This is the question that every beginning real estate investor asks himself…
When you’re just starting out, you’re looking at all kinds of options…
And more than likely, wondering what the right kind of deal you should pursue.
Should your first property deal be a cash cow?
Or should you be looking at a chunk deal to start your real estate portfolio?
Whichever kind of property deal you think you want to do…
It all comes down to one factor…
The best deal is the one that you can get done.
Does that sound simple enough?
Well, believe me…
It is and it isn’t.
A few variables to consider
When I say that whatever deal gets done is your best deal…
I’m talking about quite a few variables there.
You see, no matter what you want to accomplish…
As a beginner real estate investor…
You need to have a realistic understanding of what a deal involves.
I’m not just talking about the price and it’s affordability to your pocketbook…
I’m also talking about the deal being the right deal.
For instance, is the property in need of a major reno?
Are you able to do a reno?
Was a reno even a part of your plan?
More to the point…
What costs will the neighborhood support?
Will the property values in the neighborhood support the cost of the reno and the price you’re going to pay?
Just because a vendor is willing to sell you a property at a price that you think you can afford…
Will the reno costs eat into your profits so that you’re stuck with a chunk deal that has no more chunks left in it?
But what if your first deal is a meant to be a cash cow to give you a bit of a positive cash flow?
You know what I say…
Every property deal you do should set you up for the next one, right?
So take a look at your first deal and ask yourself…
Is this property really a cash cow?
Is the vendor accurate in his promises that the house or property will rent for the amount he says it will?
And again, what kind of reno costs are involved?
Don’t be shy about hiring a mean property inspector to give you all the bad news about the property…
And be sure to check with at least three local real estate agents to qualify the rental rates in the area…
Let them tell you what the house will rent for.
Keep your emotions in control
Now, a bit here about emotions…
It’s your first deal…
And you’re negotiating the price with the vendor…
It’s exciting and fun and you feel like you’re making a great deal.
Do you know what I do when that happens?
Admittedly, it doesn’t happen much like that anymore…
I’ve done too many property deals over the years…
But when you’re just starting out, the excitement can lead you right into a horrible deal.
That’s because the process itself leads you into wanting to get closure on your negotiating with the vendor.
It’s just part of the human psyche to feel that way.
You’ve invested your time and mental energy into a deal…
The last thing you want to do is see it fall through.
Because we typically view a deal that doesn’t get done as a failure…
But that’s simply not true.
Don’t let your emotions get ahead of you.
When you find yourself saying things or agreeing to things that you haven’t thought out properly…
That’s the time you tell the vendor that you need time to talk to your husband or wife or accountant…
It doesn’t matter who you tell the vendor you need to talk to…
You need to put time and space between you and the vendor.
At that point, the deal—and your emotions—are getting ahead of you…
You need to pull away and look at the deal when your emotions have settled down a bit.
This brings me to another part of the deal that you need to think about…
How much are you risking in the deal?
You need to know just how much is at risk in the deal?
One of my rules for myself–and my students–is to never risk the portfolio…
Or, in this case, your financial health…
On any one deal.
Why would you do that?
Any one deal can go wrong and end up costing you’re a bundle of money…
That’s why you need to assess the total cost of every deal…
Add another layer for safety…
And then decide if you’re risking too much on one deal.
That’s where talking with your fellow students at iLoveRealEstate.tv is so valuable…
You have the resources of experienced investors to bounce your ideas off of…
And present your deals to experienced real estate investors…
It’s a safe way to find out if your deal is really a deal for you…
Or, if it’s really a disaster in the making!
Once you know what the deal really is…
You can make a wise decision either for or against the deal…
And sometimes…
The best deal is not to make a deal at all.
You haven’t wasted your time…
You’re better for it, smarter and more experienced…
Without costing you your financial health in the process.