Don’t Kid Yourself
May 9, 2009 Investment Strategy
Invariably, we all find ourselves in predicaments, some self induced, others not. For example, your car could overheat on the way to work without any advance warning. However, if the fan belt had squeaked over the last two weeks and snapped on the way to work, that would be something that could have been prevented. Of course, real estate is no different than anything else. It has its own situation comedies that sometimes are and sometimes not self induced. This article, however, will focus on a self-induced type scenario that puts investors behind the eight ball. Perhaps a bit of preventive maintenance is in order. For two months I’ve been talking with a local investor about buying wholesale and how to accomplish that feat. Realistically, its not that easy unless investors pay due diligence and bide their time. I now fully understand why they say, “Patience is a virtue.” Over these past two months he has dropped by countless time at my apartment complexes for one-on-one communication. His dropping by is the good news. Speaking to others about real estate is the art of networking and the essence of buying wholesale. So that is not the issue. The problem is that we’ve always talked about the same piece of property! Every time I’ve heard the story, I’ve consistently came to the same conclusion: “Don’t buy it. Find something else.” It all began with the honest interpretation of a novice investor. Houses in the neighborhood retail for $75-80,000 in fixed up condition. This house is quite run down and all real estate agent showings have not only brought no offers, but very negative comments about the condition. My investor friend stated that the house was two doors down from the one he lives in and it would be a real convenient investment. I advised that $45,000 would be a generous offer. In time, this deal has grown to desperate proportions. It’s now worth every penny of $90,000 and it needs very little repair! He now has it in contract for $80,000. He’s so excited, he can’t wait for it to close. What a deal! It’s so convenient. He can work his day job, drive home, and literally walk two doors down to work on his investment. I’m of the opinion that most investors buy one bad investment that goes sour and then they get out of the business, never to return. It takes due diligence to find good deals and it takes a great deal of patience. New investors get in a hurry to get their feet wet and to get into the business—–right now! Investors should bide their time and get their picks and shovels out and dig deeper. My newfound friend will be one of those. Although I’ve consistently advised against its purchase, he’s moving ahead with it. He dressed the deal up the best he could to win my approval because it was important to him. Even dressed up, the deal is bad and it will, guaranteed, sour. Why can’t he move on to something else? There is nothing else. He’s found no other deals where he could move on to. This is convenient as well. Has this investor put himself behind the eight ball? Is this one of those predicaments that could have been prevented? Are his two biggest mistakes lack of patience and lack of due diligence to find great deals? Yes, yes, and yes. Are you to be the next investor to get in and get out? Time will tell. Become knowledgeable, confident, streetsmart, and patient. Furthermore, for me, making money has always been inconvenient.
Tags: Landlording
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