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Part 3 What ifs in Investing. Fix and Flop |
Nov. 18, 2008
Tagged with: fix and flop real estate, flipping real estate, peter vekselman real estate investment guru
A Quick Fix and Flop
You’ve found the perfect fix and flip property. After running the numbers through your mind countless times you’re convinced it’s a winner. After rehab expenses, which you’ve figured no fewer than 100 times, you think you’ll be able to turn a profit of about $5,000 if you can sell the property at market value.
The first stage of your renovation goes a little better than expected. You’re just under budget and your project is progressing as expected. The contractor you’ve hired for the job is doing good work and is showing up as promised. Keeping an eye on your calendar, you’re impressed when he completes the job a few days ahead of schedule and right on budget.
You decide the renovation is in the bag and there’s nothing else that can possibly go wrong.
You call a real estate broker on the phone to come look at your house. She’s impressed by the condition of the property and by how much curb appeal you’ve managed to give the place on a shoestring budget. She even said your property has character. Asking her opinion, you’re gratified to see that she agrees with your assessment of what your property is worth. You settle on your asking price and happily sink a metal sign into the front lawn and wait for the inevitable calls to come.
And then the inconceivable happens.
In one of the unexpected and seemingly random acts of violence that plagues your city, a young woman innocently walking her dog is gunned down just down the street from your property.
The property isn’t in a seedy part of town, but it’s not in the one of the best neighborhoods of your city, either. But one death has marred the neighborhood’s reputation in the eyes of local real estate agents. Not wanting to promote the area because of its newfound notoriety, your property has become damaged goods in the eyes of the public and the real estate agents you were counting on to sell your property.
Once again, your “What if…” concept has become “What now?”
When you invest in real estate with a wing, a prayer and a “What if…” scenario, you don’t know what to expect. If everything goes exactly the way you have it mapped out you will make money, and in many cases – a lot of it. By the same token, if there’s a single variable that you’ve failed to consider, you’re in deep trouble.
You never expect that things won’t go the way you have them mapped out, because doing that would call into doubt your ability to look carefully into a situation and know with a degree of certainty what will happen in the future.
A Certain Future?
However, the reality of life is that we don’t know what the future holds. If we did, we’d all be professional athletes, ballerinas, police officers, or princesses, and these decisions would have been made by the time we were five years old. Since we know this isn’t true we have no choice but to conclude that accurately guessing the future is as difficult as solving a Rubik’s cube in the dark.
“What now?” is a scary place to be because it forces you to acknowledge that you don’t know the answer and that you will likely be losing money – a lot of money – on what you had thought was a foolproof transaction.
If you want to move beyond the uncertainty of not knowing if, when, or how much money you’re going to make in a real estate transaction, and you also want to avoid the mistakes inherent to thinking about real estate in terms of “What if…” it’s absolutely essential that you set yourself up so you’re never left asking the “What now?” question in the first place.
In order to avoid being left with the money-losing question of “What now?” you must redefine the way you look at real estate investing. Instead of entering a real estate transaction with a single strategy, you go in with your eyes wide open to the reality that life very seldom goes the way we have it planned. As a result, it’s of paramount importance that you have a real estate investing strategy built around always having another move up your sleeve that will allow you to make money on a deal.
Peter Vekselman-Real Estate Coach and Investor - At your service!
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