You’ve found it — the perfect deal. The sellers are motivated, the price is right and you’ve sailed through the funding process like a pro. Since day one it’s been smooth sailing and, as you get closer to close, you can’t believe everything is moving along as easily as it is. So you kick back and take it in, thinking about what you’ll do with your earnings from this incredible flip.
And then the phone rings. Or your inbox suddenly floods with messages. Then the texts start. Just like that, everything changes. Just like that, your deal’s careening off the tracks because of some bump in the road you hadn’t seen coming. So the big question: what do you do? Do you fight for the deal or run in the other direction? Depending on the situation, either can be a good option. The key, though, is knowing when to go to the mat and when to run the other way.
Walk Away When…It’s RISKY — like, REALLY Risky
There’s always some risk when you invest in real estate. Markets can shifts practically overnight, “hot” neighborhoods can cool and other challenges can pop up at any stage of your deal-making process — and that can definitely impact the nature of your latest deal. Sometimes you can plan for it, and sometimes you can’t. BUT if a deal has RISK written all over it, it may be wise to think twice — and even avoid that deal in the end.
To decide your next steps, it’s important to assess the potential upside — how much you could make on the deal — as well as the likelihood that you’ll achieve that upside. You’ll also want to look at the downside. If you don’t get to that target number, where could you land? Is this a make-it-or-break-it situation — you’ll either make a ton or bust your budget? Or is there some comfortable middle you could find yourself in, that would still make the deal profitable?
If the deal comes down to sinking or soaring, I’d give it some serious thought. And, likewise, if it’s a risky deal with minimal upside, I’d walk. No sense in wasting your time and talent on a risky deal that’s mediocre at best.
Walk Away When…It Doesn’t Make Sense for Your Business — At Least Not Right Now
Did you ever get a gift you really didn’t like? In reality, it could have been a fantastic gift. But, still, it wasn’t your taste. And, no matter how much you tried to like it, it just wasn’t going to happen.
Apply that same logic to your upcoming deals. A deal could be perfect but, if it doesn’t fit into your portfolio and overarching business plan, it likely isn’t the way to go. It’s the square peg in the round hole — even if you give it your all, that peg isn’t going to fit. And, likely, you’re going to waste a lot of time and energy trying — time and energy that could’ve been spent tackling more meaningful, more relevant and more profit-generating tasks.
That’s not to say a particular deal will never be in your wheelhouse — sometimes it’s just a matter of scaling your business in a strategic way. For example, if you’ve been investing in wholesale deals, and suddenly an amazing opportunity to buy and hold a multi-unit apartment building emerges, you may want to really think about it before diving in. Shifting from flipping contracts to being a landlord on 150 units, let’s say, is an enormous difference. Could you do it? Absolutely. Should you do it? Maybe — and maybe not.
Walking away in these scenarios doesn’t mean you’re weak, scared or not a great real estate investor. It simply means you’re being smart about your business and its evolution. In a year or two you may come back to deals like these but, for now, you’re going to walk before you run — never a bad thing.
It’s Not Adding Up
Even if a deal isn’t risky, the numbers still need to add up. If they don’t, this could be a deal worth ditching. In real estate investing everything should be driven by the numbers. If there’s a deal on the table that isn’t measuring up — it won’t generate a meaningful payday for you, will cost too much to rehab or, isn’t as profitable as other opportunities you’re kicking around — then walk.
As a business owner and real estate investor, you need to be smart about where you spend your time, budget and resources. Ten deals worth $10,000 each will generate the same revenue as two deals worth $50,000 each. I know which route I’d rather take. Do your due diligence, run your numbers honestly and correctly and make a decision. If the pieces aren’t coming together, don’t force them. Simply pack up and move on. A better deal is always waiting, usually right around the corner.
It Doesn’t FEEL Right
I know I just said this is a numbers-driven industry but, at the same time, there’s something to be said for going with your gut. Sometimes the risk is right, the property is right and the numbers make sense — but, still, something doesn’t feel right. Maybe the seller or agent is being cagey, or maybe there are some things in the property’s past that are irking you. No matter what it is, if something feels wrong don’t ignore it. Investigate and see if you can get some peace of mind. And if you can’t, I often advise students to move on. Trust your gut. And if it says walk, walk. Find a different deal and go from there.
That said, my “gut” approach only works one way — if all other signs point to NO, don’t go with your gut and push forward with the deal. That’s a BAD idea. But if something’s kicking around in the back of your mind and that something is telling you NOT to move forward, LISTEN. More often than not, you’re more intuitive than you think — and more often than not, listening to your gut will help you avoid a bad deal.
The most important thing? If you find yourself staring down a not-so-great deal, don’t panic. Don’t get upset, don’t get frustrated and don’t blame yourself, no matter how far down the line you are. It’s always better to recognize a ditch-worthy deal earlier on than to close out of guilt, pressure or ignorance — one bad deal can set your real estate investment business back for months, if not longer. On the flip side, opting not to move forward with a deal or backing out before anyone signs on the line may be painful, but will always pan out in the long run. As long as you know when you should walk away versus when you should fight for the deal, you’ll be in good shape.
We’ll dig into all of this — the “should I stay or should I go?” of real estate investing — at the Nick Vertucci Real Estate Academy (NVREA). As important as it is for real estate investors to power through challenges and fight for the best deals, it’s equally important to know when one property is weighing down your entire business — and when to pack up and go. Understanding the differences between a roadblock you should plow through and one that signals more major issues to come is critical to your success as a real estate investor, and we’ll cover it in detail at the Academy. So bring your questions, your challenges and your list of “what ifs?” and we’ll dive right in.