Emotions almost got the better of me on this deal
Sometimes you put a lot of work into looking at a home. Sometimes you put in so much work and time that it begins to cloud your judgement and you start to make wrong decisions. This is one of those stories.
I looked at a home a few months back. This was in a decent area of town. It was a bank repossession and it was listed for $48,500. Houses in the area sell for around $65,000 - $70,000. The house stayed on the market and eventually dropped to $42,500. I went and inspected it and it’s looked ok – so I made an offer. The bank rejected it and countered and we went back and forth a few times. Eventually I made my final offer at $36,500. The bank said they would review. So I waited....and waited......and waited....then I got fed up with waiting and made a bunch of offers on other homes.
After about 2 months, the bank called and accepted the offer. I’d forgotten about it at that point and was half way through a couple of rehabs on purchases I’d made in the mean time so I laughed and told them I wasn’t interested. I closed it off and moved on. Around Christmas time (about 2 months after they accepted my offer of $36,500) I got an e-mail saying that the price was now reduced to $29,900!
This amused me because they could have gotten $36,500 four months prior. I made an offer for the asking price and they said it was going to highest and best - basically a bidding war. I didn't change my number. A few days later, the bank accepted my offer – I don’t think there were other bidders, they were just trying to squeeze some more from me.
Then the contractor when through it in detail - it was going to cost $15,000 to get it in rent ready condition. This wasn't too bad - but - what we scrutinized were the long term costs. There were a bunch of little and big items that whilst not needed now, would have to be done in 5 years or so. Total cost – about $30,000! This was much more expensive. My bargain house was now going to cost me much more than the purchase price and since I’m a long term investor, I had to give it up – it just stopped making sense.
I was devastated to walk away. On the one hand, I felt like I dodged a bullet but on the other hand the purchase price was so good I did everything I could to make it work. Fortunately, my rational brain kicked in and we let it go. To make it in this game you can't get attached to the home or decide based on emotion - the numbers are the numbers! Stick to that mindset and you can't go wrong.