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Welcome to the Billboard Mastery Podcast, where you will learn the correct way to identify, evaluate, negotiate, perform diligence on, select the construction type, build, rent the ad space and operate billboard signs. And now here is your host – the guy that built from scratch the largest privately-owned billboard company in Dallas/Ft. Worth – Frank Rolfe.
Most sellers are good-natured. You can get deals done that are fair, that are win-win by nature, and that's great, and I'm glad most of them are. But there's another category of a seller which is a very, very tough negotiator. Sometimes so tough that it makes deals almost impossible. This is Frank Rolfe with the Self Storage University podcast. We're gonna talk about dealing with tough negotiators. Now, the first thing you have to know is the reason some people appear tough in their negotiation is they're insecure. They're often tough because they don't know what they're doing, and they're concerned you are gonna take advantage of them. So they feel that if they are irrational, hard to handle, always asking for more than the property's worth, then that way you can't trick them and they will get fair value. Also, some of them have been watching too much TV or reading too many books about win-lose negotiation. The popular show "Dallas," back in the 1980s, featured a character named J.R. Ewing. And J.R. Ewing was this oil guy. Of course, it's all fictional. It was just Larry Hagman, formerly of "I Dream of Jeannie" fame. But he was a tough negotiator. He was impossible. People hated working with him. But that was supposed to show that he was macho, that he was strong in business, and of course, not being able to get deals done has never been a symbol of someone who's strong in business. But nevertheless, some people, their brain has been polluted with win-lose negotiation biopics, and therefore they think that's what you do in life, is you act very, very tough because that's what real business people do. So when someone's a tough negotiator with you, don't take that personally. Don't say, "Oh, they hate me," or something that I did. No, it's not. It's a problem with them. They have insecurity issues. Now, before you begin dealing with the tough negotiator, you need to run a bunch of numbers and a bunch of scenarios, and you need to know what is a good deal from a bad. Because since the tough negotiator is typically working from the point of view of insecurity, they're looking for direction. They're gonna test the waters by demanding too much over and over and over to see if you ever give. So you've got to create a blockade in your brain of at what point you can't give.
And you should also strategize like a game of tennis. You're gonna hit the ball over there, you know they're gonna hit it back over here, and then you're gonna hit it over there and win the game. Strategize how it works. Because we all know how negotiation works. The seller always asks for too much, the buyer offers too little, and you meet somewhere in the middle. So here are some of the standard ways to work around the tough negotiator. And we find that negotiators that are tough normally come in two categories on most deals. The first one is on price. The best way to work with the tough negotiator on price is explain how the price came to be, what it's derived from. And normally in most real estate, that goes around bank lending. So explain to them how much this deal can actually get a loan for. Tell them about things like coverage ratio, other property sales in the area, what the appraisal will come in at. Make it so it's not you that says it's only worth X, it's somebody else who says it's X. And that somebody else needs to be something of more importance than you as the buyer, and that would be what the lending community says. Also, if when you tell them the price and they're just like, "Well, I mean, I gotta have this much," then say, "Well, if I can't get a loan on it, I guess would you carry the paper on it?" Because sometimes seller financing can get around the blockades, the issues that stop typical pricing, because you can kind of dilute the pricing with a low interest rate or interest-only terms, things like that. So see if you can push for seller carry to offset the fact that they're unreasonable on their pricing. Or maybe after you told them what the price could be and they don't want to do that, just say, "Okay, look, just spare me a lot of time. What would it take to get this under contract?" And just see if you can work around whatever his then lowest price he has in his mind might be. It'll save you a lot of time and trouble. And then also, if you sometimes... If you just say, "Well, I give up," then that sign of frustration, that is what he needed. That's the trigger that tells the seller that they're getting a good deal because they've negotiated so hard that you're willing to walk out of the room as a result. Then they'll suddenly say, "Well, okay, I guess I could do that."
