I suck at negotiating commercial properties. Need help!

[James W.]

I am trying to break into the commercial real estate market. I have $600,000 down payment right now and already have been preapproved by my bank. But I really stink at negotiating.

I am in Southern California. One 20,000 sq ft property far inland with a 9% cap rate was asking for $1.6m, I offered $1.4 and all I was able to get the seller to come down is to $1.59.

Another 8500 sq ft property in a better area closer to the beach with a 6% cap rate was asking $1.69 and I offered $1.4m and he was only willing to go down to $1.65m.

I was hoping both properties would be willing to go down to $1.5m. Do you think that is too unreasonable?

Do commercial properties usually sell at their asking price? Is there a rule of thumb? This is really frustrating.

[Joel Owens]

The bigger question to me would not be the negotiating but what your end goal is for investing.

Say you negotiate something an extra 100k GREAT.What if you just bought the WRONG property for what you are trying to do.You mention putting offers on a 6 cap and a 9 cap property.

You do not even say what type of commercial property you are going after.

Hotel,multifamily,triple net,office,industrial,land,etc.

Do you want something that you will manage,have someone else manage,or you just want to collect a check every month NNN??

Are you chasing yield or location??

What kind of loan is your bank giving you rate and term?? Many local banks are giving out 3 to 5 year refi bombs when the debt service will be much higher and you will have refi costs to do a new loan.

If you can find say a loan amort. over many years and due in 10 even if the debt service is 50 to 75 basis points higher it gives you more flexibility.Even if you need to refi by then you should have a big chunk of principal paid down.

This is why your plan is much more important than shooting offers on different things and seeing how much they will come down.