Stop Letting Deals Slide Over $10K (In higher priced, higher appreciation markets)

[Dan Gandee]

BEGIN RANT (Because It's Very Common With New Investors) 

Just wanted to share how many investors want to "feel" like they are getting a bargain or a deal, and then let a deal go over $5K-$10K in difference in price. Now let me preface this forum post by saying I'm not talking about markets where $5K to $10K is a high percentage of the purchase price (lower priced markets with limited returns). 

Typically what I see when this happens, it's because they (the investor) don't know the true components of long term wealth building, forcing appreciation, value add plays, or repositioning of property management/expenses. True cap rate stabilization.

They are too concerned about saying to their buddies that they got the seller to come down one last time, that they completely missed the opportunity to acquire and HOLD the asset to perform the necessary valuation changes. 

Literally see it each and every week. They will let countless deals go over their emotions and not their investing criteria. 

Stop bickering on price, and start looking at the bigger picture. If the deal doesn't feel "right" or you feel that $10K will never be made back in value add, then move on, but don't just let deals go on "principal" of your negotiation preferences. Nearly 9 times out of 10, you'll never be successful in this business. 

How to avoid this?

1. Start by understanding the true underwriting valuation at ACTUALS vs. PRO FORMA 

2. Start looking at your MAO as the ideal price, but look where potential savings can occur elsewhere.

3. Don't just buy at list price, but buy where it makes sense. 

4. Make sure your financing is in order and your cash on hand to close is accurate. 

5. Stop looking at deals as a battle with the seller, and start looking at them as an opportunity of change of ownership. 

6. Know your market appreciation velocity and how fast you'll make up a overpayment in price in equity position. 

7. Ask for other terms in the deal to be reconfigured, and don't fixate on just the price. 

8. Remember, some of the best deals you'll do are the ones you decided to pass on. Not just because you got pissed off at the seller. 

9. Don't blame your broker or wholesaler for the deal going south. They just are a connector to motivated sellers or potential deals. 

10. Always be nice to the seller and ask them to reach out if things change. I've acquired tons of deals by putting gratitude before emotion. 

And remember, sometimes the DEBT you take on is MORE IMPORTANT than the PRICE YOU PAID for the property (i.e. owner financing). 

END RANT (Mic Drop).