Or sometimes they'll call you a week later and say that, or two weeks later. But those are the normal standard ways to get around the price: blame it on somebody else, push for seller financing, try and bring it to the end quickly saying, "What would I have to do?" And then if it looks like there's no chance, then just get up and leave. And by getting up and leaving, you increase your odds of something happening. The other item the tough negotiators typically focus on is on earnest money. We all know what earnest money is. Earnest money is held by the title company to go in as liquidated damages if you don't show up to close on the deal after your due diligence period and your financing period have concluded. And of course, due diligence, as written in your contract, or should be written in your contract, is fully refundable in the event you terminate the agreement during the due diligence period or the financing contingency. So as a result, asking for large amounts of earnest money, which is what often a tough negotiator will do, makes no sense. Why do you need the big earnest money? If you ask the seller, "Why do you want big earnest money?" Typical deals are 1% earnest money. These are people who will ask 20% earnest money. On a million-dollar deal, they want $200,000 of earnest money. Ask them why. It's refundable, what's the purpose? And what it all boils down to is they want to make sure that you have the down payment so they're not wasting their time. You don't need to put up in due diligence the full amount of the down payment for them to know they're not wasting their time. Show them a proof of funds if that's what's important to them. Show them something showing that you have the money in a bank account currently, that it's liquid, it's ready to go, and often that can solve the issue. But the one thing the tough negotiator may do, which might even be just on a regular 1% of earnest money, is they'll want to have it non-refundable. This is a line in the sand you cannot cross. In 30 years of buying and selling properties, I've never seen a situation, nor have I ever agreed to having earnest money that on day one was not refundable.
And the reason why is that seller knows a lot more about that storage facility than you do. He knows all the skeletons in the closet on the environmental issues, on the survey issues, on the condition of the facility. He knows it all. And he's insecure because he knows that when you find out the truth, you're gonna cancel. So he's hoping to kind of grift you your earnest money so he has some kind of income on the property. Never fall for the trap of your earnest money being non-refundable. It always has a terrible, terrible ending. If he knows more about the property than you do, and yet he wants you to put up money non-refundable day one on a property you know nothing about, I think it's pretty clear there's an ulterior motive, and you must never, ever step into that trap. The bottom line with tough negotiators are that as long as you understand they're working from a position of insecurity and understand how what makes their brain function, you can get deals done with them. But let me caution you, sometimes you just can't. You just can't. It's not because you'reAmerica is filled right now with a movement we call DIY, which stands for do it yourself. A lot of that was created by companies like Home Depot and Lowe's, who empower people to buy the right tools to do the job themselves. And when you do that, you cut out the middleman, you cut out the labor, and it does give you a much lower price. If you're going to change out the tile in your bathroom, if you DIY it, all you have to buy is the tile. But if I hire a contractor, I have to pay the labor, and the labor is most of that job. So we've all been trained for cost containment and to reduce operating cost, doing it ourselves might be a really good idea. But then there was the billboard. This is Frank Rolfe, the Billboard Mastery podcast. We're gonna review things you can and cannot do yourself in regards to the billboard industry.
Now, the first thing you can do yourself, obviously, clearly, is to go out and find a spot for a billboard, to get a permit, to figure out what to construct. Those are all things you can do yourself. You can even figure out how tall to build the sign. You can go out and buy a fiberglass flagging pole. You can get a 45-footer for not a huge amount of money. It's what the surveyors buy, and it's clearly marked. Each segment of the pole is about five, six feet long. You pull it out of the thing, you twist it till it locks, you pull the next section out. It's like building a giant fishing pole. And you put a little red flag on the top of it, and you get it out to the height of the sign that you think, and you have someone drive up and down the highway taking pictures. And there's something you can do yourself, and it will save you probably in your career thousands of dollars as opposed to hiring a crane to go in and do the same thing. And if you got a friend who's amenable, you could have them hold the pole and you could drive it on the highway. That's an even better idea so you can see with your own eyes. But there's a DIY project that can save you a lot of money. So, sure, flagging signs, we can do that.
But the problem is that beyond flagging the sign, now we go down a pathway of things which really you shouldn't get involved in. A lot of people, particularly if they own old wooden signs or build new wooden signs on telephone poles, those things are not super high off the ground. And sometimes they'll have the wise idea that they can do something on that themselves. I've even seen people who think they can go out and nail or screw the plywood back on the old faces of the old wooden sign. Let me give you some cautionary tales of what happens when you're trying to do that. Billboards are much bigger in reality than they look. A billboard that looks like the size of a postage stamp, when you go up against that sign, that thing might be 20 by 50 feet in size. It's gigantic. So it's very easy to get carried away. When you look at it from the street, you think, "Oh, I can do this, I can do that," but you can't, because the thing is gigantic. And billboards by necessity are typically free of any obstructions, and those create obstructions to the wind.
