This week, I have been doing a series of themed shows on what I consider to be the four deadly real estate sins. These are the most important mistakes and pitfalls that people fall into in this industry, and I don’t think they’re talked about enough.
Today, I will be discussing the fourth and final deadly real estate sin: greed.
Greed will really sink your business fast. Ambition, enthusiasm, desire to grow; these are all natural for those of us who want to be successful in this business. But greed can really get you. Here are some examples:
- Deals are hard to come by. When you find a deal with decent, solid margins, you have to be careful. Some investors see a good deal, and don’t think it’s good enough. As a result, they make a low offer to maximize their profit, and they end up not getting the deal. Somebody who saw the deal for what it was gets the deal. Low offers are good, as long as you are actually getting properties. I always say that I would rather flip three houses and make only $10,000 on each of them, than not be flipping houses at all. Even if your profit on any deal is relatively small, it’s better than being greedy and waiting around for that one amazing deal. You have to be willing to take what the market will give you.
- You get greedy in that you don’t want to give up any of your profit to investors. When I was starting out in this business, I would find an investor who had money but didn’t have the time or desire to work, and I would partner with them and do all the work. Then, we would split the profits. I’ve seen investors who refuse to give up fifty percent of their profit, but can’t think of a better way to find funding. So, they end up not doing a deal at all! Fifty percent of something is better than one hundred percent of nothing, and I’ve discussed this in detail before. You have to be willing to give up some of your profit in order to even do a deal, move forward, and actually be an investor. If you don’t have any other options for doing a deal and you still don’t do it, you’re not a real estate investor; you’re just someone talking about it, and you’re too greedy to actually work in this business. I’ve even talked to experienced investors who say they would have done their first deal for free, because the education you get is priceless. To be able to get an education in real estate without having to spend any of your own money is actually an incredible deal! So if an investor is willing to fund an entire deal for you and even give you 50% of the profit, you should be thrilled!
Greed can keep you from buying houses and it can keep you from partnering with people who could help you grow. You have to do what it takes to do a deal, get started, and once you have some experience, you might be able to negotiate better terms. Don’t be greedy, especially not when you’re starting out.