The Second Rule of Thumb and Realtors

There are two things that you need out of your Realtor. You need someone who can find you good properties, and you need someone with good negotiating skills. Very rarely will you offer full price for a property. Because of this, you need a Realtor who can help you convince the seller that even though your offer is low, it is still a great offer.

Often sellers think that you are the big, bad investor who is just trying to get a great deal at their expense. They don’t realize that because of the way that they have managed the property, it isn’t worth as much as they wish it were. When you try to explain to them that it isn’t worth very much, they think that you are being greedy. However, when you bring in a third party, like a Realtor, to explain how pricing works, they are more likely to listen.

You need to explain, or have your Realtor explain, that the value of a property is determined by how much it brings in. If the net operating income is low, the property isn’t worth as much as if the net operating income is higher. This is why a property with a low occupancy rate will sell for less than a property with a high occupancy rate.

You can also explain that the number of repairs makes a difference. Your net operating income will give you a maximum value for the property, but the needed repairs will be subtracted from that amount. This is one of the reasons that you don’t want to defer your maintenance if you don’t have to. The longer you defer the maintenance the more you will have to do to bring the property back up to top condition.

When you explain how an appraiser comes up with the value of a property it often helps a seller understand why they may not be able to get what they hoped for out of the property. You can also explain that a lender won’t allow you to borrow more than a property is worth. These can help with reducing the price when a seller is unrealistic. If they don’t believe you, bring in an appraiser or a Realtor to help explain the process. As always, happy investing.