breakeven point-do you consider it? - Posted by John T (WI)

Real Estate Investing Triple Net Leases
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Re: Stepping over dollars??? - Posted by JeffB (MI)

Posted by JeffB (MI) on December 09, 2006 at 22:13:40:

Ryan,

These aren’t 60 day deals… these are right-now deals. But my point was that opening my mouth generally costs me money. If $1,000 was acceptable to a seller, and I pay $2,000 because I threw that number out there too soon (even though it’s good 'nuf) then I’ve just cost myself $1,000. That’s bottom line, spendable income before taxes, and it’s a yield and profit killer.

Sure, I’m making money either way, but if the seller is happy with $1,000, but unhappy at $500, then my goal is to get him to his lowest price where he’s still happy, in this case, $1,000. Not $2k, even though that’s still a great deal.

I agree with everything you said though, about not missing deals waiting to make every last buck.

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Re: Beware the trap - Posted by JeffB (MI)

Posted by JeffB (MI) on December 09, 2006 at 09:37:23:

Tony, I like that line, I’m going to try it. But here’s a typical scenario that I am running into:

  1. Seller has home for sale for several months, or alternatively, comes into a situation where they need to sell fast (ie, motivated)

  2. Seller tells PM their tale of woe.

  3. PM tells seller, call Jeff, he buys homes and he’s a great guy too.

  4. Seller calls me, says, “I have a home for sale, I’m asking $10k, but PM says you don’t pay that much. Would you come look at it and make me an offer”

  5. I look at home, ask seller to name a price, they say they were asking $10k but at this point will take the best cash offer they get. How much will I pay, they ask?

This is where I always get stuck and have a hard time turning the tables back on them. Because I do all my deals in one park, and most people in the park know who I am, they’ll often say “How much do you typically pay for homes like mine”.

So the sellers really are motivated, and usually we settle on $2-3k for nice homes, but, like I said I can get them cheaper and need to figure out how to steer the conversation to make that happen.

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Re: Beware the trap - Posted by Don(TN)

Posted by Don(TN) on December 09, 2006 at 15:07:39:

When I encounter the question of “how much will you pay” I usually try to “set the table” with a indirect really low offer. Let’s say they are asking $5000.00 and I am willing to pay up to $3000.00. When they ask what I will pay I just scratch my chin and squint at the trailer and say “it depends” It depends on what time of year it is, the needed repairs, my cash flow, and how many vacant units I have. After telling them this I say " I have payed as little as $500.00 for a trailer similar to this before. (only I can define similar)Then just listen to what they say. they might say “gosh I can’t sell for that”, or maybe they will then say 3000.00 is the least they can take. It will usually make them say something.

The beauty is that you haven’t really made them a offer. That way you haven’t offended them but still have gently lowered their expectations.

Don

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Re: Beware the trap - Posted by Tony Colella

Posted by Tony Colella on December 09, 2006 at 10:12:00:

I see what you are saying now. I don’t know that there is any right or wrong way to approach this but here is what I did in these type of situations.

I would explain that I am an investor and not someone that will be living in the home. I encourage the people to try and sell the home themselves to someone who will live in the home because they will get more money. I slip in that these people will likely need financing which makes it harder to sell but I encourage the seller just the same. Maybe even give them a few ideas on where to market.

Usually this type of seller has tried that or is giving up so they understand this all already. If they express that they are fed up with trying to market this home I then keep talking. If not, the we go back to the walk away technique.

If we are still talking I simply remind them that I have to buy wholesale in order to sell and make profit as this is my business. I explain that I take payments from my sellers which means it will take a long time before I see any profit.

Here is where I just cut to the chase. I don’t know that this is a proper strategy but I don’t want to waste their time or mine any longer. I simply say that our company typically does not pay more than (whatever price you would pay for this home or a bit less). I then explain that I understand they want to sell for as much as they can get and that I would want the same. I steer the conversation back to the ideas of what they can do to market the home to wannabe homeowners.

I then just shut up and see what they say. In most cases my number is too low for them. I say that I understand and hand them my card as I do the walk-away. The 60 day deal has begun.

Again I don’t know if this is the best way but since people know you in the park they know about what you pay anyways so you telling her "Our company can only pay about $2,000 to $3,000 for a home like this (add in the reminders of the type of frustration they are finding and feeling) and leave it at that. I do explain that I am not trying to insult them or low ball them (again working in the factors that are making it hard for them to sell).

I like Karl’s technique best. He ads something like, “I understand your frustration. I have 10 homes I am trying to sell right now and having the same problems you are having with just 1.”

In a nut shell I try and get them to see we are on the same side of the table here and that I am not trying to steal there home but in order for us to help them out the price has to fall within our guidelines. I encourage them to sell for more and leave them with my card and state that if that doesn’t work out then please call me. When they call 60 days later they have resigned themselves to my price and the $10k no longer is an issue.

Tony

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P.S. - Posted by JeffB (MI)

Posted by JeffB (MI) on December 09, 2006 at 09:40:11:

One thing I want to mention after reading what I just wrote, is although it may seem I am trying to squeeze every last nickle out of people, what I am really trying to do is find that lowest price they will accept and still be happy to do the deal.

I don’t want people handing me the keys and being angry about the deal. I understand the value of helping people and the benefits of having a good reputation for doing that, as opposed to being so cheap that everybody hates me.

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Re: Beware the trap - Posted by osupsycho (OK)

Posted by osupsycho (OK) on December 10, 2006 at 21:25:51:

Don,

I use this type of technique a lot as well. I just say “well I usually get a X bedroom trailer that is this age for $X” (condition is usually left out but can be brought up if preferred). It gets the negotiations to the point real fast if they won’t name a price on their own or even it their price is unrealistic. Usually its a walk away and wait but if they are motivated it helps cut through to the heart of the issue.

One key here it to watch there reaction carefully (most of the time it won’t be hard to see) when you say what you usually pay for their type of home because it will say a lot as to wether they are in the correct state of mind yet. If they aren’t then quickly move into the walkaway and watch technique and move onto the next trailer.

Jad