Posted by John Behle on September 16, 1999 at 14:52:45:
In Reply to: John, Some Pre-Meeting Advice? posted by MN~Chicago on September 15, 1999 at 11:37:18:
You may have a large gulf between the yield your investor wants and an accptable yield for the lender's portfolio. At that LTV, there may need to be very little discount. How much?
How long is a rope?
It's all in what you want and negotiate. If your funding source will consider lower yields for safety and the ability to place a large amount of money, then you just negotiate out a piece in the middle.
I think of it as the "Double Push". Picture Sampson between the two pillars. I am negotiating on one side for the lowest cost of funds possible with the investor and on the other side for the lowest price (highest yield) acceptable for the lender.
That could amount to a great deal or as I said, they could be worlds apart. You just have to ask and negotiate.
A primary thought to keep in mind about negotiations is "don't make up their mind for them". Don't "pre-negotiate" for them. It's rare that you could go TOO long before making commitments and talking numbers.
We are in the middle of a deal right now. I spent an hour at their place. In that time period I may have said 50 words. While at the same time, the property owners may have said the phrase "I probably shouldn't tell you this" 50 times and then rambled off information that torpedoed their own negotiations.
I didn't make any offers. I didn't talk prices. An hour later one of the sellers called and said "Ok, just take it off my hands". $115 value and a 75K loan.
The point.
I constantly see people trying to pre-negotiate or make up the mind for the seller, investor, buyer, etc.
ASK QUESTIONS, LOOK WISE, SMILE A LOT.
From the information you give, I'd say the focus needs to be on finding out what they want, expect, desire, etc. I always try to catch myself when I start wondering "what to offer?", "What to say?", "What would they take?", etc.
Exchangors have a creative, brainstorming, benefits approach to problem solving. I love the statement - "DON'T TELL ME WHAT YOU WON'T DO, TELL ME WHAT YOU WILL DO".
It is very hard to remain quiet, ask questions, etc. Yet, it is one of the most powerful negotiating skills you can ever have. It was hard to say as little as I did last night, but it paid off - and If I take it, I get a better deal than I might have offered and get to be the hero - not the adversary.
Sometimes you do need to get things going. Use non-specific or open ended questions like "What would you take?", "What do you think is fair?", "If you could place a large amount of cash Mr. Investor, at a very safe LTV ratio, what kind of yield would you need?"
Remember, you don't HAVE TO RESPOND - right then or ever. A deep breath, a slight look of shock or dissappointment, etc. - can be powerful.
The lender says 9% yield, your investor says 11% yield. Shrug the shoulders, shake your head slightly, deep breath. "Is that the best you can do?". "You heard me say VERY SAFE, low risk, right?"
Maybe this investor isn't the one for these kind of deals. His yield may be too high. How about a bank, credit union, pension fund, etc.
You have different investors for different needs and types of deals. There are different sources and types of notes. These may be something an institution or even institutional note buyer would love. It may be too low a yield for a private investor.
BUT!!!!!!! DON'T PRE-NEGOTIATE for them or make up their minds - or answer their questions. Ask questions even if you think you know the answer. Ask questions even if they have answered it before. Ask the same question again with a skeptical look.
ASK ASK ASK
- I Knew That! MN~Chicago 18:45:41 9/17/99 (0)