Bending Reality in Deals

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Welcome To The Business Of Wholesaling Newsletter!

Every week, we’ll be sending you strategies, tactics, and tools used by successful wholesalers and we’ll cover any important market insights and news in the industry.

Here’s what we got for you today:

• Bending Reality in Deals

• Creating An Illusion Of Control

• Price-To-Rent Ratio

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Bending Reality in Deals

What's happening beneath the surface often matters more than what's said out loud. 

Like an iceberg, the visible discussions about price and terms are just a small part of what's really going on. The real action happens underwater, where fears, desires, and pressures shape decisions.

This "bending reality" concept is about understanding and shaping how your counterpart sees the negotiation. It's not about trickery - it's about recognizing the emotional currents that drive decisions.

Take deadlines, for example. When a property seller mentions they "need to sell by the end of the month," that deadline creates pressure that can work in your favor. As the clock ticks down, people become more willing to compromise to avoid missing that deadline. The approaching deadline bends their reality, making options they would normally reject seem suddenly reasonable.

Fairness is another powerful reality-bender. Everyone wants to feel they're being treated fairly. When someone believes a deal is unfair, emotions flare and rational thinking takes a backseat. Simply acknowledging potential fairness concerns up front ("I want to make sure you feel this is a fair deal") can dramatically change how your proposals are received.

Perhaps the strongest reality-bender is loss aversion - the human tendency to fear losses more than we value equivalent gains. This explains why sellers often struggle to reduce their asking price - it feels like "losing" money they never actually had. By helping them see what they might lose by not accepting your offer (like missing the chance to move into their dream home), you can shift their perspective.

Smart investors also know that money isn't everything. By offering non-monetary terms that matter to the other party (like a flexible closing date or leaving certain appliances), you can make your price seem more reasonable while giving up things that cost you little.

The essence of bending reality in real estate isn't manipulation - it's understanding human psychology and using it to create deals where both sides walk away satisfied.

Creating An Illusion Of Control

Ever notice how some salespeople seem to guide conversations exactly where they want them to go?

All it takes is asking the right questions. 

Specifically, questions that start with "how" and "what" have almost magical properties in negotiations. Unlike yes/no questions that back people into corners, these open-ended questions give the other person room to think and respond. 

They create an interesting dynamic where you're actually steering the conversation while making the other person feel they're in control.

Think about the difference between "Will you take $180,000?" and "What makes you feel the property is worth $200,000?" The first question invites rejection. The second invites explanation and opens a conversation about value.

These "calibrated questions" work because they remove confrontation from the equation. Instead of creating resistance, they encourage problem-solving. 

When you ask someone "How can we make this work for both of us?" you're not fighting them - you're inviting them to solve a puzzle with you.

This approach is particularly effective with strong personalities. When you ask questions like "How would you like me to proceed?" or "What would make this a good deal for you?" you're appealing to their ego and expertise. 

You're essentially saying, "I need your intelligence to solve this problem," which is hard for most people to resist.

The beauty of this technique is its subtlety. By asking thought-provoking questions, you guide the conversation exactly where you want it to go, but the other person feels they're driving.

In negotiations, the person asking the questions is often the one actually controlling the conversation. The illusion of control can be more powerful than control itself.

Formulas For Newbies

For beginner wholesalers, there are some simple formulas you need to understand. One of them is the price-to-rent ratio.

The price-to-rent ratio tells you how a property's purchase price compares to the rent it can generate. Think of it as a measuring stick for potential profitability. The better this ratio, the more likely a property will put cash in your pocket each month rather than take it out.

Calculating potential profit is straightforward: add up all the costs of owning the property (mortgage, taxes, insurance, maintenance, vacancies, property management, etc.) and subtract them from the expected rent. The result shows whether you'll be making or losing money each month.

The 1% Rule is a quick way to spot promising properties. If monthly rent equals at least 1% of the purchase price, the property is likely to be profitable.

For instance, a $150,000 house should rent for at least $1,500 monthly to meet this rule. Properties hitting this benchmark often generate positive cash flow without requiring complex calculations.

For house flippers and wholesalers, the 70% Rule offers similar guidance. Multiply the after-repair value by 0.70, then subtract your estimated repair costs. The result suggests a maximum purchase price that allows room for profit, unexpected expenses, and holding costs.

The 2% Rule represents exceptional deals where monthly rent equals 2% of the purchase price. While these properties exist, they often come with hidden challenges. A property meeting this rule might be located in a declining neighborhood or require significant repairs, explaining why it's selling for so little compared to its rental income.

These rules aren't perfect, but they're valuable tools for quickly filtering through potential investments. They help you identify promising opportunities without wasting time on properties that simply won't make financial sense.

Thanks for reading this week’s issue of the Business of Wholesaling. 

We’ll be back next week with more marketing & sales strategies, market insights, and other advice you can use to grow your wholesaling business. 

See you next week.

Team Business of Wholesaling