May 1, 2020
A bad real estate deal is something every investor strives to avoid. However, some poor real estate deals aren't as obvious as you may think.
Even the best investors have been known to enter into some pretty bad deals, but that doesn't mean all is lost. It's not impossible to remove yourself from a poor real estate deal, provided you give yourself some contingencies to exercise.
We have had a challenge on one of the buildings we purchased even with all the due diligence done properly.
During the same time, there were lots of condos built for sale but due to the economic situation those condos got hard to sell for the investors so them put up for rent for nearly the same price as we were renting our units.
Thus many tenants moved out because with a little bit more rent they got to stay in newly built condos causing us higher vacancy than usual.
During that time the boiler kept causing us challenges and we incurred a lot of maintenance costs fixing it even though it was a fairly new.
So after on going maintenance issues with the boiler we decided to replace it which also costs a lot.
Once the boiler issue got taken care of then a water pipe broke and caused mold to build up in one of the units costing thousands for the insurance company to fix.
And that we had a tenant who was switching his unit from I think Two Bedroom to One Bedroom and left his window open in 40 degrees below and caused damage of over $70,000 for our insurance company resulting in our insurance premium almost doubling.
All these events drained out so much money from our investments we decided to sell the property to cut our losses.
Sometimes the property might just turn into a money pit where the cash flow is down due to higher taxes and township inspection fees. Or maybe the maintenance is so high because it's an older property.
To learn more about the exit strategies, Watch my Facebook Live Video here.
But how you exit the deal can be just as important as the investment you choose.
If you're not cash flowing enough but there's significant equity, you could increase your yield by refinancing and reinvesting that capital in something that cash flows more.
Of course, you can sell the property. If you take a loss, you may be able to offset other gains somewhere else in your portfolio which I always tell my students to diversify your portfolio.
That being said, deciding upon the right strategy is really up to the individual and depends on their situation.
If you need my help to build your Real Estate Portfolio, reach out to me at email@example.com