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by Richard Odessey
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tual real numbers, that brings the reality of the deal into actual focus. Our hopes and wishes dissolve before the actual profit and loss calculations.
Moreover, the numbers can pinpoint the weaknesses in a deal, and point the way to a solution. No mere checklist can do that.
What About Risk?
I think you'll also agree that a Good Deal, is not just High Profit, but also, most importantly Low Risk. Many a dream of a golden future has come crashing down because some little thing went wrong.
Many a would-be mogul, is now working at a 9 to 5 because their killer deal was wrecked by an unforseen glitch. This is what we mean by high risk.
The successful investors do deals with low risk. Deals that are so robust that even if almost everything went wrong they'd still come out with a profit.
Build In A Safety Margin
For example, suppose you have a rental with a positive cashflow. Is your cashflow high enough or your option payment big enough, that even if you had to evict your tenant for non-payment and it took you 2 months to fill it with another cash-paying customer, you'd still come out ahead?
Or, is your investment to value so low that even if you had to offer your buyer a big discount for a quick sale, you'd still walk away from the closing table with a fat check?
In real estate things can and usually do go wrong. It's Normal. So, wouldn't you like all your deals to have these kinds of safety margins?
Fixing the Problems with Your Deal
Now, if you knew in advance that your risk was |
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