"Whose Profits Are They Anyway..."

Just got through responding to an email from Jimmy, who was telling me how much he loves the blog and the postings on the Realinvestors site (http://www.realinvestors.com) in the Forums.

Jimmy then went on to ask me a series of questions that went something like this...

"...I see you have lots of stuff going on in {omitted to protect our deals} ... I see a {xx} bedroom multifamily unit building in {omitted} great for Condo conversion for (XXX)K, is that a good buy....Its a complete rehab and a shell near {omitted}."

My response: "...I have yet to see a successful condo project be taken all the way through in {omitted}. Buy it based on apartment numbers, or you will be turning the keys in back to the lender in 10 months."

In his next response, Jimmy goes on to explain the wisdom of being able to buy now, rent and do a condo conversion later <- SMART. Then, in a couple of more exchanged emails we discuss the "condo market" for this location and Jimmy shares with me what he plans to spend, which prompted this response, and is the essence of what I wanted to share in today's blog:

Jimmy - Buy it for “what it is”, (and not a penny more) Not what it “can be”!
What it is, is the value the seller has created - What it “can be”, will be the value that you create.

Why would you ever want to give “your profits” to someone who has not earned them...?

However, if you decide to go forward, based on a condo deal, (as in paying dollars today to someone else for a non-existent condo market) then please call me. I have some non-existent condo’s I’d like you to buy from me too!

-Sherman

|------ End of Email ------------|


The reality is that both new and seasoned investors alike make this mistake all the time: Over paying for a property based on the efforts that are to come (by them) versus the effort that has already occurred (on the part of the seller). It is very easy to get caught up in the buying fever that takes place when you know you have a deal in a "hot", or "up and coming" area of town. But don't let your enthusiasm allow you to be pulled into a situation where you over pay.

Golden Rule(s):

"Never Play Ball on Another Man's (Woman's) Court", and;
"Never Give Your Profits Away To Someone Who Has Not Earned Them"!