5 Ways To Help Any Deal Reach Its Fullest Potential
By JD Esajian on November 10, 2018
Every individual real estate deal is full of ups and downs. One minute you are riding high and feel on top of the world, and the next you get a gut punch and wonder what just happened. If you are not careful you will take enough jabs to knock you out and be left with a property you are ultimately disappointed in. As an investor it is critical to take advantage of opportunities when they are presented to you. Maximizing the profits on a given deal allows you to make a little less on the next one, but still be ahead of the game. When a new deal comes your way, you want to be ready to not only handle it but get the most from it. Here are five tips to help you achieve that goal.
- Get involved in deals you really want. As crazy as it sounds there are investors out there who end up with deals they don’t want. Either through boredom, pressure to get a deal or bad accounting before they know it they are caught up in a bidding war. When they do get their offer accepted they use fully math to justify the deal. Deep down they know they either overpaid or the market is on shaky ground and they don’t put their all into the project. This has a trickle-down effect on everything that happens and every decision that is made. Simply put, only get involved with deals and projects you really want. Not only will you be more motivated to work, you will be excited about the potential bottom line. It is ok to pass if you need everything to break right to scratch out a small profit.
- No lost days. On a rehab project it is not hyperbole to say that time is money. To get the most out of the deal you need to constantly keep things moving towards the finish. Even before your offer is accepted you should have a good idea of what you want to do, when you want to do it and who you want performing the task. From there your job is to coordinate these tasks and get everyone on the same page. Not having the electrician or the plumber for a few days can set your project back days, if not weeks. Even if you make small daily progress it is better than taking steps back. Unexpected items always happen on every rehab project, but you can’t let it shock you into doing nothing. As difficult as it can be, you need to quickly gather yourself and set the project on a new course. Whatever decision you make you must stand by it and run with it. The more days you can get things done, the sooner you can put the home on the market and get it off your portfolio.
- Lean on your team. Most real estate investors, by nature, are control freaks. They always want to know everything about every aspect of their business. It is only when they learn to let go and trust their team that their business will truly take off. This doesn’t mean you have to bury your head in the sand and blindly give up the reigns, but you should have the confidence to delegate to your team. You and your contractor or property manager should have a plan in place before the project starts. The odds are they know as much, or more, about the property than you do. Listen to their advice and consider everything they say. If you decide to go in a different direction give them a reason why. By spending time to assemble your team you should be confident they know what they are doing. Empower them to offer input, suggestions and make decisions without running everything by you all the time.
- Always be a step ahead. As we mentioned, unexpected things happen in a rehab all the time. One day you are cruising along and the next there is a problem with the plumbing. With everything you do you should always consider the worst-case scenario. This allows you to be one step ahead of whatever comes your way. Thinking about the worst-case scenario doesn’t make you a negative or pessimistic person. It prepares you to act when other people wouldn’t. The odds are you will never have to use a majority of the items you plan for. However, it is always better to have a plan in place you don’t use than to scramble around when a negative situation presents itself.
- Finish the job. A rehab isn’t over until there are signed documents at the closing. There are plenty of times along the way where you will want to pat yourself on the back for a job well done. These mini-hurdles are small victories and not the end goal. You need to constantly keep chugging until the property is on the market and the deal is at closing. As any experienced rehabber will tell you, things happen at the end of rehabs all the time. You will need to put the finishing touches on the property to maximize appeal. Getting pretty close is not good enough. Put your all into every property all the way to completion.
There is a fine line between success and disappointment in the real estate business. Maximizing profits on every deal is the ultimate goal, regardless of how many deals you are involved in a year. Use these five tips to help get the most out of all your deals.