Where to Draw the Line

[Megan Hirlehey]

Hello,

My best friend's mother is currently going through a divorce and trying to sell her house. She just dropped a potential buyer after over a month of going back and forth with low-ball offers, inspections, negotiations and nit-picking about the property (Her home inspection was sound, the house is just a little outdated cosmetically). Her life has been turned upside-down enough by the termination of a 20somthing-year relationship, and now she is trying to get what is left of it back on track without being ruined financially.

This got me thinking, where do you draw the line? Obviously, no real estate investor would ever make money if they paid full/asking price all the time for everything as there is no room to build value (although you can generate passive income from rent I suppose). But at what point does the investor step back and say "Ok, I'm crossing the line from 'Getting a good deal' to 'Screwing someone literally our of house and home' "? I assume it's a mostly personal decision, but I am curious about how seasoned investors deal with this aspect of the industry.

[Ryan Dossey]

For most of us we have metrics that we try and hit. A certain APR or COC return. This is where having a good moral compass comes into play. As does understanding your market. A 75k profit on a flip may be the norm for your area. While that may be downright robbery in another. Ultimately real estate is an imperfect market and knowing how to capitalize on that is key to generating a profit.