Too Clever For My Own Good

Real estate investors are famous for saying that you can buy a property based on both price and terms. I will let you set the price as long as I set the terms.

The trivial example is, I’ll pay you $10M for that old 1950’s single family home. But I’ll make daily instalments of $0.10 per day until the $10M is fully paid off. As long as you set the payment terms, you can agree to virtually any price.

I learned a powerful lesson in the past month. It’s a lesson that I already knew, or at least I thought I did. Sometimes, I find myself learning the same lesson more than once. So here’s the story. I’ve always known that a confused mind doesn’t make a decision.

The author and marketing expert Donald Miller is famous for his saying “When you confuse you lose, noise is the enemy, and a clear message is the best way to grow your business.”

I’ve known this for a long time. A confused mind will not make a decision.

My partners and I have a property under contract and we are looking to assemble several of the neighboring parcels in order to build a high rise project. This requires negotiating the purchase of these properties with each of the land owners. As with any negotiation, the seller wants to maximize the price, and as a buyer I don’t want to pay too much.

The value of the land to me is largely dependent on what the city will ultimately allow to be built on that site. The value will be influenced by the height restriction, and by the setbacks from the property line. It will be influenced by any restrictions imposed by the zoning code.  Will the city allow 6 stories, 9 stories, maybe 14? The higher the density, the greater the value of the land. Can I build right to the property line, or will there be a required setback from the property line?

So here I was, thinking that I had come up with a clever solution to negotiating the purchase price for three properties. In each and every case, the idea didn’t really connect with the seller. Out of the three, only one of them truly got it. Even then, they didn’t really value it.

In almost every case, we were negotiating with one representative from each property. But there were multiple stake-holders behind the scenes that we didn’t have a chance to talk with directly.

So what was the lesson.

1) Keep it simple and easy to understand.

2) Don’t assume that all the stakeholders will connect with your clever idea if they’re not part of the conversation directly.