Don’t Chase After Your Cash.
To avoid losing their earnest money, some investors who have put a few thousand dollars down on a deal that suddenly makes no sense have decided to close on it anyway and try to salvage the deal. Instead of throwing more money into a losing situation, sometimes the best financial strategy is to let the deal go.
Having “escape” clauses in your contract is highly beneficial. Just don’t become known as the investor who uses those clauses all the time. You’ll lose credibility and won’t be taken seriously as an investor.
Establish Your Walk-Away Point.
There are many moving parts in business, but in the end, it’s all about the numbers. It makes no financial sense to offer or spend too much money to rehab a property. To be successful, you must spend less than the property’s price and thus make a profit.
Choosing your exit strategy is essential, but you must stick to it. In the real estate arenas I’ve worked in (including short sales), it’s easy to keep pursuing a deal after you’ve invested a significant amount of time and possibly money in it.
It’s better to move on to another deal that makes sense. It’s much easier said than done!
Have a variety of exit options.
It might be quite beneficial to have both a Plan A and a Plan B. We’ve remodeled a house a few times just to have the local market take an unexpected turn.
We could either sell the property and lose money or rent it out.
Although we don’t usually earn as much money upfront as if we sold at the total price, it can turn a break-even or losing business into a profit maker.
Bringing in a money or credit partner may make sense if the loss can be made up quickly and the arrangement becomes lucrative. Confirm that there is enough profit to go around once the deal is completed so that neither of you loses money.
Keep yourself educated and informed about the current market.
Some things may have affected the market just because it was wonderful a year ago. It’s critical to stay informed about the current real estate market in order to make informed selections about what’s a good deal and what’s not.
Attending Real Estate Investor Associations, Title Company, and Realtor Courses provided to investors are excellent ways to stay current.
Remember, if you’ve been in the real estate market long enough, you’ll come across a deal that started off terrific but ended up being a dump. I hope one or more of these tactics can assist you in navigating a deal that has gone bad or is about to go bad.
Always keep the big picture in mind when weighing your alternatives. Here’s to your continued success!