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Get better deals

ninja learning Feb 20, 2019

When you’re trying to negotiate with vendors to bring down the price of your property, you need some smart strategies to reduce the price (and increase your profits).  The Calculator Close is one of these strategies, this is how it works:

The Calculator Close

  • Rule 1: You must give control of the calculator to the other party.
  • Rule 2: Any figure punched into the calculator must come from them, never from you.

Start with the asking price – get them to enter this in the calculator.  Then break down all the costs involved in getting it to the ceiling price, one by one, including:

  • The cost of the needed refurb; you’ll add credibility by breaking down the cost into separate component parts, materials and tradesmen or room by room.
  • Any buying and selling/refinancing costs (including Stamp duty land tax)
  • Maybe borrowing costs
  • Definitely the profit you need to make from the project to make it worthwhile taking on.

Don’t allow them to use ‘bargain basement’ costs, explain that you like to use good quality materials, for instance, not a cheap and cheerful fitted kitchen, but something at least mid-range.

Ensure they accept that your time has a value – if the refurb will take six months, then it must equate to six months’ pay (ask them how much they would need to stay afloat for six months).  Most investors are looking for a profit of around 20% on their deals, so don’t forget to have them add that in at the end.

Then you ask the question “So what figure have you got in your calculator?” and the vendor should be able to consult the calculator and give you an answer. 

To which you reply, “Well, I couldn’t pay more than that for the property.”

They may or may not accept this price, but it is the basis for negotiation.  If you’re negotiating with the agent they will need to submit your offer to the vendor, if you’re negotiating with the vendor, they’ll be able to carry out the negotiation. 

Does this work every time – No – but it gives you an opportunity to improve your outcome.  If you don’t ask – you don’t get.

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