Walk away from deal?

Question

We are days away from closing on two properties out of state. We are trying to extend closing another month to give the COVID chaos some time to settle but I, as well as many others, am beginning to think a month is not enough time. We've searched for a year and while the  numbers are good, these properties will be mortgaged and with rent freezes and eviction moratoriums this is concerning for fledgling investors.  Even though we have reserves the goal isn't to use them upfront, right? Thankfully we are still working but unemployment claims across the country are at record highs and this is my tenant pool. We don't have a deposit to lose, but could be sued for 10%. Walk away and wait out the storm?

Jonathan Greene · Answer

If you have no money down and an addendum for COVID signed, which should automatically renew if the same factors are in place every 30 days, why not just keep waiting? Personally, I don't like OOS investing unless you have done it before, but how are you evaluating these deals? Have you seen them in person? Are you relying on a "team on the ground" that you have never met? How confident are you in the numbers and cash flow back if things were to go just ok? Are there tenants in place and have they given notice to the current owner of any COVID forbearance on their rent?

Marc Winter · Answer

There are many states that have promulgated a CV19 related addendum that allows the closing date to be extended.  If you have a good deal, think about pushing the closing out 30--60--90 days.

CV19 will not last forever.

Todd Rasmussen · Answer

@Olivia Hardy

While a pandemic of this magnitude was not planned for by most, you should always buy to be sustainable through all market cycles at a minimum. If you had a great deal before covid 19 it should still be a good deal now. If you can't wait out a few month hardship, you don't have sufficient reserves to get started. That being said, we and I suspect many others bought number one with insufficient reserves.

You are the only one who knows how much money you have coming in and out and how thin or fat your margins are.

Personally, we closed yesterday. Sure it's a little unnerving, but if you don't lean into the wind you'll get blown over.

Jaron Walling · Answer

@Olivia Hardy "We don't have a deposit to lose, but could be sued for 10%."

Who the hell is going to sue you right now? Nobody.

I'd wait it out or cancel the contact if the deal isn't that great. There will be opportunities after the COVID-19 outbreak ends.

Jenny Roman · Answer

@Olivia Hardy If you have done your due diligence, numbers made sense and you have a solid team that will be looking out for your best interest at all time then proceed. Otherwise sign the COVID 19 addendum and extend as long as possible if your state has one.

Walk away from deal?

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