Cash More Checks with

Aaron the House

Real Estate Investing Problems Solved!


Comment Box is loading comments...

May 2015

take the thin deal in front of you or wait for something better?

When there is a lull in business, it's hard not to take the deal in front of me to get the money flowing again.

April was a bit slow. After being on vacation all of January, most of February and getting things started in March, I was gearing up for some serious house and contract flipping. In this business, it is important to learn that it is a lot like the tides - there are times when it is busy, and times when it is slow. If you've been doing the business a while, you must learn to enjoy the slow times. You will have them. I'm getting better at it, but I've certainly not mastered it yet.

For this reason, I started doing deals that weren't in line with my typical 55 cents on the dollar buys. They are still profitable, but definitely a bit more risky. I like to be the market maker when I sell. If times are great, I list high and try to sell for top dollar pushing up values for every homeowner in the neighborhood. When times are slow or trending down, I want to have enough cushion to drop my price until my house, or inventory as it should be considered, is the next property in escrow. If it wipes out 3, 5 or even 10% of the equity in the neighbor's homes, well, business is business and I have to do what needs to be done.

I recently closed a pretty thin deal. You can read about in April's D.O.T.M. At the time, it was the deal in front of me. If I didn't take it, my money sits in the bank, on vacation, not earning me a dime. I decided to do the deal and keep moving forward. I then got a smoking deal on a beat up house out in Banning. I figure it is worth $130K and I paid $70K for it. I had cash so I closed it. Another marginal deal in Riverside suddenly came my way. I paid $145K. I really think I let the seller out-negotiate me. I was having an off day, what can I say. I had a wholesale offer at $152,500. Had my buyer said $155K (and don't think I didn't try to get him there), I would have taken it. In retrospect, I probably should have taken the offer any way. Instead, I got my private lender to fund me $130K and I hope to make around $20K on the deal. I'll take a single if it means getting on base. It only takes 4 singles to get a home run, right?!

I was at Disneyland on Friday and got a call from a very motivated seller. We came to an agreement and I was able to purchase his $230K property for $135 - Not a bad margin. Now I have to borrow more money and put myself at a higher level of risk. These are the evenings when I lay awake at night going through the numbers. Would it have been better to pass on the April's deal and use my cash for this deal? What I will pay in points and interest will wipe out any profit I get out of the first deal. So, had I known then what I know now, yes, I should have waited. But, at the time I didn't know, and the expression "A bird in the hand is worth two in the bush" certainly applied.

On Tuesday, I spoke with the seller of my Disney deal and he backed out. Claimed he was going to move into the house. Just like that a very nice profit goes up in smoke. So is the life of a real estate investor. Now, having taken the deals in front of me and not held out for a better opportunity proved to be a very smart move. Bird in the hand.

In the mean time, I'm still trying to enjoy the slow times and remember that good times are coming.

Feel free to leave any comments below or head over to my blog.