How to Negotiate the Best Rates for Your Fix ‘n’ Flip Property

If you love the thrill (and the profits) that come with fixing up and flipping a property for sale, then you know you’re always on the lookout for how to get the best possible deals. When it comes to ultra-competitive markets like Portland and San Francisco, investment opportunities can be gone in a blink. Even in less-competitive markets, it may be easier to find properties, but your profit margins are smaller.

This means that not only do you have to be skilled in uncovering lucrative real estate investment opportunities, but also in negotiating the best possible rates for those properties.

Fortunately, all you need to do is follow six proven negotiation strategies. And the best part is, they work with any kind of real estate investment, including MLS-listed properties, auctions and short sales.

Do Your Due Diligence

No great battle was ever won without a thorough and strategic view of the battlefield, and the same principle applies to real estate investing as well. The last thing you want to do is waste time on negotiating deals that aren’t going to net you the best profits. You only have a limited amount of time -- why not spend it negotiating on a property with much higher profit potential?

This goes doubly so for highly-competitive or growing markets. It’s very possible that you’ll find yourself in the midst of a competitive bidding war or trying to negotiate with an unreasonable seller. When that happens:

Remain Firm in Your Offer

You’ll want to stand firm in your assessment of the property’s profitability. This, in turn, keeps you from getting emotionally involved and making costly decisions. No matter how much time you invest in fixing up the property, you won’t find the success you were hoping for if you pay too much for it to begin with.

Set a maximum price before negotiation starts, and stand firm to that price. If you’re not sure how to set an accurate price, don’t hesitate to enlist the services of a local real estate agent who knows the area well. You may also benefit by working with an appraiser to help give you a much better picture of the area in conjunction with the overall market.

The end goal is always the same: maximum, consistent profitability from fixing and flipping. And have multiple properties in the queue as well, If your first pick doesn’t work out, move to the second pick without hesitation. You don’t truly “win” when you buy a fix-and-flip property, but you pay too much for it.

And it should go without saying, but don’t get emotionally invested in the property. A strong negotiator knows when to walk away.

Be Comfortable with the Margin for Error

No matter how experienced you may be at negotiation, the core rules are this: your due diligence gives you the final price -- and that is an amount with a profit margin that takes into consideration the expense, time and effort to be had from fixing and flipping. Any dollar beyond that is simply money in your pocket.

But you’ll also need to keep in mind the margin for error. After you purchase the home, any number of things could happen. The market could change -- rapidly, an act of God could happen that completely changes things. The lower your purchase price, the higher your chances of overcoming the challenge and ultimately being successful.

Conversely, you don’t want to make an insultingly low offer, either. You will come across sellers who are emotionally involved in the sales price, and if you offer them too little, they may be offended - thus weakening your negotiating position.

If you truly do want to buy the property for a specific price, but your bid is too low, this can seem like a bluff, which also hurts your credibility. If you’re new to fixing and flipping, you’ll learn how to accurately gauge pricing in time. But no matter what, always communicate with confidence and remain firm.

Know the Seller (And Their Motivations)

Investing is just as much about knowing the sources and networking as it is about properly negotiating a deal. Likewise, you should be cultivating your own network. Reach out to real estate agents - particularly the agent of the seller and find out everything you can.

Ask questions -- such as:

• How long has this home been on the market 
• Why are they selling it? 
• Are they in a hurry to sell it? 
• Is the house in danger of foreclosure?

By knowing their motivations, you also have a better position and advantage from which to negotiate.

Anticipate The Seller’s Every Move 

Negotiating on a fix ‘n’ flip property is much like a game of chess -- you’re always anticipating your opponent’s next move. And it starts from the moment you make an offer. When you counter the initial offer, it also sets the tone for the rest of the negotiation. Most negotiations will meet somewhere in the middle, but it is very much a game of give and take. If you increase your offer by a certain amount, how much of a difference can you expect from the seller?

Always be thinking as many moves ahead as possible.

The No-Contingency Benefit

Finally, one of the major benefits you have on your side going into negotiations is the non-contingency benefit. With fierce competition on an in-demand location or property, many buyers have contingencies, such as selling their existing house first.

But you don’t have any of that. Because you have no contingencies, the seller should be more willing to accept a lower price from you, which in turn increases your profit potential on the home. Ensure that the seller knows this and make it one of your biggest selling points!

Get a Lender That’s On Your Side 

In highly-competitive markets and fierce real estate negotiations, your “ace in the hole” is a lender who understands that time is not on your side. You need a lender who can help you close profitable deals quickly at the best possible terms. Contact LBC Hard Money Lenders for the best possible rates and don’t miss out on another lucrative real estate investment opportunity!