Make sure you stabilize your rent roll and its occupancy for 3-6 months.
What does that mean? Your occupancy rate is above 90% with your maximum rental rate in place.
You do this so your property is easier to finance or refinance.
Once you have control of the property, your ROI is growing, your expenses are decreasing and your revenues are increasing, stabilize the maximum occupancy with maximum rents for a couple of months.
Then put your property on the market.
Review Your Expenses Be careful about paying for unnecessary expenses.
However, don't defer maintenance or repairs.
You'll end up with dissatisfied tenants.
Separate your expenses into capital expenses.
These are larger capital items such as a boiler, roof or appliances.
They can be depreciated over time.
Regular repairs like fixing holes in the walls, painting or changing fixtures are ordinary expenses that receive a full deduction for tax purposes.
Calculate Your Net Operating Income Income minus expenses equals net operating income (NOI).
Net operating income minus debt service equals cash flow before taxes.
Cash flow before taxes subtract capital expenses equals net cash flow.
Note that capital expenses do not reduce your NOI, and NOI determines your price.
Next, devise two strategies.
When you buy and hold for cash flow and depreciation, focus on ordinary expenses you can write off.
If you're into the sell or refinance mode, focus on capital expenses for at least six months so your NOI remains higher.
The more time you spend planning these two expense categories, the more dollars you'll get when selling or refinancing.
Negotiating A Purchase Remain calm Make sure you have a plan and a strike price before you arrive at the negotiating table.
A smart seller or negotiator will try to unsettle you.
How? They may make you wait 15-20 minutes or longer before meeting you.
They may position you in front of a bright window or busy street.
Other times, they will ask you to repeat yourself over and over again.
They may even continuously tap their pen or foot, or take lengthy pauses before responding to your questions.
All of these are tactics used to throw you off your game.
Also be aware of a smooth, well-prepared presentation that leads from small yes answers and commitments to accepting the offer - even if it is not close to your desired plan.
The presentation may be so smooth that you simply follow it.
Create Rapport & Trust Be likable in the negotiation.
This includes the initial inquiry phase.
Your intent is not to hammer the seller on the price of their property during the first meeting - the first meeting discussion is a discovery phase for both parties.
Be on time for the meeting or callback.
Throughout the process, look for commonalities like their love of golf, car racing, a charity or possibly the property may be the common link.
When the seller and listing realtor like and trust you, negotiations will go smoother.
Create a Win-Win Situation The idea is not to take advantage of people or pummel them into the pavement.
Investing is a small universe.
Your name and reputation will precede you.
Besides, a disgruntled seller may have a way of getting back at you.
Don't allow that to happen in the first place.
Ask Important Questions Ask the seller, "What are your goals of the sale?" Let them answer, and then ask them what else they are looking for besides price.
Drill down.
Keep asking questions.
This way you can present the best offer for both of you.
Remain Flexible When you begin negotiating, have a few pre-planned, acceptable offers you will accept.
Maybe the price will be higher than you anticipated if the seller offers seller financing.
Maybe the seller will stay in the deal for less investment on your part.
They may accept a trade as partial payment.
Your initial discovery stages should yield some of the above information.
Remember you can always walk away from the negotiations.
Know your bottom line in terms of price, closing, deposits and seller financing.
Repeat the Responses When the seller speaks, pause and then relay back the information.
The seller will know you're paying close attention.
Again, this will create trust.
Evoke Empathy Empathy is your ability to understand the feelings or emotions of another person or to "put yourself in their shoes.
" Follow up with seller's questions or counter.
You may have covered this in your cover letter.
Now you can do it verbally.
This dovetails with the above technique.
You show respect for their position, but don't go overboard.
Maintain your position.
Remain Quiet Present your offer and then keep quiet.
Silence is your friend.
Keep this tactic in mind, whether you are the buyer or seller.
Usually, the person who answers first loses or shows his/her hand.
If you end up in a silence standoff, write a note and slide it to the seller.
Get them to do something.