If you want to make the most substantial impact in wholesale real estate, the number one skill you should work on is your ability to negotiate. Remember that by its very nature, wholesale real estate is almost more challenging than a traditional real estate transaction. Instead of just acting on behalf of one party, you’re trying to get both the buyer and seller to agree to what you want. Everyone has to walk away happy to a certain extent, including yourself – you can’t get to that point without knowing how to negotiate.
Of course, sharpening your negotiating skills isn’t as simple as flipping a light switch. It’s like a muscle you need to consistently work at and strengthen over time. To get to that point, there are a few tips that you can start using right away.
1. Conduct Thorough Market Research
The number one way to become a better negotiator in wholesale real estate involves conducting as much market research as possible. Market research can uncover a treasure trove of information pertaining to things like the population growth of a particular area, the job outlook and employment prospects for a community, education levels, and more.
Remember that the property is only one small part of a larger story. You could have an objectively terrific property that nobody will buy if it is located in an objectively terrible area. Only by understanding the market as a whole will you be able to see each transaction for what it really is.
The primary benefit of this level of market research is that it allows you to use hard data to support valuations. You’re not making offers based on gut instinct or intuition – every choice is backed by fact. If you’ve done your research, you’ll also be able to identify unfavorable deals quickly, putting you in the best possible position to walk away from them to avoid wasting any more of your time.
2. Outline Clear, Actionable Objectives
Another way to become a better wholesale real estate negotiator involves setting clear, actionable objectives for yourself before you ever sit down with a seller.
If you want to be able to measure success, you have to know what “success” looks like. Why did you get into wholesale real estate in the first place, and what are you trying to accomplish? Do you want to diversify your portfolio and build wealth over time, or are you going for a faster return? How much risk are you willing to take on?
Use the answers to questions like these to set objectives for yourself and measure your negotiating skills against whether you were successful in accomplishing them.
Break down your larger real estate strategy in terms of specific key performance indicators or KPIs. Keep track of how many transactions you’re participating in a year, how long it takes to close each one, and how much you’re making. These are ways to understand how you’re doing and, more importantly, where you could be doing better with a little more work.
Just because you closed a wholesale real estate transaction doesn’t mean you were a “successful negotiator” if all you really did was break even, for example. Understand what “success” looks like so that you know how good you are at hitting those benchmarks and which areas you can improve on.
3. Establish a Rapport With Sellers
Real estate tends to be looked at as a cold and cynical industry more often than not. Therefore, one perfect way to become a better negotiator and separate yourself from your competitors involves establishing a rapport with sellers whenever possible. Don’t just look at someone as a walking, talking dollar sign. See sellers for the people they truly are.
You’ll need to come prepared to the negotiating table with compelling offers to do this. Understand that one of the keys to effective negotiation has nothing to do with your ability to “out-talk” someone. Instead, it’s all about actively listening.
Think about it like this: You’re entering into a negotiation with a complete understanding of what you want. If you’re trying to get someone to compromise, you must first understand what they hope to get out of the deal and why it matters to them. Sellers are more than willing to tell you this information – all you have to do is actually pay attention to what they need instead of focusing exclusively on what you want.
The most immediate benefit of this is that it clearly conveys to someone that you care about their viewpoint. You’d be surprised by just how rare this can be, especially in the real estate industry. Secondly, it shows you’re serious about creating a win-win situation for all parties. Someone who isn’t listening likely isn’t willing to be flexible. This flexibility is paramount if both parties are going to walk away from the table with something of value.
This approach will also allow you to create and nurture the lasting partnerships you need to remain competitive in wholesale real estate.
Each Negotiation is a Learning Experience
Ultimately, wholesale real estate negotiation is a skill that must be honed over time. You’ll likely make mistakes, especially if you’re new to the sector. But you must treat them for what they are: learning opportunities. Every negotiation you enter into will leave you with a lesson you hadn’t previously understood. By being mindful of those lessons and using tips like those outlined above, you can become the negotiator you need to be to maximize your success moving forward.