New investor client is adamant about buying things that will lose money

[Devon Garbus]

So here is the story-

There is a REI guru who does training and refers his local students to me. He's a great guy and his students know a lot about how to run numbers and are pretty good at estimating rehab by the time they are done. He also does basically unlimited follow up calls. Anyway...

That being said they waited about 3 months from taking his class until they wanted to put in an offer, and that was early this year so in that time the banks stopped releasing the foreclosures. Now here we are and we haven't bought anything at all. Why? Because I just can't let them lose money. I feel like I'm obliged to help them make good investment choices. I veto things they want to look at because I know the margin is non existant. That and the market they want to invest in is nuts. We offer 61k on a 49k asking price and were outbid last week! Which was fine by me I didn't like the profit margin bidding over 55k...

Oddly that particular market has nothing by way of wholesalers. I've discussed becoming wholesalers with them before and I think they just aren't 'getting it' as far as why they would want to. I think the 'dream' of fixing up nice houses is sort of ephemeral for them.

What can I do to help them out as wholesalers? I've put them together with a direct mail guy that is great, and I've told them I'd go with them to everyone they get in to speak too.

How can I help these guys? I can't door knock this market for them because there are other communities I can do it in more profitably. THoughts?

[J Scott]

As their agent, you have a fiduciary responsibility to them.  In my opinion, that means doing everything you can not to let them make bad purchase decisions.  Ultimately, the decision is in their court, but you shouldn't hesitate to be completely blunt about a deal not being worth pursuing if you believe that to be true.

Ultimately, it may hurt you short term (fewer deals get done), but long-term, those investors will trust you and the good will will come back to you in spades...