The best investments in real estate are those that match your strategy. Having an idea for what you want to be and how you want the deal to go is rather useless unless these ideas are based on fact. Sure, most investors want to make a huge spread on every deal, but sometimes that isn’t possible. Certain deals require you to take what you can get and move on. It is entirely up to you to discern which houses meet your particular criteria. Having said that, your exit strategy is dependent upon the hard data that is made available to you. Never forget that real estate is a numbers game. Some houses will enable you to swing for the fences, while others will force you to hit consecutive singles. When investing in real estate, let the numbers be your guide.
There is nothing that gets investors into trouble more than hope and assumption. It can be easy to make the numbers work on a deal if you are bending them in your favor. If the property currently rents for $800 a month, there is no amount of work you can do that will make that figure increase to $1100. Even if you give the property a facelift, it will probably not make renters ignore the comparable rents in the area. If your assumptions are wrong on the rental price, every other figure associated with the deal is now thrown off and profitability will be negatively impacted. If you simply looked at the data and comparables you would have known your projections were a stretch.
The same goes for any type of budgeting and projections you do for every deal. If you have a rehab budget of say $10,000, is that really going to cover all of the work you want to do or are you hoping you can get four or five different people to agree to lower their price? If you are off with your budget it changes how you look at the property and ultimately affect your sales price. Now, instead of selling for a certain price to get a profit you need to adjust your numbers to a higher sales price. This price may not be realistic and if you list at this number you may do more damage to your property and end up having it sit on the market collecting dust. This all could have been avoided if you started with a realistic look at your budget.
The numbers will always tell the tale on every deal. It is usually when emotions and personal feelings about a property come into play that your decision making becomes skewed. You can have an affinity for a property but you have to know where to draw the line. That line should be based on where the numbers tell you to stop. It is easy to get caught up in a bidding war on a property that you see potential in. That potential is only based on getting the property at your price, once you exceed that price you need to move on regardless of how much you love it. There are other deals out there. If the numbers tell you to walk away you had better run.