Do You Include PM Expenses in Negotiations?

[Rob Simpson]

I have a handy spreadsheet that helps me quickly assemble the various numbers (ROIs, cash flows, etc...) involved in assessing a properties potential. When a property's ROI is just shy of my return objective, I often ask the seller if he'll come down on price first so the numbers fit my goals.

More often than not, I find adding back the cash spent for a professional property manager will put the returns back into my target return range. This got me asking myself if it was appropriate to build in that cost to my estimates (and by association, my negotiation points). I am not sure because:

(1) The choice to hire a PM is mine, not the seller's, so why should the seller come off their asking price to accommodate my personal choice?

(2) But counterpoint to (1), I've read (on this web site, no less) that a responsible investor tries to paint as complete a picture as he can during his pro forma, therefore it is prudent to include the costs of the PM.

Please note: I live abroad and have for a few years. I need a PM to help me because I cannot be there to do the job myself. Just wanted to clear that up before someone asked the question "Do you really need PM?" The answer is yes.

So, all that said, how do you feel about including PM costs in a negotiation with a seller?