To Know means No: When to walk away from a deal

I know I’ve been there before; I think we all have. In the last couple of years in Sydney, there were many investors who were so keen to get into the rising property market that they sometimes lost sight of whether the deal really worked for them or not.

Don’t Get Emotionally Attached

What happens is, you become so desperate to buy something that you become emotionally attached to the outcome. It makes it really difficultto walk away from a transaction – at a time when you may really need to walk away.

This is what you need to remember: Property investing is all about ‘the numbers’ and nothing else but the numbers. When the numbers don’t stack up, there is usually a reason for this and it serves as your “warning bell” to walk away from the deal.

Sometimes, investors fail to walk away from deals when they should when negotiations between the buyer and vendor break down and an agreement can’t be reached. I’ve seen highly emotional investors hang in, offering more and more money in the hope that the vendor will change their mind.

While the investor is desperately trying to close the deal, the vendor actually has the upper hand in the negotiation process and will push the investor to their maximum.

If the vendor asks for more than the investor was prepared to offer at the beginning of negotiations, then the investor should walk away from the deal. The reasoning behind this is that as soon as you walk away, the tables turn and you as the investor once again has the upper hand in the negotiations.

After all, the vendor needs you more than you need them – there are plenty more property fish in the sea. But you could be the last buyer for their particular property for months. If the vendor really wants the deal to go ahead, and soon, then once you walk away, they will have no choice but to call you back!

If this happens, as the investor you will know that the vendor has no other serious buyers and is keen to sell. This gives you some extreme bargaining power so now is the time to negotiate hard.

Let the Numbers Dictate Your Decision

Use the numbers to help you dictate whether you pursue the deal or not. The numbers will help you to keep the emotion out of the deal and it is important that you understand that and know when to walk away.

For instance, I have a client who was recently looking to purchase an apartment investment for around $300,000. She crunched the numbers and pre-determined her ‘walk away figure’ of $283,500. The vendor counter offered at $290,000.

My client walked away from the deal; even though it’s only a matter of $6,500, she was not emotionally attached to the deal and so was happy to walk away and pursue other opportunities.

If the vendor comes back with a lower counter offer in the next week or two, she may consider it, or she may have moved on.

This is the power that comes with setting your walk away figure: it allows you to be completely unemotional without getting caught up in the hype along the way.

Now matter how much you love a property or how convinced you are that the investment will pan out, be prepared to walk away if the numbers don’t stack up. Use tailored software to help you analyse the deal from a financial perspective if you need to, and remember:the next best deal comes around at least once a week, so don’t be disappointed if you have to move on.

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About the Author:

Helen Collier-Kogtevs is the Managing Director of Real Wealth Australia, a leading education and mentoring company for real estate investors. Not only is she a highly successful property investor and an educator, but also a best-selling author, and a philanthropist.

 

Helen is particularly passionate about helping people, especially people who are keen to create wealth and make a difference in their lives. She has been mentoring thousands of new and experienced investors in their pursuit of wealth creation through property.

She founded Real Wealth Australia to mentor investors create wealth and financial freedom by focusing on helping them build an investment strategy to fit their individual goals, rather than focusing on one particular investing method using her successful property investing system.

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