Adopt a ‘Why I Shouldn’t do this Real Estate Deal’ Attitude

by |

Michelle from Michigan hasn’t closed a deal in over two years, though it’s not from a lack of effort.  The real estate market there is in the tank.  It’s no wonder she left me two messages, twice last Friday and again on Monday.  She was excited about finally finding a profitable opportunity.

I explained to Michelle that I’ve never been to Michigan.  I know very little about real estate markets 200 miles from me, much less 2000.  All I could offer her was some objective feedback.

She proceeded to outline the parameters of her deal:

  • Custom home located on 3 acres of forest land
  • Appraised Value at $1.8 million
  • Purchase price $1.3 million
  • Move-in ready condition
  • Owner will carry with 20% down

 Michelle gave me a little more information about the area and then asked for my thoughts.  I told her I didn’t have any thoughts.  However, I did have several questions:

  • What’s your exit strategy?
  • What kind of ROI do you want?
  • How long will it take you to sell this house?
  • If you had to sell the house FAST what would the sales price be?

It turns out Michelle didn’t really have an exit strategy in mind.  She may live it the house for a few years and then sell it.  Or, she could flip it.  She hadn’t given much thought about an ROI but she was supremely confident the house would sell in about 9 months.  Michelle was also very certain the home could be sold quickly for $1.3 million.

Ugh.  When presented with any real estate investment opportunity I always try talking myself out of the deal.  Michelle was doing the opposite. 

Most of her desire to do this deal came from the fact that the owner was willing to carry.  Great I told her.  But without a clear exit strategy the terms are irrelevant.   What really concerned me was the acquisition price.  Michelle said the home would sell fast for $1.3 million and that it’s in move-in ready condition.  So if she decides to flip the house quickly she’d be paying full market value.

It’s important to adopt a why I shouldn’t do this deal attitude.  This can be tough, especially if you’re just getting started or going through a drought like Michelle in Michigan.  That’s why it’s a good idea to get feedback from an experienced real estate investor whenever possible.

The investments I talked myself into cost me the most – in time and dollars.  By the end of our conversation Michelle understood why this deal wasn’t really a deal.  She promised to evaluate any future deals with a whole new attitude.  You go girl.

About Author

Marty (G+) is the Chief Financial Officer for Rising Sun Capital Group, LLC, a real estate investment firm based in Gilbert, AZ. His firm purchases homes at the courthouse steps and public REO auctions. They have two exit strategies, either fix and flip or seller financing.


  1. Pam Simmons on

    Thanks for the great post, Marty! So many good points here… I am a new REI and I have yet to do my first wholesale deal. I appreciate your straight forward, no non-sense approach on how to analyze a deal to determine if it’s good or bad. One consistent theme I’m learning from all of the materials I’ve read so far is, you have to begin with the end in mind. Having an exit strategy is paramount to the success or failure of every deal.

  2. I think you saved her bacon!!! If the house could sell fast for 1.3M then how did she get so lucky to find the deal. Was it a pocket listing a friend of a friend? My guess if it had to be sold fast the answer might be as low as 900K
    You did her a big favor. Nice work

  3. LuckyLarson on

    Great questions and great article on healthy skepticism!

    Two more questions I would ask are;
    – When was the appraisal done and by whom?
    (if it wasn’t for a refi or purchase and wasn’t within the last 6 months the appraisal is worthless)

    – What do the actual sold comps look like over the last 6 months.
    (if there are no sold comps for custom homes on wooded acreage then that is an answer on it’s own.)

    Great little article Marty!

  4. Marty,

    That’s an EXCELLENT point! For me personally, the most difficult part about real estate investing is taking the emotions out of business decision and decide what’s best for business. Great post!

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here