You’ve Got to Live and Die by the Numbers!
In my conversation with Josh Weidman, who is an experienced property manager, buy-and-hold and fix-and-flip investor, and currently operates a successful turnkey real estate company, he provided his best real estate investing advice ever, which comes from the knowledge he has attained through an accumulation of his many experiences, positive and negative: you’ve got to live and die by the numbers!
When Josh first got into real estate, he was convinced by wholesalers and home owners, on more than one occasion, to put properties under contract based on future projects that were supposed to be coming to the area. “This property is going to worth so much money because they are building a casino around the corner,” is an example of a line from a homeowner that convinced Josh to purchase a property. Unfortunately, and as you can guess, no casino was ever built…
Once Josh learned his lesson from being misled on multiple occasions, he began making decisions based on the numbers alone. However, this didn’t stop him from continuing to make mistakes. Instead of looking at the numbers, contractor bids, and today’s market values for what they actually were, he fudged the numbers to make the deal work. He would tell himself that he could complete a renovation for $5,000-50,000 less than the contractors bid or that he would be able to sell the property for the highest price that has ever been paid for in the neighborhood.
A specific example was a deal that had 3 walls and no roof. The rehab costs came back at $125,000. However, Josh convinced himself that he could get it done for $85,000. He made an offer and purchased the house. And sure enough, the rehabs ended up costing the original $125,000.
Flashing forward to the present, these mistakes are behind him. And, from these mistakes he has learned a valuable lesson: you will be much more successful in real estate investing in the long-term by saying “this is what the property is worth today, and based on the cost of expenses today, here is my offer.”
Even when looking in emerging markets, you still need to buy based on today’s numbers, meaning what the house will sell for today if you renovated it and put it on the market. You never know what tomorrow may bring. Real estate is a cycle that has its ups and downs, so you have to invest today based on today’s numbers, not the hypothetical future projections.
Remember that it is an investment. You are not buying a house to move into, so take the emotion out of it. Look at the numbers and if they don’t work, then the deal won’t work and you need to walk away!
Are there times where you fudged the numbers or listened to a seller’s fairy tale and ended up paying a price?