Things to Remember When a Deal Falls Apart

We were recently talking with an investor who was a bit disgruntled because they had put a lot of time and money out-of-pocket into a deal and ultimately it fell apart a couple of months into the process. In my opinion, that was probably for the best, it's better of to not go through with a bad deal than to in fact do a deal, something we always have to keep it back in our minds.

We get so invested in deals so we tend to feel compelled that the deal has to work but there are a few reasons why a deal shouldn't fall apart. One is you can't raise the money, that may be a sign that you have the wrong deal, you may not have put enough of your time together to do the right work to be able to prepare your investors to understand the deal properly and you may have done this too late in the game. Another reason would be if you don't have financing in place, now, that again could be a blessing in disguise. You could have lenders telling you differently, they can't under 8 the property to meet their guidelines, either it's the wrong lender for this type of property or ideally, they're looking at numbers and they've done this and they do every day and they're telling you this is not a good deal.

It's okay for a deal not to work out as long as you're the reason it's not working out. Some other reasons it may actually not work out is perhaps the seller has not been completely upfront, which happens a lot, and there are some ghosts in the closet. There's a lot of things that can kill the deal outside of your control but don't fixate on just making the deal work because this is for most people a couple of year holds possibly longer and you can imagine if it's a difficult project to start and you buy it wrong, well, it's going to be that much more difficult to operate and control this property and make it perform and turn it into either a great property for you or ideally a great property for you and your investors.

There are multiple things that can make a deal fall apart. I think the one thing you have to remember when getting into any deal whether it's multifamily, single-family or any sort of investment

try not to get your hopes up because anything could break it apart

and if it does fall apart, even if you've made a huge investment try to move on. Don't take that as a failure, take that as a lesson learned and move on to the next thing and the next thing because the deal-flow will keep on coming if you have the power. 7

Stick in your parameters, use people to your advantage. Build out a team of your property managers and your lenders and your mentors for this reason. Don’t you want to go into this deal with as many people looking at it as possible? because what you see may be right but in fact you may be missing some of the other elements that one of the others may pick up on and they may see that there needs to be more in reserves or that your repairs are not adequate for that nature or they could be anticipating that your increase in rents might not be as great as you first thought because the comps you're pulling are not to that area especially if you're doing this out of market. Use your team to advantage, be completely ok with a deal not working out because it's much better to have a deal not go to the finish line if it's the wrong deal than to buy a bad deal.

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