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The Calculator Close

property investment Mar 20, 2019

When you’re negotiating with the seller of a property you are interested in, don’t forget to prepare properly.  That means being ready with your persuasion strategies. One of these is the Calculator Close. This is how it works.

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.”

One word of warning – do these sums for yourself beforehand so you have a good idea of what the numbers will come out at to avoid shooting yourself in the foot!

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