If you go up and take a piece of plywood up on a billboard on any given day, if there's any wind at all, it's gonna blow you right off the sign. Or it's gonna blow the plywood right off the sign, which will then come spiraling down to the earth, which will then go through a car windshield or a building's front glass or God knows what. So don't be putting, taking parts up on a billboard yourself and trying to do it. That's a terrible idea. Some people have tried to go up and they've tried to put vinyls on a billboard, the big vinyl wrapping, and ratchet strap it tight on the back. You can't do that. Among other issues, even though you don't even know how to do it and you can't survive the wind load, you don't even have the safety equipment. OSHA mandates that you have safety equipment, and when people go up on billboards that they use the safety equipment so they can't fall to their death or even to be injured. You don't have any of that stuff. You have no know-how whatsoever on OSHA or how any of that works.
So once again, you can't do it. Some people think they can get involved in the wiring. The wiring is expensive. It can be thousands of dollars. You're not an electrician. You don't know how to do it. You don't know how to put things in conduit. You don't know even any of the electrical laws and how things work. You may be in a city where they do inspections of it. You're gonna flunk. You can't even file for the electrical inspection because you're not a licensed electrician. So once again, that's not gonna work. Is there anything you can do on the physical structure, any DIY project? Yeah. You can get a paint roller and you can get an extension for a paint roller and you can roll the paint up the column. If it gets old and rusty or gets a lot of discoloration on it, you can paint it. But let me warn you, if you paint it, you better know where that paint's gonna go. When you start rolling paint way up in the air with that paint roller, that paint is gonna blow. And next thing you know, you could be sued by somebody who has a car nearby that was parked that claims you got paint on it or another property does the same thing.
So that doesn't always work. You can go out and check your time clocks. That's a DIY project. You don't have to pay someone to do that. But you have to know how they work. There's not a whole lot of the old manual ones with the dials anymore. Many have now gone to digital. Do you know how the digital ones work? Do you know how to reprogram it for daylight savings time? Do you have any clue how any of these things actually work? They're very complicated. You're not gonna be able to figure it out in the field. And particularly if you go out in the field at night to check your lights, you'll be standing in a field in pitch darkness. And if you don't know exactly how everything in that electrical box works, even with the aid of a flashlight that you're holding in your mouth, you're not gonna be able to get the job done. You're not gonna get it figured out. Now, another DIY project you can do is you can pick up things that fall from the sign. Sometimes the sign installers will drop the vinyls down in other parts, and those parts, like maybe a ratchet strap, sits underneath the sign.
It's very unsightly. It doesn't look good. You can do that. Or if you own the property underneath the sign, well, you could probably mow it if you want to try and give that a whirl. But the problem with billboards are they're really, really big and they're really, really dangerous. There's a billboard on Interstate 30 between Dallas-Fort Worth. It's been fenced in now so others can't try and do this, but it was a billboard that was about 50 feet off the ground. But it was on the side of a mountain, and at one end, that skirting or the catwalk was only like a foot off the ground. So it was like a foot off the ground at one end of the mountain, but then as it went away from the mountain, it was 50 feet off the ground. Many a person went out and stepped on that billboard just to see what it was like and would walk out to the end nearest the freeway that was 50 feet to the ground. It was terrifying.
Back in the early days when you painted signs, once in desperation, I even climbed up on a sign because our sign painter had painted the wrong word. Terrible idea. I was absolutely certain I was never going to get back down alive. The bottom line is pay people for those kinds of jobs. It doesn't make any common sense for you to get injured, to break your hip, break your leg, break your neck. Don't do that stuff. There's no reason to do that. In every market in America, there are people who know what to do. They know how to use OSHA equipment. They can get the job done, they can do it safely, and the price really isn't that expensive. But when it comes to DIY projects, leave those for your house, things in the garage, but just don't use them on the great outdoors when it comes to billboards.
This is Frank Rolfe, the Billboard Mastery podcast. Hope you enjoyed this. Talk to you again soon. not a good negotiator. It's not because you had a bad presentation. There are some people that you just can't work with. And when you come to find that out, when you realize that, the best thing you can do for the sake of your own time and your own mental health is just to cut it loose. That doesn't mean you have to close the door forever. You can try back to them periodically to see if their opinion has changed. But wasting time is a sin when it comes to trying to buy a storage property. If you spend too much time wasting time negotiating with people who will never sign the agreement, then all is for naught. This is Frank Rolfe with the Self Storage University podcast. Hope you enjoyed this. Talk to you again soon.