After I had successfully purchased my first mobile home inside a mobile home park I went back to my house, sat down with my girlfriend, and began balling-my-eyes-out crying. I did not know it at the time but the reason for my UNHAPPY mood was a completely necessary part of investing since I planned to make real estate investing my career.
Let me paint the setting for you. It was early 2002, I had less than $500 in my savings and no real-world investing experience. I was burning through my life savings with marketing costs trying to find my first slam-dunk real estate deal. After approximately 90 days of hard work and repeated offers I had no profits to show for it.
One Monday morning I was contacted by a seller of a mobile home inside a park. I was so green at the time I did not even realize the mobile home was located inside a mobile home park. The sellers we’ll call “Sue” was extremely motivated and ready to leave town yesterday. Sue was originally asking over $15,000 for her 1989 beautiful double-wide 4/2 mobile home in a family park – however when I asked her a price she was willing to part with the home for only $8,500.
Whoa!!! I thought at the time; this price was surely a good deal. I was wrong, dead wrong! I was however wise enough to continually ask the seller, “Can you do any better?” and other cliché lines we are taught to use when learning to negotiate. I knew the seller needed to leave town and was desperate to sell. After 36 hours of easy back-and-forth negotiations the price dropped, and dropped, and dropped.
We ended up settling on a purchasing price for the home, including all appliances and central air unit for a total of $3,000, payable as ten monthly payments of $300.00. We closed the same day and later that night I began the water-works.
Here’s why – I knew I had beaten Sue down over price. Don’t get me wrong I was always friendly, polite, and courteous to Sue but I knew she desperately wanted more and I hated to disappoint her. I knew she was in a tight spot and empathized with her feelings the more we got to know each other. The bottom line in my mind at the time was that I knew this seller had no other alternative besides me and I felt I did not treat her fairly over price. The reason for my crying that night was my feeling of shame when I looked at myself in the mirror. “Is this what real estate investing is?” I asked myself, “Just taking advantage of desperate and fragile sellers?” How could I keep doing this business and live with myself? After all, I was supposed to be helping people right?
At the time I had no idea how much money I could resell this home for. As it turned out the answer is over $41,000 in 10 years.
If after reading this article you feel the same, can sympathize with my first deal, or think me a monster for low-balling the seller to an unfair selling price then wait until my next article. In part 2 of this two-part story I show why this “predilection for price” was necessary. In fact if I had agreed to Sue’s first price of $8,500 there is a great chance you would not be reading this article today.
Invest time in your future daily.