The Most Costly Mistake You’ll Ever Make as a Creative Real Estate Investor
Have you ever read or heard about a killer deal that a real estate investor did and thought to yourself, “Why in the world would the seller ever accept an offer like that?” or “I could never make that kind of an offer” or “How do you talk someone into that?”
If you answered “yes,” than you have most likely suffered from this common profit destroying tendency. At some time or another, ever creative real estate investor has made this mistake and must always be on guard against it. Without further ado. . .
Don’t Think for Other People!
Here’s an example when we didn’t think for the other person and came out on top.
A motivated seller gave us a call. She owned a mobile home in North Charleston. Our primary business is not buying mobile homes, but our motto has always been, “We do deals.” So, whatever it is, if it’s a deal, we’ll take a look at it. The home was in good shape and the owner wanted a cash offer so we gave her one. We offered her $9K. And the seller owed $36K!
You may be thinking that our offer doesn’t make sense, but who ever said that you had to offer a seller more than they owe. She went through a credit union and got a personal loan for $27K to pay off her title loan. That’s how bad she wanted out.
We bought it for $9K, had the carpets cleaned, and financed it to someone for $24,900 with $3K down! Had we thought for the seller, we never would have made that offer in the first place.
4 Sure Signs That You’re Thinking for Other People and Losing a Ton of Money in the Process
1. You Get Your First Offer Accepted
My business partner, Dusty, is a master real estate investing negotiator and does his best never to think for someone else. He prides himself on the fact that he has a method to not only negotiate price but terms as well. Typically, most investors only negotiate on price but there is much more to deal structuring than what you pay for a property. How you structure paying for a property can turn a mediocre deal into a grand slam!
A lead came in about a year ago from a seller who owned a property free and clear. The seller was already asking a reasonable price so we knew there was a great opportunity here. Dusty took the seller through his normal negotiating process and low and behold when Dusty made the offer . . . the seller said, “OK.”
Even though we got a good deal under contract that day, I remember talking to Dusty when he got back from the appointment, and he was not too happy with himself. When you get your first offer accepted, you know that you left money on the table, and the culprit was most likely thinking for the seller.
2. You Don’t Ask for What You Want
Only you can be the judge of this sure sign that you’re thinking for other people. Maybe you didn’t ask for the terms that you wanted in the deal or you didn’t ask for the seller to include the appliances, fixtures, or the boat sitting in the front yard.
Children have an amazing capacity to continually ask for what they want regardless of how many times they have been told “No.” Think back to when you were a child and harness that ability.
3. You Consistently Make the Same Profit on Your Deals
Have you done several deals now and seem to make around the same profit in each deal? Even if you are a seasoned pro, there is an average profit that you make per deal.
Find out what your average profit is and determine to make more on your next deal. You may have gotten comfortable and stuck in your ways. You may be thinking for other people and have an established profit # in your head that you “should” make per deal.
Every deal that we do is looked at on a “deal by deal” basis. Depending on the terms of the deal, the location of the property, condition of the house, etc., we determine our bottom line and make an offer we feel will be rejected.
4. You “Try” to Make a Deal Work
“Trying” to make a deal work is a dangerous thing to do. This usually occurs when you become emotionally attached to a property, the seller’s situation, and you start thinking for the seller.
It must be black and white! Either it’s a deal or it’s not. Run your numbers and keep your thoughts on what makes sense for you.
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Patrick Riddle:
Dusty Keefe:
Great Stuff! I especially like the part about not “trying” to make a deal work. It’s easy to pad the numbers when you haven’t had a deal in a while and you “need” a deal. Your advice about running your numbers and sticking to your business plan is tight. Thanks again.
I have encountered point 1 many times in life. Sometimes I’ll be selling items on craigslist, and get 5-6 replies that day. That is how I know that I priced it too low. Patience is important to remember when asking a price that not everybody is going to jump on.