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✨Negotiating Terms: Learning the Power of Negotiation
I can still remember the moment we got the term sheet for our first deal and happily signed it, thinking that was the end of the talks. What we didn't know was how things would really turn out. It was a shocking wake-up call.
I learned very quickly that in real estate investing, anything can be talked about. I learned a useful lesson that I have kept with me throughout my work life.
Our second deal really made us understand how important it is to negotiate. As we went back and forth, we saw that the terms the bank or loan gave us were not set in stone. Negotiation made a lot of things possible.
Someone told me, "This is simple; these people are beginners." When that person said that, we realized how much power we had to negotiate terms that helped us reach our goals.
You can't just take what's being offered when you negotiate. Figuring out what can be negotiated and fighting for it is what it's all about. For example, we discussed the interest rate, looking for good terms that fit with our long-term financial plan. It didn't end there, though. We pushed back on terms and extensions, making room for change. We also learned how to discuss the amount of equity needed to make sure that everyone was responsible for their fair share of the money.
As we got more practice, we got better at negotiating. We learned how important it is to rebalance tests, which is something that is often missed but is essential for long-term success. By talking about the timing and number of tests, we were able to make them fit our specific needs. We also knew how important it was to negotiate down payments and recourse clauses, which made the conditions good for our business plans.
It's not enough to just get what we want; we also need to set ourselves up for success. The measures we set as goals became our guide. We talked about things like the loan-to-value limits, rebalancing schedules, and the debt service coverage ratio to make sure they were reasonable and fit with our investment plan. "You want to make sure you hit those targets" is a quote that speaks to me. To negotiate successfully, we had to get terms that would help us grow and reach our financial goals.
Some things get better over time, like good wine. We need to find the middle ground and figure out what makes the other person tick in order to create situations where everyone wins. Absolutely nothing is set in stone when it comes to real estate business. It's a great place for skilled negotiators to make money.
Cheers!🍷