EP 313: Are New Investors Unethical?

Today I want to address a question that I saw on an online real estate group: is it unethical for a new real estate investor to sign a purchase agreement for a deal when they’re not sure they have the money to close?

When you’re starting out, you’re going to make mistakes. You might not be able to perform on that commitment. You’re signing that purchase agreement, you’re taking massive action, but you might not know the next step.

You’ve heard a lot of successful investors on the show say that you shouldn’t worry about not knowing what you’re doing; you should get out there, get a deal, and the rest will fall into place. I used to think that you should have everything ready to go before you get started on step one. I’ve changed my opinion on that. If you’re new and you really want to be successful in real estate as soon as you can be, you need to take massive action. And as a new real estate investor, that means you’re going to be taking steps that you don’t exactly know how to handle.

For example, in the question I saw online, a new investor might be signing a purchase agreement despite not knowing whether they can close. That might sound a little unethical or like a bad idea, but the fact is that doing something is the only way to get experience. You can’t wait to make an offer on a property until you’re an experienced investor, because you’ll never be an experienced investor until you start making offers. So in determining whether it’s ethical or right, you have to think of the alternative. How do you get that experience to make it “ethical” if you can’t make an offer?

In my opinion, it’s not unethical. That said, you should always have 100% intention of fulfilling the commitment on a purchase agreement. But even as an experienced investor, you don’t always have the money or buyer lined up when you sign a purchase agreement.

So if you’re new, go out there and take massive action!

About the author, Mike

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1 Comment

  1. Blane on 03/19/2015 at 10:38 PM

    Great podcast today on a question that I know comes up for many new investors, since I’m one too! Like you initially, I thought at first that you need to have the whole deal planned out from purchase agreement signing to having private investors lined up with checks and a ready rehab crew on standby! What I realized is that trying to be that ready-to-go was actually holding me back from taking action and pulling the trigger. Because you’ll never have all your ducks lined up at just the right time.

    I do think new investors need to know at least the first critical steps, how to recognize a good deal, how to write up the purchase agreement so you can assign, and where to look for someone to fund or buy your first deal.

    Then once the clock starts ticking, NOTHING accelerates learning and doing like a deadline. You’ll find a way so the seller will get to close on time and you get to pocket a good deal!

    Thanks again for the post and podcast! Looking forward to listening and reading more on the site.


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