5 Real Estate Investment Mistakes to Avoid - by Peter Conti (Thanks Pete !)

If you are going to jump into real estate investing, then you'll want to make sure that you avoid these common mistakes made by most property investors. I've seen some well intentioned investors give up completely when all they needed to do was follow these five simple suggestions.


Property Investor Mistake # 1 - Negotiating Over the Telephone

Why is it that so many property investors think that they can effectively negotiate the deal over the phone? Yes negotiating over the phone saves you time, but it also is extremely difficult.

You will ALWAYS be more effective in person as compared to negotiating via the phone. In person you'll have the non-verbal cues to watch for in their body language.

In person the other party can really get a sense that you are a good person and come to like you more. And in person you can more easily connect with the other party, something we'll talk more about in a moment.

How is it that property investors get TRICKED into negotiating over the phone? Sellers will say things like,

"Tell me about your program?" or "What will you give me for the property?"

Be WARY before you answer. If you are not careful, you will get yourself into the heart of the negotiation prematurely.

Instead, answer these questions cautiously. Say,

"Well Mr. Seller, to be frank I'm not sure if I do want to buy this property. With all that's going on in the world I'm not sure that now is even a good time to buy. May I ask you a few questions to see if this is even a house I would want to have you show me through the inside of?"

Notice how you have effectively turned things around on the other party.


Property Investor Mistake # 2 - Negotiating Money Before Motivation

The single most important key to closing the deal for property investors is to remember to never talk through any numbers or specifics of price and terms before you have spent time talking through the seller's motivation to sell the property. In order to get a great deal on a property you need the seller to feel motivated. We use the word feel intentionally. It's one thing if the seller intellectually knows he is motivated. It is quite another thing for him to feel it in his gut. One is an intellectual response, the other an emotional response. When you can help the seller cut through the layers of denial and get to the emotional core of why this property you are talking with them about buying is such a burden to them, then you will get a great buy.

The more time you spend letting the seller tell you all the reasons he or she has had trouble selling, the better deal you will get. Remember that the next time you are tempted to rush past this step. The amount of money you make in the deal as a property investor is directly proportional to the time you spent building the seller's motivation. 


Property Investor Mistake # 3 - Talking In Technical Language Versus Descriptive Language

Can you imagine the seller's response if you were to say to them,

"Mr. Seller, what if we were to lease option your house with an option price of $150,000. We would give you $1 as option consideration, in addition to our commitment to the long term lease which will be additional option consideration. "

The term of the lease will be one year with five additional one year renewals to come up on a rolling basis every twelve months".

Have your eyes glazed over yet? Are you a little intimidated by the language? If you feel that way imagine how the seller will feel. Scared and confused.

And a scared and confused seller is NOT going to ask property investors the questions to clarify their understanding or to settle their anxiety. They are simply going to say one word...NO! So make sure you instead talk in descriptive language like,

"Mr. Seller, what if we were to make you a guaranteed monthly payment every month and then at some point down the road we were to cash you out of the property at the full $150,000 price we talked through a moment ago. Is that something we should talk about, or probably not?"

The funny thing is that what you said in the second example describes in functional terms what you said in technical jargon in the first example. Remember, sellers want to feel comfortable with whatever property investors offer them. You have got to explain things to them in language that is simple and tells them exactly what they get. Never use jargon or fancy language to cloud up the discussion. Using fancy language usually only results in bolstering an investor's fragile ego, but at the expense of his or her bank account.
 

Property Investor Mistake # 4 - Selling the Other Party On the Deal

One of the subtle negotiation applications of this take away approach is for you to become an expert at being a reluctant buyer.

The single biggest language pattern of the reluctant buyer is how they qualify everything they say with phrases:

"I don't know if I could do this, but what if"

and

"My partner might not like this, but what if I could get her to agree"

Also, when you get the other party to give their initial agreement on a specific idea or offer, fight the urge to rush in and SELL them on the benefits that accrue to them if only they move forward with the deal. Instead, get them to sell themselves! Property investors do this by asking them a question. For example, if they said they would be interested in a five year lease option ask them,

"What about me making you payments for up to five years and then cashing you out is such a fit for you?"

The result will be them telling you all their reasons for wanting to do the deal.
 

Property Investor Mistake # 5 - Negotiating On an Intellectual Level

Don't make the mistake that average property investors do of talking only in intellectual terms, work to get the conversation to touch the other party at an emotional level.

The single most important skill you have as an investor is your ability to connect emotionally with people. This is the skill that will help you get the seller to open up as to their real reasons for selling. This is the ability which will help you create trust and rapport with the seller. Master this skill and you'll never really be "negotiating a deal." Rather, you'll be talking over ways of coming up with a win-win solution with the seller.

So there you have the five most common mistakes that property investors make when negotiating deals, don't you dare make these common mistakes!