We have some sharp negotiation strategies to share with you as Nhan Nguyen, from AdvancedPropertyStrategies.com, tells us todays how he ensures he gets it right at the purchase stage. Remember you make money when you buy not when you sell so this advice is gold.
Kevin: You’ve heard us say time and time again that you’ll make money out of real estate when you buy, not when you sell. That’s very true because when it comes to buying, how sharp you are as a negotiator is going to really depend a lot on how successful you are as a property investor. Nhan Nguyen has written and spoken a lot about this. Nhan is from AdvancedPropertyStrategies.com and joins me once again.
Nhan: Good day, Kevin.
Kevin: I know you’ve made a big study of this. Like me, you’ve probably seen a lot of people fail in the area of property development or property ownership because they simply don’t think about negotiating strategies.
Nhan: Absolutely. There are so many circumstances and ways you can do business, but you need to think about what the options are out there. I’m happy to share with you a couple of strategies when you’re ready.
Kevin: What are some of the tricky ones?
Nhan: Oftentimes, when people see a property market go hot and there’s a lot of activity, a lot of people think they can do development. The reason development pays a lot of money if you get it right is that there are risks involved.
One of the risks, for example, is development approvals. Some people just buy a site thinking that they can get it approved. Part of the negotiation is, when I can through a deal, I prefer to deal directly with owners. I know that real estate agents are probably listening here, but I prefer to deal with owners because I can negotiate, for example, longer settlement terms.
Longer settlement terms allow me to, for example, reduce the risk on holding costs. It allows me to lodge development applications. It allows me to, for example, clear a site if I need to. There are so many reasons.
One tip, if you can, if you’re doing developments, is definitely get longer settlements so that it allows you more time to do things like get finance, get approvals, get valuations, and reduce your holding costs as well.
Kevin: The market is very cyclical, and quite often when it swings from being a seller’s market to a buyer’s market, we find that a lot of multiple offers start to happen. How do you handle that situation where you’re actually competing with other buyers but at the point of contract?
Nhan: Yes. That’s very, very difficult, especially if it’s multiple offers on the same day and it closes that day. Building up a good relationship with an agent is really, really important.
There’s a property I purchased last year where it was a private treaty and there was a two-week window. I basically negotiated with the agent. I got her into the property on the last day of the bids. I just was having a frank conversation with her and said, “Okay, do I need to offer more?” She hinted this, hinted that, and in the end, I was able to buy it, but I had to really, really be frank with her and say, “How do I buy this without her telling me an exact figure?”
She couldn’t under the law with the multiple offers. She just said, “You might have to offer more money,” and that allowed me to offer a couple of grand more than the last buyer in that particular instance and secure the property. But I had to know that the deal was solid and that I could get it through council and get it approved to build townhouses in that instance.
Kevin: Yes, it comes back to what we spoke about several weeks ago on the show. That is when you’re building your team, you have your real estate agent, someone you actually build a relationship with.
Nhan, tell me about auctions. What’s your negotiating strategy there if you find that you have to buy at auction?
Nhan: Auctions can be a good and bad place to buy at the same time. I’m not a big fan of them because generally the reason they’re there, it’s a deadline and it forces you to make decisions on the spot, whether you’re a seller or a buyer. It makes you commit and if you’re not ready to commit, then it basically eliminates you from the process completely.
I think it’s a good and a bad thing from a buying point of view. If the seller is desperate to sell, that might be a good case for you. However, if there are a lot of bidders, obviously, you’re going to be bidded out most likely.
I think with auctions, one of the tips there is don’t get intimidated by the other people. Know exactly what number that you’re going to stop at. That’s critical before you go into the negotiation phase, because then if there are other people there, there is a lot of traffic, and a lot of people sniffing around, sometimes you can get a bit excited and lose the plot and spend too much money.
You need to know exactly how much you’re going to spend, when to pull out, and if you want to ring in by phone, negotiate and bid by phone, that might be a good idea, as well, but you may not be able to feel where the auction is at.
Kevin: Yes, I think it’s always good to get there if you possibly can. It allows you to see exactly what is going on and even eyeball your competition. That doesn’t hurt either sometimes.
Nhan: Yes, exactly. My friend had a Porsche, and what we’d do from time to time with the auctions is we just parked right at the front and see if we could intimidate as many of the buyers as we can saying that we have money and we’re not afraid to spend it and you’re not going to buy this property come hell or high water. That’s potentially one way. I’m not sure if that actually worked, but that was our strategy at the time.
Kevin: Yes, a bit bold, a little brave. Nhan, thank you so much for your time. Nhan Nguyen from AdvancedPropertyStrategies.com. Thanks, mate. We’ll talk to you again soon.
Nhan: Thanks for having us, Kevin.