Even If The Numbers Work, It Might Not Be A Deal

Hopefully you know your formulas when it comes to evaluating a deal. If you don’t know your formulas then you won’t last very long in this business. However, even if you know to buy houses at 65% of ARV and you know to subtract repairs and financing costs, etc., then you still might not have everything you need to evaluate a deal.

Here’s what I mean: The other day a partner and I were looking at a single family house. The numbers worked, the seller was motivated, but when we saw the house we immediately knew why it hadn’t been selling. It had a horrible layout, was odd looking and you had to walk a little ways just to get to the garage/workshop.

Appeal to the masses

Now, someone out there would love this type of property, but to the average homeowner it would not appeal at all. And when you’re picking up properties you want to get houses that appeal to the masses. Think about it this way too: For this particular property we were thinking of selling it on a rent-to-own.

But I can pretty much guarantee that nobody would want to rent-to-own this house and it would sit vacant forever. How do I know this? Well, awhile back I came across another odd type of property. The seller was highly motivated and practically begged me to take the property off of his hands.

I knew the chances of getting it filled were slim to none but I made a deal with the seller. I told him that our agreement will only start when I find someone to fill the property. And that if in 90 days from now I hadn’t found a tenant for the property then I’d just walk away and we would have no obligation to each other.

100% risk free for you

The seller was motivated enough that he agreed. And since this was 100% risk free for me, I was happy to do it. However, the property never got filled, which I wasn’t surprised at since it was an “oddball” property.

But, a very long time ago, I did another risk-free agreement on an odd property in Dumfries, VA. I told the seller that I’d start paying if and when the house got filled. I found a tenant who loved the house and things worked out great.

The bottom line is this. If there’s a property you are unsure about never do a deal where you sign a 5 year lease option and then get stuck with a property you cannot fill. I don’t care if the numbers work, don’t get greedy. Always make it 100% risk free for you and just be honest with the seller. Tell them that their house is unique (use the word unique) and that you’re not sure if you can get it filled.

And when you come across odd properties tell them it is company policy (always use company policy) that you do a 90-day risk-free time frame to try and fill the property.