Negotiating the Purchase of Rental Property

For landlords and real estate investors, negotiating the purchase of rental property is normally part of the natural process of buying investment property. There's an old adage that states "everything's negotiable", but the red-hot real estate market of a few years ago would have really put that proverb to the test!

But now that the real estate market is coming back to reality, negotiating between buyers and sellers is taking center stage for selling property once again. Some of the typical steps that take place when purchasing rental property are…

• Buyer visits the property and conducts inspections,

• Buyer furnishes seller written offer and earnest money deposit,

• Seller either accepts, refuses, or makes counter offer,

• If seller makes counter offer, buyer can accept, refuse, or negotiate,

• If counter offer is accepted or further negotiations are successful, buyer and seller sign purchase and sales contract, and

• Closing transaction takes place and property is transferred from seller to buyer.

The degree to which the level of negotiations can take place depend primarily on how "motivated" the seller is, and the strength of the real estate market.

If you happen to be buying in a relatively strong market, then don't be too surprised if the seller isn't overly flexible with negotiating sales price or terms. The same holds true if the seller really isn't motivated to sell the property either. It's hard to "haggle" with a seller if he or she is dealing from a position of strength.

To the contrary, if you are buying in a "buyers market" or the seller is highly motivated to get rid of the property, then your bargaining power can rise dramatically. But remember, even a highly motivated seller may have a "breaking point" at which they'll throw a lowball offer off the table and terminate negotiations completely.

Depending on the circumstances involved, if the seller is not willing to negotiate on price, then maybe the terms of the sale can be negotiated. Specifics such as seller financing terms, property repairs and upgrades, closing costs etc. may be open to negotiation.

Negotiating the purchase of rental property is just as much a skill as it is an art. Persistence, attitude, and diplomacy go a long way towards making negotiations successful. The ability to put yourself in the "seller's shoes" and see the situation from their perspective is a skill that takes some experience to develop.

The bottom line is that a sale will only take place when the seller accepts a price that a buyer is willing to pay. Putting forth the time and effort to negotiate with and convince the seller to accept your reasonable price and terms can be the deciding factor that leads to a successful "win-win" sale.

Remember that if you're a long-term investor, haggling over a few thousand dollars today will only turn out to be a tiny blip on your radar screen in the years to come. It may not be worth losing the sale over.

For more in-depth information about negotiating the purchase of rental property, please visit The Landlord's Library book collection. It's a terrific, one-stop source for practical, comprehensive information on the entire subject of residential landlording.

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