Recently, I got a great deal on some property. It was literally pennies on the dollar. And it was not because I have great connections (although I do), or because I had a note on the property, or because I bought some tax liens, or even because the owner was in dire financial distress and had to take a huge cut on the property in order to stay afloat. It was not any of those things, even though they are all quite common in today’s market.
I got the deal on this property, plain and simple, because the owner had no idea what to do with it. She was a real estate investor that had gotten involved in real estate just a few years ago, when properties were, to put it lightly, starting to be really easy to come by. She was so excited at the great deals that she was getting that she overextended herself, thinking that she would just flip the properties since she had gotten them at such good prices. However, she overestimated her ability to attract buyers, and the end result was that she ended up selling this particular property at a very steep discount.
While one lesson you can certainly learn from this is that you should not overextend yourself, another is that you should always know the risks involved in short term real estate investing. By far the biggest risk is that you will not be able to get rid of the property in short order. You should have plans for how to deal with this issue. Secondly, you should factor in the instability of the real estate market at large. Things are definitely changing – and some of the rules and legislation concerning real estate investing is changing for good. You need to be prepared to deal with new laws like “seasoning” laws, which may require you to hold even short term investments for a certain amount of time before selling them. Finally, you need to be ready to fail. Now, I don’t mean you need to be ready to lose money – no way. But you do need to be ready for the possibility that you might not make your absolute best-case-scenario goal on every property. To be honest, this particular investor could have sold the property in question several times and turned a smaller profit, but she was so emotionally invested in the deal that she viewed anything less than a slam dunk as a failure. And finally, she ended up taking a huge loss for being so stubborn.
Now, I will admit that I have several ideas for this property, and one of them is to hold it. However, I think it’s more likely I’ll try to sell it in the next month or two. Given what I paid for it, the “buy low and sell high” motto of flippers everywhere should fit the bill nicely – even if I end up selling to another investor. If you’re wondering how I can be so certain about my ability to sell this property, then keep an eye out for the next lesson.
Peter Vekselman has been successfully investing in real estate since 1996. He has completed over 1200 real estate deals, owned a construction company, been a private lender, and owned a property management company. Peter currently works with clients all over the US helping them achieve riches in real estate investing. For more information please visit www.CoachingByPeter.com.

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February 6th, 2010
Written by coachbypeter

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