How to not fall in love?

Question

Hi BP!

After many years of prepping and listening to Biggerpockets since Josh Dorkin was the host and Brandon was the funny co-host. Now, my wife and I financially ready to make offers! I was thinking this was great! We can finally buy a duplex or triplex house we wanted to house hack, or so we thought. I was totally unaware of how competitive the home buying really is in New Jersey. After multiple "Highest & Best" offers we started to slowly adjust up our numbers, writing more heartfelt cover letters, and basically stay glued to the market and make offers to basically any multi-family we see pop on the market. We did have one home that we had an accepted offer on which got us all excited just to have the owner short-sale it behind our back to the bank. Time and Time again we keep falling in love with homes building up our excitement and offering as much as we can possibly afford (Most offers are about 40k over ask) just to not win a bid. I even picked up the talent of asking why my offer wasn't accepted and adjusted and re-presented my offer, yet for some reason, it seems like an FHA loan is very undesirable to sellers in this market.

In any case, my question is simply this. How do we investors stay emotionally unattached? As a realtor that would like to help fellow investors, how can I prepare myself and my clients for the potential setbacks and disappointments? What do other BP Members do to not fall in love with a particular house?

Ujwal Velagapudi · Answer

Maybe the issue is more about thinking you've got it before the funds are transferred, title in your hands, and you're physically inside your property with keys in hand? A job interview doesn't mean we got the job, a first date with your crush doesn't mean we're going to get married, and a property listed on the MLS available for sale doesn't mean it can be ours (even if we offer asking price). It's only human to get excited about things like this, but knowing that it can be a battle and will take multiple rejections before closing the deal is important.

I slowly learned that like you are that sometimes deals just fall through for a million different reasons. I have grown to become more patient with the process and understanding that anything can throw out a deal, even with a signed purchase agreement in hand, or even after due diligence.

It's not wrong to love it, but I think setting expectations up front is the key that it will be a tough process and it is not over till it's over. Know that you will inevitably face rejected offers, sellers who back out, deals fall through in failed due diligence, investment partners get cold feet, lender doesn't come through with an 11th hour rejection, etc.

Derrick Dill · Answer

Why don't you do a low-down conventional? Usually 5% can do the trick. Sounds like the extra 1.5% can make you a lot more competitive, and worth it to me. FHA has more inspections, paper work and red tape

Pat L. · Answer

Tough to avoid with the mistress REI-TA. But we only focus on the margins & the returns. The numbers must work or we move on.

Mike McCarthy · Answer

@Jay Batista I fall in love with almost every house I walk into. I see the potential, what can be done to make it a great rental or flip. But in the end, a combination of running the numbers (the house listed for $300K but hardly worth $200, is probably not a good fit) and my investment partner (wife) reminding me when it’s outside our scope. Sure the house needs to be half-torn-down, but.... (not something we do).

Be realistic, and if you keep losing these deals, start testing out other alternatives. Find a wholesaler who can find off market deals, look in another area, etc. Not everywhere nor every house works for your type of investment, and that’s ok. Move on to the next.