There are few skills as important in buying a self-storage facility – or less understood – than the correct way to negotiate. Those who have this skill do well and those that don’t never end up with a deal at all, or they end up overpaying for the asset. So how do you become a pro at negotiating a storage property?
Make two offers?
One principal to consider in buying an RV park is if you would be better off offering two different prices: 1) one for cash and 2) one if the seller offers terms. Those terms are seller financing at a reasonable down payment of roughly 20%. So here’s how it works. The offer might be $500,000 cash or $550,000 if the seller offers financing. Of course, you want that $550,000 to still be a great price. The point is to steer them towards owner financing.
Start Low
You want to buy low and sell high. Not buy high and sell lower. So the important word of that concept is simple: LOW. You cannot go backwards in your negotiating. If you start high, you can’t retreat. So make sure that your first offer is significantly less than you would actually pay.
Get a counter-offer
Your first offer was a failure if you cannot get a counter-offer from the seller. Anyone can say “$200,000” on a $500,000 deal – but what’s the purpose. The only way you have done anything of value with your offer is if it close enough for the seller to counter it. So don’t make ridiculously low offers.
Act pained no matter what the truth is
Part of successful negotiation is pure Hollywood. Sellers like to feel that they got the better of you, so help them in that effort. When you offer $400,000 and they counter with $500,000 act like they have really hurt your future. Say things like “wow, that’s way more than I hoped for” – even if it’s way lower than you thought it’d be.
Go up slowly
When you increase your offer, make it seem like it’s a big deal to you and do so in small increments. If you offer $400,000 and they counter $500,000, then you’re next offer might be $410,000. If you go with big jumps they know that you’re not really thinking $400,000. If you go in smaller steps you appear more earnest in your pricing.
Have a walk-away price and don’t be afraid to show it
Before you enter into any negotiation, make sure that you already know what would be a success vs. a failure. If you decide that you won’t pay more than $475.000, then you’ll send that signal in your speech pattern and body English. When the seller can feel they’ve hit your absolute limit, they tend to stop trying to go higher. So you have to send that message.
You have nothing until it’s signed
All the above points are of zero value if you don’t get the deal under contract. So you have to shepherd the negotiation process to the ultimate goal of getting the seller to sign the contract. That means you have to close the deal. Once you agree on a price say “Ok, I’m glad we got that settled – now let’s sign this up and get it into the title company”. If you procrastinate and let closing the deal lag over the weekend there’s a good chance that another buyer will call on Saturday and steal the deal from you.
Conclusion
Negotiating self-storage deals is an art form. But it’s one that allows you to paint by the numbers. These tips will get you started.