3 Reasons to Turn Down Great Real Estate Deals

​​Real estate investing can be lucrative, but it’s not always easy to decide which deals to pursue. As a real estate investor, it’s essential to know when the time is right to turn down a deal and walk away. Making the decision not to move forward on a real estate offer can often be beneficial for you in the long run.

When it comes to real estate wholesaling, knowing when to pass on a deal can save real estate investors time and money while protecting them from unnecessary risks. While real estate investors should always strive to maximize profits, sometimes taking a step back is what needs to be done in order for that goal to be achieved. For example, real estate investors may be faced with deals that require an unreasonable amount of time and effort to complete. In these cases, it might be best to move on from the deal instead of investing too much into something that may not turn out profitable.

It isn’t working out with the seller

Our rule of thumb is that we’re a great fit for a property if the seller is sensitive to the closing timeline and agrees to the terms of the sale. Let us give you an example. We have had deals with Sellers who needed to close the deal in under 10 days, as well as sellers who didn’t know how to find all the heirs of the property. These are special situations in which you’d want to be the contracted buyer since these properties are generally sold under market value. In the world of wholesaling, you want to look for cues like these because focusing on people with specific needs or problems helps filter out Sellers who just want top dollar in the market. Ultimately, you want to find properties at a discount, so it really doesn’t make sense to go for houses that were recently renovated. Those homeowners would be better off contacting a real estate agent and listing their property on MLS.

We also want to caution real estate investors about getting into real estate deals with too much competition. If there are multiple real estate investors interested in the same property, it can be hard for you to get a favorable deal due to the high demand and fierce bidding wars that can result from such situations. In these cases, even if you win the deal, it’s likely that you won’t have much margin for profits.

In real estate investing, the most important thing is to do your due diligence and not rush into decisions. Weigh all of your options and decide if the real estate opportunity is worth pursuing or if turning it down is the better choice in the long run. Knowing when to pass on a real estate deal can be just as valuable as knowing when to go for it. Don’t be afraid to walk away from deals that don’t seem worthwhile — it could save you time, money, and lots of stress.

The property doesn’t fit your portfolio.

If you’re a real estate investor, the portfolio of properties that you hold is your greatest asset. You want to make sure that your real estate investments are performing well and not just taking up space in your portfolio. Therefore, it’s important to know when to walk away from potential deals that don’t seem like good fits for your real estate goals.

You’d want to look at as many properties as possible and talk to many sellers, but at the same time you always need to question yourself: “is this a property that’s going to fit my portfolio?” Some of the houses you’ll come across won’t do the job. Location or condition may be the issue that makes you want to pass on a real estate deal. It could also be something like the seller is not willing to negotiate, or your real estate goals are not aligned with their desired sale terms. But don’t forget that you always have the option of passing on the home to somebody who is interested in buying it. If so, you can lock up the contract with the seller, and then call your buyer contacts to ask whether they are interested in paying you a little bit for passing those rights over to them. If they say yes, this makes a successful wholesale transaction, and you can walk away with a juicy fee; and that’s not hurting your portfolio, either.

The opportunity doesn’t meet your financial goals

There are transactions or there are opportunities that won’t meet your financial metrics, whether that’s a cap rate or a cash-on-cash return. As real estate investors, it’s important to know your financial metrics and understand why you are investing in real estate. If a real estate deal won’t meet your numbers, don’t be so desperate that you go ahead and make the purchase anyway. Do yourself a favor and pass on the real estate deal if it doesn’t fit your financial metrics or real estate goals. You might have tight numbers, meaning that you want to have a 20% return on a property in a given period, but it only provides a 17% forecasted return, so you’ll turn down the deal or pass it on to someone you know. Just because a transaction doesn’t work for you, there are plenty of people out there who are thirsty for a deal like that, and this is the opportunity to provide them the option to get it. Every individual investor has a different risk tolerance and expectations for creating monetary value. For you a 20% return might hit the spot, but for others that might only be 25%.

There are plenty of opportunities out there that are in special situations waiting for you to capitalize on. Don’t be too eager to get into real estate deals; stay focused and wait for the right moment to make a move. When you know what real estate goals you are striving for, it will help you identify the right deal and turn down those that don’t fit your criteria. Sometimes turning down real estate deals is just as important to real estate success as taking them. As real estate investors, it pays to be smart and not rush into decisions. Weigh all options before accepting or passing on real estate deals — it can save you time, money, and stress in the long run!

Find this helpful? We go wayyy more into detail on this topic in our latest YouTube video. Check us out!

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