until next time, stay positive!