Ken Williams' success tips

It’s the numbers, period!

This past week I decided to pull my offer on a huge Victorian single family house, with tons of potential here in Washington DC. It is an REO “Real Estate Owned” by a bank. For one, this listing comes as a sure sign that times have changed in the DC market. Over the past four or five years any foreclosure in DC was snapped up by frenzied speculators either before or during auction. Other times the banks themselves were the high bidders knowing all they had to do was give the property the once over, put back on the market over priced, to be scooped up by an overzealous buyer. Those days appear to be long gone.

Back to my deal. Agents, (can you believe it?) two real estate agents were fighting hard to convince the bank’s asset managers to accept my offer. That’s right, the listing agent knew this property which needed a ton of work would only appeal to a person like me who had the means to both purchase and rehab the property. My buyer’s agent whom I met recently was pushing hard to make the deal work as well. Much to her chagrin, I had my number and held tight to it.

I knew what I was comfortable with for a worse case scenario some five or six months later when the property would be ready for resale, I wasn’t willing to budge. I did at one point offer a little more than my initial price with a request for closing concessions, which really was a wash.

The bank’s asset manager had their number which wasn’t close to mine. The agents tried talking me into coming up a little higher to make it work. I sensed they both meant well, but surely their advice was driven by some self focused motivation of getting the sale. Nope! I wouldn’t budge. Either the bank came down to my price, or I walk.

My buyer’s agent, who is fairly knew, and never worked with an investor/developer didn’t quite get it. After verifying my private lender letter approving more funds than the bank’s asking price, I’m sure she thought that I could surely pay it.

Having the available funds wasn’t the point. There is no emotion for me when I make an offer. I learned this the hard way. It is the patient investor who waits for the low hanging fruit and the BIG bucks.

Finally, I pulled my offer, in the midst of the listing agent introducing other investors supposedly willing to pay more than my offer. God bless em!

As I drive around my downtown office neighborhood, I count many properties owned by investors who got caught up in the frenzied times. They over paid for properties which are now sitting like hulking brick ghosts. One nearby row house with gorgeous potential even has the dumpster and project fencing on the lot. The tell grass surrounding both dumpster and fence serve as a constant reminder of a real estate era gone by.

No surprise to me as I saw it coming 18 months ago as many of them were over paying for these now thorns in everyone’s side. I’d often scratch my head and wonder, “how in the heck does this guy think he’ll make money on that one he’s just over paid?”

This should come as no surprise to anyone, but real estate investing is all about the numbers. Period! Save your emotions for when buying your family’s dream house.

I can’t tell you how many times I’ve entertained investors during a Q&A session when someone utters out in frustration that they can’t find a buyer for their deal. I politely listen as long as possible as the person goes through a song and dance for why they believe their deal is not selling. All the while my inner voice is screaming “it’s the numbers.”

Finally, I share with the grieving investor that their problem is the numbers are wrong. That statement is usually met with immediate protest with emphasis on how nice the property is, the neighborhood, schools, huge back yard with picket fence, and so on and so on. All that stuff is great to know, however, they’re all emotional details. Important? Yes, but less so than the numbers.

Getting properties sold, assigned or rented boils down to one thing, and that is the numbers. Any property, anywhere, in any neighborhood will sell, in any economic cycle, if at the right price.

I have no love lost with the potentially elegant Victorian Queen. There’s nothing worse than being stuck holding a dead property you can’t move. I’ve had many sleepless nights in my days, counting not sheep, but carrying costs as I stared up at my ceiling.

My advice to you is to decide now, to tuck away all your emotions when it comes to making offers, place them on a rear shelf somewhere in your heart. Save those emotions for when you are deciding to build your dream house. Invest with your head not your heart.

Much Success