This Weeks Focus: No Place for Greed

What is the biggest killer of deals? That would be greed. And it comes in different forms and it kills all kinds of deals. It can kill a quick wholesale deal. It can kill a JV deal. It can kill a quick owner occupied sale. And it has no place in our business.

Unfortunately, greed is subjective. What is solid profit? What is an acceptable level of profit to the level of risk involved in a deal? As mentioned, it’s a subjective mark, one which will not be an equal amount across the board for every business. Each business of ours is at a different level of development and age, and each is in different markets with differing goals. So one cannot say that profit of 40% is too high or too low. One cannot say that $2,500 wholesale profit or deal commission is too low or too.

However, when looking at relationships in this business, sometimes profit and success go beyond a bottom line number. Long term relationships are what matter most in our business, and for long term success. It’s easy to think that squeezing an extra $1,000 out of a deal will help us pad our account and provide additional investment for future projects. And we should look to maximize our profits. And that is great to end up with the best outcome as possible.

But where greed creeps in is after the initial discussion and set up of deals. This is where deals go south, and relationships are torn.

In this case, imagine that you have found a property which meets your investment criteria. Numbers look good on paper, and when you do the site visit, things seem to click well. You put together proposals with partners and maybe even construct numbers for a JV you are attempting. And all partners and stakeholders are in line.

But then after a night of looking over the figures, you think you may want to renegotiate the deal, as you think you conceded too much to the funding partner. You think that the commission is a little higher, and you think if it goes south when you break the new numbers, the deal is strong enough to find new funding partner. Or conversely, you are surprised the next morning to receive a phone call from your funding partner stating they want an addition $2,500 from the deal. Why not? There is plenty to go around, right?

This is where your greed, or another party’s greed has just killed a deal. Much worse, it could cost a relationship. It could cause long term repercussions of your reputation as well. There is no place for greed in establishing your business, setting yourself up for success, and developing solid relationships. Competition, drive, and profit are not greed. When you work a deal, work it. When parties are in principle agreement, run with it. Get it on paper immediately. And keep emotion out of it. Most importantly, keep greed at bay. It isn’t worth risking your business and long term success for an extra few bucks once you’ve worked a deal.