Real Estate Deal Analysis & Advice

The Best Real Estate Advice I Ever Received

Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Flipping Houses, Business Management, Personal Development, Mortgages & Creative Financing, Real Estate News & Commentary
209 Articles Written

As a real estate investor for over 15 years, I have done a lot of deals, seen many properties, and watched other investors come and go.

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Way back when I was first getting started, I sought out the best real estate investing knowledge I could find. I talked with many other investors and read as much as I could before I ever did my first deal.

Some of the things I read and heard were top notch, others were dubious at best. But one piece of advice has stayed with me all of these years. It seems to ring incredibly true and forms a basis for everything else I have learned about real estate investing: no deal is better than a bad deal.

woman with hand extended out gesturing stop or rejection

Avoid Bad Deals at All Cost

It is better to not do any real estate deals at all than to get yourself into a bad one. You cannot let yourself slip into the opposite mindset (that any deal is better than none at all).  Bad deals will cost you money, time, and your sanity—and perhaps your business, friends, and family.

For these reasons, bad real estate deals must be avoided. This advice can be very difficult to remember and stick to though.

When one is trying to get started in real estate, the excitement of doing that first deal can be blinding. What is more, today’s market conditions—high prices, low inventory, and intense competition—can make even experienced investors slip. The urge to do a deal, any deal, at times becomes overpowering.

Related: Introduction to Real Estate Investment Deal Analysis

What Is a Bad Deal Exactly?

This discussion begs the question: what is a bad deal?  The answer is hard to nail down, as every piece of real estate and every investor is unique.

There are, however, some pieces of sage advice that you can use to hopefully bypass the bad deals that come your way.

1. Numbers Never Lie

Many of the mistakes I have seen investors make stem from ignoring or massaging a potential deal’s numbers. Again, the urge to do a deal, any deal, can be so strong that exuberance wins the day. Cash flow is found where none exists and the song in the musical chairs of property flipping will surely not stop.

Yes, as entrepreneurs, we investors need to take risks. But learning how to do that is a carefully crafted art that is learned in part by sticking to the numbers.

Is your market bad?

2. Partnerships Very Often Sink

Some say a partnership is the ship that never sails. There is some truth in that saying! A bad partnership will make an otherwise great real estate deal hellish.

Partnerships do have their place though. They can be very successful at times. But one has to be especially vigilant before they enter into any partnership deal, especially with friends and family.

Clearly define who does what, where the money goes and how the partnership can be dissolved. Assuming someone else in the partnership will take care of some role or always do the “right thing” is a recipe for disaster.

Related: Partnering With a Friend: Yeah or Nah?

3. Listen When Someone Says No

People say “no” for many reasons, sometimes for the right ones and sometimes for the wrong ones. Either way, listen and attempt to understand why “no” was said.

“No” can come from many places, such as another investor, a trusted advisor (like an attorney), or even a lender. And it should make you take notice.

If someone you respect and trust says “no,” do not be hard-headed and march forward. Instead, stop and think carefully about doing the deal.

Bad real estate deals can be especially difficult to get out of.  There are very few white knights out there who will ride to your rescue to bail you out.

And a bad real estate deal is going to be costly—a lot more than most realize. This is why it is best to avoid them and do no deal at all.

So when you start feeling antsy and simply must have a deal, remember this advice. If you do not, you might not get the chance to try again.

Have you heard any deal horror stories? Have you experienced a good deal gone bad? 

Share in a comment!

 

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.

    Tracy Williams
    Replied 5 months ago
    Great article, Kevin. I learned this the hard way on my very first REI deal. About 12 years ago, I made an emotional purchase on a SRF trying to help family, with disregard for the numbers. It was right before the housing market bubble burst, and I also took bad advice on doing a cash out refinance. Thankfully, I have learned from my past mistake and my husband and I own other cash-flowing properties with good tenants. Always keeping in mind, no deal is better than a bad deal!
    Neo Motloung
    Replied 5 months ago
    Why do you have a picture of a black man on your introductory post smilingly impersonating him in your opening paragraphs? That was a bit deceptive.
    Michael Baum from Olympia, Washington
    Replied 5 months ago
    It’s called B Roll. Stock photos. Nothing deceptive about it. Biggerpockets is filled with B roll shots. Just look at the article above. Do you think that the other 2 photos are his advisors? Most likely not. Just relax and enjoy the article!
    John C. Investor from New York, NY
    Replied 5 months ago
    He’s not impersonating anybody. Lol. Those pictures are basically background music. Space fillers. Ice breakers. Etc. There’s nothing deceptive here. Not with the pictures at least. What would be the point?
    Scotty Ball Investor from Gainesville, Georgia
    Replied 5 months ago
    It’s better to have a property vacant than put a bad tenant in it because the bad tenant usually will cost you much more in the long run. Don’t ever not screen your applicants just to fill a vacancy.
    Shelly Brown
    Replied 5 months ago
    Great advice!
    Jerry Maze Flipper/Rehabber from Portage, MI
    Replied 5 months ago
    I’ve made plenty of offers that were not accepted…. that’s OK… I just say to myself, next! … no deal is “way” better than a bad deal!
    John C. Investor from New York, NY
    Replied 5 months ago
    Well said. I have a few friends who are just dying to get into real estate. They tell me they want to buy this and that, just to get into the game. They tell me they are willing to negative cash flow for 30 years because they “know” real estate will be worth a lot more in the end. I try to explain. I tell them that there’s a way to do it where they can cash flow AND get the appreciation. I tell them that the first deal is crucial, that it will make or break them. I tell them that I want them to acquire more real estate after their first one, and not just have 1 piece that they’ll regret for 30 years. But, of course, they don’t listen. They tell me they understand my way of thinking, but that they have a “different” way of thinking. Sigh.
    Madelaine Au from Eugene, OR
    Replied 4 months ago
    Wonderful article. Thank you for the advice. I will remember this as I am picking out my first deal. “No deal is better than a bad deal” words to live by!
    Anne Jenkins
    Replied 4 months ago
    Numbers sometimes do lie…especially if a politician is using them….))grin((….. In our case the numbers were good but unfortunately the massive amount of stuff in the house masked a bunch of things we couldn’t see. So… once it was cleaned out, lots more revealed itself. It will still be a fair deal….no real loser….but not nearly as lucrative as we originally thought. Much learned about digging a bit deeper before doing a deal.