It is assumed that you have already decided what type of property to buy, where to buy, and how long you expect to own the property. All of these should be understood prior to initiating the negotiation process.
First, you must determine the monthly cost for owning the property. This includes principal, interest, taxes, and insurance as a minimum. There may be other costs such as repairs required prior to renting the property. Use last years taxes, current mortgage rate for investment property, and previous insurance costs. Add in an estimate if repairs are required. This will provide you with a minimum income requirement for debt service. I usually add 30% to cover vacancy and repairs. Armed with this information you have a clear understanding of how much you can pay for the property and still stay above water. This process should be repeated for at least three additional properties so that all your efforts are not tied to one property.
Next comes the negotiation with the bank. The bank will most likely have an asking price which is based on how much they have invested in the property. Your first bid should be low; remember you can always increase your bid. You will know early in the negotiation if the bank is anxious to rid themselves of the property by the conversation with the bank. Do not hesitate to show the bank the results of your cost analysis, it will back up your bid with hard numbers. If you cannot get the bank to come close to a price that will allow you to purchase the property move on. You have shown the bank what price you can afford to pay and still have a viable bank foreclosures Manitoba investment. If you are close to a price that is acceptable to you, there are still negotiable items. Try to get the bank to give you an allowance for repairs that are needed prior to renting the property. Try to get the interest rate decreased; if this does not work try to get a rate buy down. That is, if the interest rate is 5% ask for 3% the first year, 4% the second year, and 5% for subsequent years.
Also try to get the bank to agree to a very low down payment; remember, the down payment is what you have invested in the property (other than your time). Assume that the bank wants 30% down and you agree for 10% down. If the property price increases 10% over three years that is 100% on your investment rather than 33%. The most important point to remember from this article is that EVERYTHING is negotiable.
To read more about buying foreclosed homes please visit:
Foreclosure Listings Canada http://www.foreclosuresearch.ca