Any idiot can pick up the phone and see if a self-storage facility is for sale. Or call a broker and look at their listings. But how does that translate into making a deal? It doesn’t, unless you understand how to negotiate for the purchase of a self-storage center. Without negotiation, facilities for sale are just raw material that can never be processed into a done deal.
Understanding the Process
Negotiating a self-storage facility is like connecting two electrical cords – it is the essential task of making sure that all goals and conditions of both parties are met favorably. Otherwise, there will surely be a blow-out, in the form of a failed contract or an unfavorable acquisition. There is no magic to negotiating, contrary to what most books will tell you (they are just trying to get you to buy the book) – it is a process. And if you do the process correctly, just like baking a cake, the end result will normally be successful.
The Types of Negotiating
There are two basic types of negotiating. The first is often called “Russian Negotiating”, or “Win/Lose” negotiating. In this form of negotiating, one party walks away a “winner” and the other a “loser”. How it normally works is that the buyer comes at the transaction from a position of strength and forces the seller to take their offer “or else”. This is the type of negotiating you often see on foreclosed assets, where one party forces the other to do whatever they want, or risk legal or financial suffering. Many buyers and sellers do not understand the real impact of this type of negotiating. While this may work well in issues of national security (such as the Cuban Missile Crisis, and even then it is not a great idea), it normally results in terrible side effects in business. If you bully and threaten your way into a self-storage facility, you may very well end up in litigation or, more commonly, end up buying only facilities that are lousy and have no other buyers.
The Better Method is Called “Win/Win”
In this process, the needs and desires of both buyer and seller are met, and everyone walks away from the closing happy with the outcome. This has become the industry standard, and is what you should strive for. That is not to say that all deals can end in a win/win situation. If the buyer or seller is unrealistic, or stubborn, or dishonest, it may be impossible to come to a win/win agreement. In that case, the deal never happens, and both parties go their own separate ways.
How to Use “Win/Win” Negotiating
The first building block of win/win negotiation is honesty. Both parties have to lay out what their real goals and expectations are. This is not a time for posturing. If the seller needs $900,000 for the self-storage facility, and has the ability to carry the note, then that needs to be thrown out for all to see. If the facility needs $200,000 in capital improvements, then that needs to be laid out also. If the buyer has $250,000 cash and nothing more, then that needs to be identified. Once all the raw material of a deal is laid out on the table, then the buyer and seller can see if they can build a successful sale out of those pieces.
How would you build a deal based on the facts in the preceding paragraph? Well, the seller might agree to taking $250,000 as the down payment on the facility, and carrying the note for the balance. And the $200,000 in capital improvements might be completed by the seller before closing, and rolled into the note. Or another construction might be for the buyer to make the repairs with his own cash, and then put only $50,000 down.
But what happens if the buyer lies and says he has only $100,000? The deal would probably never happen. Or what if the seller refuses to carry the financing? Then the deal will surely die. To make win/win negotiating work, everyone has to put all their cards on the table.
Listening is essential
Many times, even in win/win negotiating, things will break down – even when there is the raw material on the table to build a successful deal. That happens when people don’t listen to each other. Often, it is easy to address problems if you will only listen to what the real problem is. When you are the buyer, you should listen to the seller intently, and make no comment until you have really heard and understood what they are saying. They are often only looking for reassurance that they are doing the right thing and won’t get burned (particularly if they are carrying the financing).
Negotiating a self-storage facility is not based on tricks or secrets. It’s not an art form (contrary to what many books will tell you). It’s just a process. Stick with doing the process properly, and you will succeed at negotiating your self-storage facility. If you divert from the path, you will almost certainly fail. Or end up with a bad acquisition.