I ended up
selling to the current tenant, which was great, but the timing was a bit squirrelly and ended up springing the deal on me a bit quicker than I would have preferred. So now I’m in the 45 day window to identify my replacement property(ies)…and the clock is ticking.
I identified a pair of duplexes that I liked that were for sale by a single owner. Great location and properties were in decent shape. The problem (as always): based on the income that they’ll generate the seller had the properties overpriced. By a lot. The owner wanted $485k for the pair. By my numbers I would have been happy paying $360k. A price of $380 would be so/so. My walkaway – based on running the numbers: $390k.
The properties had been languishing on the market for half a year, and I'd take both of them off his hands. I told my realtor to see what she could do. I told her to shoot for the $360's but I never give her my walkaway.
A few iterations later after a lot of discussion between the agents we had an upset seller that had come down to $399k.
Too high. We tried. I had to walk.
I have a great relationship with my Realtor® and we’ve done a lot of deals together. But on this one she was ready to kill me. She got the seller to come $86k off the asking price – why couldn’t I give up the extra nine?
Well if I were negotiating to buy a house to live in she’d have a point, and the vast majority of Realtors® are coming from this mindset. But I wasn’t buying a home. I was buying a pile of bricks that was going to generate a certain amount of cashflow, and as an investor I had to go into the negotiation w/ a walkaway price that I was willing to stick with. That’s just good investing discipline.
An investor who consistently goes into negotiations w/ no walkaway price will consistently overpay. The idea isn’t to win the deal; it’s to win the right deal. And in order to do this you need to set some ground rules for yourself before you get into the emotion of the negotiation.
Don’t forget that you can move your walkaway price if you’re able to trade the concession for something of equal value (something that we tried to do in this case to close the $9k gap but weren’t successful). But remember, sometimes the best deal is the one that you don’t do.
Caveat: That said - you gotta win some deals, especially if you want to create a successful symbiotic relationship with your real estate agent. If you're constantly coming up with nothing then you need to question your business model; and you'll want to do this before you piss off everyone in the community.
