Deal Making

Learning to negotiate is critical to investing in real estate. Although this is not a full class on business negotiating, or even a brown-bag lunch seminar, I found this list of tips on negotiating on the Forbes website, and it is helpful. The article, “15 Tactics for Successful Business Negotiations” is by Richard Harroch and was written in 2016. The techniques, or tactics, are worth considering.

It is very likely you will naturally have some negotiating ability or you wouldn’t be in the real estate business. However, your skills may not be evenly distributed, and it is good to reflect on a comprehensive list so you can bring to mind skills that you might need to work on. For example, perhaps you are not shy at all, but you hate paperwork. As you will see from the following list, both of these traits, no fear and paperwork, will have a place in your negotiating tool box.

The 15 tactics include:

Listen and understand the other party’s issues and point of view.

Key: Do not do all the talking.

Be prepared.

Key: Review the business’s website and do Google and LinkedIn searches to learn all you can about the other party, the person you will be negotiating with, past deals, and what you competitors have offered or their pricing.

Keep the negotiations professional and courteous.

Key: “Don’t be an asshole.” Establish a good long-term relationship.

Understand the deal dynamics.

Key: Who has the leverage, time constraints, alternatives available to the other side, who is getting the payment?

Always draft the first version of the agreement.

Key: This lets you frame how the deal would be structured. Balance is key.

Be prepared to play poker.

Key: Know your walkaway price and stick to it. Walkaway if you cannot live with the offer.

Avoid the negotiating by continually conceding.

Key: the other party will learn your tactic and keep producing unreasonable demands, knowing you will concede. The deal will not get done.

Keep in mind that time is the enemy of many deals.

Key: be prompt and turn documents around quickly. Keep the deal moving.

Do not fixate on the deal in front of you and ignore alternatives

Key: Alternatives let the other party know they have competitors.

Do not get hung up on one issue

Key: Set aside hot issue for later so you do not get stuck on it and maybe can think of a creative solution.

Identify who the real decision-maker is.

Key: You cannot get anywhere if the other party cannot say yes or no. If you have the leverage, ask to speak to the person who has the power.

Never accept the first offer.

Key: Counteroffers and some back and forth will most likely lead to both parties being satisfied with the deal.

Ask the right questions.

Key: Do not be afraid to ask questions.

Prepare a Letter of Intent or Term Sheet to reflect your deal.

Key: The letter reflects your view of the key terms of the deal.

Get the help of the best advisors and lawyers.

Key: It is often worth the money to hire an investment baker or real estate attorney in a complicated deal.

As a broker, I can help you make the funding contacts and fill out the applications. But, in the business of real estate investing it is worth your time to learn to negotiate so you are satisfied with the deal you end up with.

To read more from Richard Harroch who is a venture capitalist in the San Francisco area.

hand_shake_(28112844326)

The entire article appears at https://www.forbes.com/sites/allbusiness/2016/09/16/15-tactics-for-successful-business-negotiations/#7ac99a025281

Pat St. Cin

Patrick@InvestorsLendingSource.com

512-213-2271

Austin, Texas

 

Handshake picture courtesy of EU2016 SK [CC0], via Wikimedia Commons.

 

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