Always start with why. And not always yours

[Adam Sheren]

They say you should always start with why; that what you do is not nearly as important as why you do it. The saying really plays to persistence and strong will - it reminds us to think deeply about why we do what we do, AND, if that 'why' is strong enough than success is only a matter of time, as a strong enough 'why' will never allow us to give up when things get tough.

This is also true when it comes to real estate investing. Now, I don't want to downplay the role of your personal 'why' - however, in every potential transaction you take part on from this day forward, the 'why' you should concern yourself most with is that of the sellers.

As we learn more and more about artful tactics to employ in our impassioned pursuit of the next investment, we must never underestimate the power of truly understanding WHY the seller is selling. Here are a few things to consider when getting ready to make that next offer.

1) Who is the seller?

Knowing who or what you're dealing with will help you diligently prepare an acceptable offer. Is the seller a middle aged single woman, a Bank, an investment firm, a down on their luck married couple, a couple going through a divorce, a growing family, an Estate? Knowing who the seller is will allow you to take an educated guess as to what aside from financial gain, could be motivating them to sell.

2) Why are they selling?

The first two points go hand in hand, who and why, and ultimately, are are usually not to difficult to put together. Once you know who your seller is, with a little bit of due diligence and detective work, you can almost always find out the REAL reason behind the offer to the market. Knowing the way will aid you in unimaginable ways when negotiating. As we all know, there is much more to be decided when purchasing an investment property than just the price. Knowing Who the seller is and Why they are selling could help you negotiate in the following ways:

• obtaining a reduced purchase price
• obtaining seller financing
• provide a lease-back option
• offer an equity stake in new development vs. cash at close

There are countless ways that the terms and structure of a deal could be altered to get you to the finish line, and sure, it's possible that you could get a win-win deal for you and the seller without knowing their true why, but just like you should always make sure you know what you're buying, you should just as well know why they are selling. With a little extra effort, you may uncover something that would steer you away no matter how good the price.

3) What do I have to offer (outside of $$$)?

Well to begin with, I hope you have access to funds - as in almost all cases, there will be some type of currency exchanged to take title. But outside of money, is there something you can offer that would be of such great benefit to the seller, that they would strongly consider taking less money.

Case Study:

The last property I purchased was a 5 bedroom 3 1/2 bath SFR in a great neighborhood. The asking price was at market value. I was looking for an asset with these exact characteristics for my next flip. When touring the property with the Seller's agent, I was able to find out that the Seller was a married couple who was in the process of building a new home. They had 3 kids and 2 dogs, and were unsure of when their new home would be ready.

I knew what the sellers may be going through. I had just sold my home as well, as my wife and I were getting read to build our new house. Let me tell you, the construction process can be a nightmare, and the thought of having two mortgages with a middle class income can be a very scary thought.

My wife and I were very lucky, and had arranged a place to stay (for the cost of utilities) while our home was being built. We were fortunate to have this lined up before even putting our home on the market, which took 3 months to sell, knowing that we had a place to go no matter when it sold.

We had no timetable as to when we had to be out of our home so we were literally worry free during the process.

This was not the case for the sellers of this particular home. While I knew the home was priced correctly, I also knew that I couldn't make any money on it without getting it for a much reduced price, 15%-20% less.

As I made my initial offer (18% below asking) I contacted the seller's agent and asked them to run a scenario by the sellers. What if:

I purchased the home from them and we closed as soon as possible, and then I would lease-back the home to them for the next 3-4 months, depending on how much time they think they'd need for their new home to be completed.

Seller Benefits:

Reduce anxiety of possibly having two mortgage payments

Eliminate the need for moving twice - once after the close of this sale, and then into their new home

Reduce anxiety of trying to find big enough space that is also pet friendly

Enjoy one last Thanksgiving and Christmas in their own home (not a rental)

Buyer (my benefit):

Get a quality investment home for 18% under market value

Have my first few months mortgage payments made for me through the lease-back

After a bit of back and forth, we were able to come up with an agreement at a price 15% below market value, with a lease back option for 2 months, with a one time option for a 30 day extension. The rental rate was $100 more per month than my mortgage payment with taxes and insurance, and they were to cover all utilities and maintenance during the 60-90 day period.

Ultimately, they decided that avoiding the anxiety of two potential mortgages and the hassle of moving twice was worth a deduction in their final net from sale of this home.

In conclusion, when considering your next purchase, strongly consider the following three items:

• Who is my seller
• Why are the selling
• What can I offer outside of money that would prove to be beneficial

The answer to these three questions could be the difference between a good deal and a phenominal deal.

P.S. It may not hurt to pick up a copy of 'Start with Why' by Simon Sinek either! Best of luck!

(disclaimer: I have no affiliation with author Simon Sinek and am not being compensated for the recommendation of this book)