Real Estate Tips - Advice Article

Rental Negotiation Strategy Use Your Capital For A Better Deal

My report is for you to use your power to negotiate, not only a reduced weekly cost of accommodation, but also to get the best accommodation available in the area in which you wish to live.

Hello Colm Dillon here ...

Market conditions will effect the final outcome.

Irrespective, a good negotiation, following these guidelines, will save you money. Get to know the state of the market before you commence.

Determine how much you can afford to pay and then go higher. For example if you can afford $200 per week, start looking at a figure of say $250 - $260 per week. If you fall into a higher bracket; say $400 per week, start looking at $500.

Go to several real estate agencies and ask them what they have on their books at the amount you nominate. Also tell them your preferred areas.

Go through the normal selection process and pick the best place in which you would be happy living.

Confirm the weekly/monthly rental with the agent and the length of the lease term i.e. 6 months etc

Confirm with the agent that you really like the place, although there are a few others you like as well. Don’t say which ones, just give the impression that their agency is not the only 'cab on the rank.'

Note: Final selection by you will be made on the basis of the landlord attitude, as you intend living in the property for a ‘while.’

Start The Negotiation. Ask the agent to find out how much the landlord would accept for a 12 month lease. He will probably reply by stating the same amount back to you as you would pay for a six month term.

Start ramping up your approach by enquiring about a 2 year term. At this stage you should be getting the agent to phone the owner and coming back to you with a discount.

You could leave the agency for a hour or so ... allows time for the agent to see that you are giving serious consideration to the other properties, as well as theirs.

Don't be to automatic in your process. "Time" is a wonderful tool in negotiation.

Generally talk a bit more to the agent and raise the question of what discount the owner would accept for a 3 year lease term.

Again a phone call to the owner should take place. If the agent is making all the decisions without calling the owner, you should insist, as h/er does not have a big latitude in rental decision making. The owner is the agent's ‘boss.’

You should expect a further discount from this latest approach.

The agent may start to feel as though the negotiating should be coming to an end. Don’t worry, you are about to bring out the ‘Big Guns.’

Confirm again that you are warming more and more to the property, but there are a few other things you want to raise.

Tell the Agent that you would consider pre-paying 12 month rent in advance, if the owner would come to the party on the rent. Emphasize, the lack of risk to the owner; a large one off payment in his hand now that could be used to buy more property, etc etc.

Expect a reduction and Get It.

Depending on how your are going in the reduced rental stakes, in approaching your target base rent price, you may have one further go and offer 18 months or two years rent payment in advance.

You may hold off with this final offer by leaving the office after the last response.

The agent and owner have given ground on the rent so they may be feeling a bit tender. Let them 'marinate' for a few hours; maybe even over night, then put the last proposal of the 18 to 24 month prepayment of rent.

Once again, only you can judge how the negotiations are going. Most people want to ‘do a deal’ quickly and do not have the patience for a long term, several hours, negotiation.

By adding a more and more enticing offer you are making yourself more desirable as a tenant ... you will start to surround yourself with a "Golden Glow" of desirability.

When the final deal is done on rent and before you sign any Lease, you can now raise any property questions you have; i.e. carpet shampoo, condition, painting, plumbing, door locks, blinds etc etc.

Take photographs on a dated film of every aspect of the property (2 copies) one for the agent, one for you. You sign the back of the photos you give the agent and they sign the back of the copies you keep and it is noted in the lease.

When all these actions are taken, you will have accommodation, that you want, that is better than the original $xxx per week would get and you are secured for 3 years.

Finally, from these negotiation processes, both the owner and the agent will hold you in high regard, because most people admire a good negotiator.

Happy renting

Note: There is a financial mathematical formula called Discounted Cash Flow (DCF) which can be described as a means of calculating the ‘Present Day Value’ of ‘Future Cash Flows.’

So what does that mean?

Let’s say that you have got the $250 per week rent down to $230.00 before you start offering to pay rent in advance.OK?

In making the decision to pay in advance, you are giving the owner an amount of cash that they can use to make other buying investment decisions.

What this means is that the money you give them can earn them an amount of money, and we’ll call that ‘interest’ – just like the bank. This is just one concept I want you to lock away.

That concept has been given to you so that you can see, or understand, my next concept of DCF.

Imagine writing across a page a whole string of $230, $230, $230 etc for every week you would normally have to pay that rent; 52 times or 104 times.

Now imagine discounting the 52nd $230 by an interest rate of whatever; say 5% for 52 weeks. Then the next $230 is discounted by 5% for 51 weeks and so on until you get back to zero weeks. Having done all these calculations and then add them up you arrive at a $value of all those Cash Flowed $230’s for 52 weeks or for any other period.

I have not done the calculation for you because individual circumstances vary so much. However it is this discounted amount of money that you offer to the property owner.

Now going back to my first concept, you can see how the owner can invest the money. If they were to earn say 5% they would almost get back to the figure we started with i.e. 52 x $230.00 except of course the investment would also have gained in capital value.

I hope this brief explanation helps you understand why you should expect a discount for the Pre-Payment of rent or any other purchase you make where payment over time is the deal.

Last Point: If you were to leave your pre-paid rent in your bank account you would pay Tax on the interest you earned.

The Discount you get off your rent is Not Taxed and so is much more valuable to you and in effect you are getting a better return on your money invested in RENT.

This Article Shows You How To "SAVE MONEY & GET WEALTHY" by Renting & Using You CAPITAL.

Colm Dillon Author, "Residential Development Made Easy" is a best selling ebook in 38 Countries World Wide, through his web site: http://realestatedevelopmentcoach.com/realestatedevelopment.html having developed $1.2 Billion worth of projects himself.

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