People fall in and out of love with a variety of things for a variety of reasons. Whether this is a spouse, a pet, a hobby or even a piece of real estate, this attraction can cause you to do and think crazy things. It is not uncommon for an investor to track a property for months and develop an affection for it that borders on love. They see potential and the endless possibilities, but at the current time or in its current state, the numbers just don’t make sense. How far they go to pursue this property can have a major impact on the rest of their business. It’s OK to love a property, but make sure you have the property first. Falling in love before you buy a home can lead to serious problems and over spending.
Just because you have been watching a property for a long time does not put you at the front of the line. Even if you have only just looked at a property, you need to take a step back and run the numbers and look at the big picture. Potential is nice, but that potential costs money and usually relies on a number of other factors to make that potential happen. The house may be great with a few tweaks or some sweeping changes, but you are not bidding on that property. You are bidding on the property in its current state and odds are you are not the only one. Someone else may want the same property, forcing you to think irrationally in the face of a time constraint.
Having a passion or a love for a particular property is fine if the numbers work, but where investors get in trouble is trying too hard to make a deal happen when deep down they know they should walk away. You may make an offer on the property at a number you are comfortable with only to find that you have some competition. At that point, what do you do? Do you go above your absolute bottom line number or do you walk away? Many investors will go over budget and before they know it they are thousands over their original offer. You are now the owner of a property you love, but behind the eight ball on. In other words you are stuck with a property you greatly overbid for because of “potential.”
Walking away from a property you see potential in is difficult, but it is these difficult decisions that will prove wise down the road. In most cases, the investor that overbid for a property will regret their immediate infatuation with the property and wish they had walked away. Shaping and molding a property in your vision is great, but walking away from one with a big check is much better. If you accept the fact that you are not the only investor in your area with “dibs” on every property you see, you will not fall in love with every property that has everything you are looking for. You are not the only one that sees this potential and if the numbers don’t work, even on properties you are high on, you need to move on to the next one.
Drawing a line in the sand and moving on and not looking back can be very difficult in the moment. Some point down the road, whether it is one day or a few weeks, you will look back and be glad you did not get caught up in a bidding war. Passion and love for your properties are great, just make sure you have the property first.