Negotiation Tips and Strategies for Purchasing a San Diego Investment Property - Article Banner

Are you a strong negotiator? 

Even people who are accustomed to making deals in their professional or personal lives can find themselves flummoxed and overwhelmed when it comes to negotiating a real estate deal. 

Especially in a market like the one we’re experiencing now.

When you’re ready to buy an investment property in San Diego, you will probably have a strong idea of what you want to spend and how you want the deal to be structured. Even if this is your first time buying an investment property, you might think it’s as easy as naming a price and signing the paperwork. 

But, it’s not that simple at all. 

Whether you’re an experienced investor or purchasing a property for the first time, you need to be prepared to negotiate. You want to feel like you’re getting the better deal, but your seller plans to feel the same way when they come to the table. 

Everyone needs to walk away feeling like they got what they wanted. 

Having a great real estate agent on your side can help you negotiate the best possible deal. We have some additional tips that might help you strategize as you approach a competitive and sometimes unpredictable San Diego real estate market. 

Find a Fantastic San Diego Real Estate Partner

Before you start negotiating things on your own, make sure you’re working closely with a local Realtor or a San Diego real estate agent who specializes in investment property. It costs very little to hire a real estate agent; you’ll pay a commission that’s barely noticeable against the backdrop of your full purchase price. However, if you don’t hire the right agent or listen to their advice, you’ll find that you spend a lot more money and waste a lot more time. 

Surround yourself with experts. This is the best advice we can provide when we’re talking about negotiating from a place of strength.

If you don’t already have an agent in mind, ask for referrals from friends and colleagues who have recently had a good real estate experience. Do a bit of research and see who you like in the community. This is a relationship business, so you want someone who knows the market really well. You want a good negotiator. You also need someone who has business values that align with your own. You want to make sure you actually respect and trust the person you’re working with. 

When you’re buying investment property that you’re likely to turn into a rental, it makes sense to find a real estate partner who can also provide property management. Advice and insight from a property manager during the negotiation of the deal can be invaluable. Your property manager will understand rental values, California’s strict rental laws, and the cost of maintenance and renovations. 

Educate Yourself on San Diego Real Estate before Negotiating

If you’re local to San Diego, you might have an idea of what people are paying for homes. If you’re an investor from outside of San Diego, you might feel like you’re at a bit of a disadvantage. Housing markets are all unique, and you need to know what to expect from this one before you make an offer or negotiate a deal. Educate yourself on how the market is performing and what you can and cannot get away with when it comes to pricing and sales terms. 

You’ll find yourself in a strong position when you have the data and the comparable sales figures to support what you’re hoping to get the property for. This is another excellent reason to surround yourself with local experts.

The research you conduct on the San Diego market could potentially save you money, as well as time and frustration. If you learn something that could save you even a thousand dollars on your final price, you’re likely to turn that savings into some impressive returns five or 10 years from the date of your purchase price. 

Know your numbers before you even enter the market. What are homes selling for? How much higher or lower are those prices than the listing prices? Will you need to make an offer that’s above listing or can you offer something less than what the home is priced at? What else are you willing to negotiate?

Maybe you’ve found a great investment property that you know you want to buy. Before you begin negotiating on that specific property, analyze comparative properties in the neighborhood. You need to know what they sold for over the last quarter or even the last year.

With the right data and market evidence, you can support an offer that’s less than asking. You can also negotiate terms like inspection requirements, credits, closing date, and even closing costs. Information is power. 

Calculate What You Can Spend and What You Expect to Earn

You cannot negotiate effectively without knowing your own limits. 

Now that you’ve taken some time to understand the market numbers and you know what’s reasonable when it comes to an asking price and an offer, you have to decide how far you can go when you’re hashing out an agreement. 

Next on your negotiating to-do list is understanding your own purchasing power and setting firm boundaries for what you can and cannot afford: 

  • First, check your finances and get comfortable with where you are and what you can offer. You’ll need to know how you’re financing this investment deal before you begin making offers or considering counter-offers. Paying in cash, for example, will give you a bit more leverage with a seller. It promises a quick, uncomplicated sale, and a lot of sellers are willing to drop their price point in order to access that ease. 
  • Put together a budget. This will help you understand how hard you can negotiate and how much you can raise your offer when the seller pushes back. 
  • Review your investment goals. Think about what you’re trying to achieve. Is immediate cash flow more important than long term appreciation and equity? 

Reviewing your finances and investment goals will tell you where you’re starting when you negotiate and how high you’ll be willing to go. Don’t let yourself get carried away. Stick to those numbers because they determine your profitability and keep you from agreeing to deals that might not be the best for your investment plan.

Negotiate Inclusions for San Diego Rental Properties

There’s more to negotiate than price.  

You’ll also have to use inclusions towards the end of the negotiation process. Leverage whatever you can to get the best possible deal. If you are leaning towards accepting the seller’s latest offer, ask for something in return. Maybe they’ll leave the washing machine and the dryer. Or, you can negotiate the repairs they’ll make before you close the deal. You can offer to waive the requirement that the water heater is replaced if they’re willing to come down a thousand dollars on the asking price. 

Using inclusions can help you get closer to your target price when you’re negotiating an investment property purchase. 

Get Comfortable with Compromise and Stay Flexible

You cannot enter a negotiation thinking you’ll get everything you want. That’s unlikely, even with a motivated seller. But, if you’re willing to compromise and be flexible, you can likely come away with a deal that makes you happy. Give a little in the places that you can, but hold firm in the areas that really make a difference to you. 

Think about how it might feel to walk away from a deal. At what point are you simply wasting your time? Smart investors know that there’s no reason to try and force a deal into place if it’s just not happening. 

It’s not always easy to say no when you’ve invested so much time and energy into negotiating what you think is a pretty good deal. If you’re not ready to walk away entirely, tell the seller that you need some time to think about what their final offer looks like. You can continue negotiating after all parties have cooled off and thought about their positions. 

Avoid Looking Eager or Desperate

Poker FaceA lot of dealmakers insist on having a poker face when you start negotiating. You don’t want to approach the negotiation with an emotional energy that lets the seller know you’re eager to buy this property no matter what’s required. Desperation is going to destroy any advantage you might have had during the process of negotiating a real estate deal. Try to remain detached. 

Give your seller the impression that you’re considering a number of different properties and you’re not even sure you’re completely sold on this one. Try to appear interested and willing, but not over-eager. 

This doesn’t mean you should be arrogant or boastful. The seller will likely come to the table with their own plans for negotiation. And they likely have other interested buyers, too. So compliment the property, express your interest, and then see if you can come to an agreement. 

If you need some additional support as you seek a San Diego investment property? We can help you. Contact our team at Chase Pacific Property Management & Real Estate Services.