Rule #2 - Take The Money And Run

I learned this rule early... on my first house in fact, but only after much grief.

My partner (rule 4) and I had purchased a nice 3br 1ba home in a high demand area. We got it for around $150k with an ARV of $215k.

The first day we put it on the MLS through my real estate company 60dayrealty.com (@60dayrealty for you Twitter followers). Listed it for $175k in as-is condition. In 24 hours we had an offer of $170k.

After my partner and I spoke we decided to decline their offer. I told the Realtor we were not offended by the offer, but had just purchased the property and fully believe the home was worth the $175k we were asking.

We all thought they would counter back at full price and the deal would be done. We were VERY shocked to find out they walked away.

My partner and I weren't too upset b/c we were excited about the possibility of doing the rehab and gaining an even greater profit out of the house.

Essentially we walked away from $10k each for doing no work. Nada. Zip.

Needless to say, we spent the next 3 months managing subcontractors, buying supplies, and doing a lot of the work ourselves. A lot of long, not to mention late, hours. We spent around $25k to fix it up and sold it for $205k with no Realtors involved in the transaction.

For our hard labor, stressful nights and bloated costs we made not $20k, but a whopping $25k! We walked away from $10k and beat the hell out of ourselves for 3 months to make an extra $2500.

Stu. Pid.

This rule doesn't ALWAYS apply of course. With experience you can tell if the fix up and profit is far worth the rehab instead of the wholesale.

In my world though, I live by rule #2. It worked very well on the next property I sold.

Thoughts? Disagreements?

Rule #1 - Strike While The Iron Is Hot

I weed through around 30 properties that are sent to me through the MLS every day through my company 60 Day Realty (SHAMELESS PLUG - follow @60dayrealty on twitter). I also go through roughly 50 properties that are sent to me through Craigslist. Add in the auction houses I go to review weekly and the FSBOs I drive by and I'm looking at roughly 100 properties a week.

In that 100 properties I may find 5-10 that interest me and only 1 that I'll make an offer on. I'm a fairly conservative investor (though in this market I should turn that around) and I'm picky about what I buy. It will either have strong cash flow in the bad parts of town or I am able to get it cheap enough to make cash on a flip in the better parts.

As I look back on my first few months in the flip/rental business, I spent a lot of timing being nervous about whether or not the buy was worth it. I had done my numbers, my instincts were good... I was just afraid to pull the trigger.

And then I would lose them.

Why?

B/c someone else was also looking at the property and wasn't afraid to stare success in the face and act.

If you are sure about the property, the finances and your goals you should never hesitate to pull the trigger on buying a property. In the beginning I lost too many homes that I now would LOVE to have back.

What are your thoughts? How can people overcome this hesitation?

The Starting Four

I learned 4 hard rules early on when I started flipping houses. They were learned through many days and nights filled with blood, sweat and tears. For noobies out there thinking of getting into the business... start with these basics.

I am always looking to build onto this list. I will elaborate on why I have chosen them through this week!

1. STRIKE WHILE THE IRON IS HOT
2. TAKE THE MONEY AND RUN
3. IF YOU CAN'T CUT A CHECK YOU SHOULDN'T BE DOING IT
4. PARTNERS IS A DIRTY, DIRTY WORD

Are there any RE lessons you have learned the hard way? If so, PLEASE leave a comment! I am building the list and would love to read your rule and story.