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  • Property-a-holics

    Numbers do not lie. Truth and integrity when negotiating

    I presented an introduction to Lease Options the other night at the Hampshire Property Club. Someone asked me a question concerning a deal that turns out was not a deal.

    Thinking back to the specific conversation reminded me of something that some wise investors once said. The easiest way to think of the situation is by asking the question: "Where is the deal?"

    To really drive the point home let me embellish a bit. "Where is the deal in the deal?" Similar to the movie line "Show me the money"

    Run the numbers. Break them down. Make sure you note the assumptions you are making about the numbers. Can each specific number be proven? If it is a guess how much could the number change before you get into trouble? Let the numbers guide you as to what is on offer.

    As real estate investors you are looking for lump sums of cash and cash flow. If the numbers tell you that there is little to be gained or the risk of it turning out worse then let the seller know. It is not really about them or you. It is all about the numbers. If they really are motivated to sell they need to change things so the numbers stack up. If they can not change the numbers there is no deal. There is no money.

    You invest to make money. You are running a business. Be honest about that. Be honest with yourself and with the seller. If you can not make money on the deal it is not a deal. It might be a deal for someone else who has a different set of circumstances. That does not change your position so stop wasting your time. Nicely tell the seller that there is no profit on offer so you need to move on. If the seller's position should change in the future they should come back to you. Hint: Best if you check in with them as that makes for a more likely reconnection.

    The numbers are the numbers. They are based on facts concerning the present. Never make a guess about the future. Price the deal as it standards and not as it might be. You are not paying the seller for potential. You are buying what they are offering now and let the numbers guide you. If you need the seller to improve the deal show them what needs to change for the numbers to start working correctly.


    John Corey
    http://www.ChelseaPrivateEquity.com/blog
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    Brilliant post John. On a number of occasions, I've tried to fit a square peg into a round hole, but the numbers told me the truth every time, and told me in no uncertain terms to "let the deal go". Like you say, numbers never lie.
    In fact, if you want to be really efficient, and leverage your time, stack the numbers before even walking out your front door to view a property. If the numbers don't work, its not worth your time, trouble, petrol etc driving to view a property as the numbers have already told you its a no-goer.
    Thank you for sharing such a valuable and realistic insight into what makes a deal ... really makes a deal.
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    "If they can not change the numbers there is no deal."
    "If you can not make money on the deal it is not a deal."
    "The numbers are the numbers."
    Great post! Many thanks.
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    Great post everyone. It’s amazing how people can get hooked in by being told they have a “bargain”. Because they’ve been convinced they have value they’re happy to go ahead. But like you say, the numbers don’t lie. It is actually vital to do all the figures before you go to see a property. You are then going to look at it more objectively.
    It’s also so important to remember that the only thing relevant with a property investment is how well it will perform as an investment. Whether or not it’s a property that you would choose to live in yourself is irrelevant. I think some people get too caught up in buying a property that they like, rather than one which stacks up with the numbers.
    Mary Waring
    https://www.marywaring.co.uk
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    Mary Waring said:
    It’s also so important to remember that the only thing relevant with a property investment is how well it will perform as an investment. Whether or not it’s a property that you would choose to live in yourself is irrelevant. I think some people get too caught up in buying a property that they like, rather than one which stacks up with the numbers.
    Mary Waring
    https://www.marywaring.co.uk
    Very good point Mary.
    Fit for purpose, priced at a level that works for the buyer, the renter, the seller, etc.
    An investment property does not have be something you would live in as the investor. It just has to be a property that there is demand for. Maybe people who have different standards or different tastes.
    Similar to HMO properties where the owner is not looking to live in an HMO. Many people are just fine with an HMO because it meets their needs.
    What works for one person as their future home is not always right for another person.
    John Corey
    https://www.ChelseaPrivateEquity.com/blog
    https://www.twitter.com/john_corey
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.