4 Ways to Recover from a Bad Investment

Wed Jun 12 2019

Real estate investing is an interesting field. If you do your homework, you almost can’t make a bad investment. However, sometimes, no matter how much research you do and how sure you are of a property, things go wrong. Then, before you know it, you have to get out the best way you can and move on.

I was talking with some of our students the other day about this, and one of them asked me how you can bounce back when everything goes wrong like that. After all, if you did everything right, and it seemed like a good deal, it can be hard to trust yourself to get back in the game.

I know what it’s like to second-guess yourself after a bad house flip, but doing that won’t help you succeed in real estate investing. In fact, it’ll only hold you back. That’s why I’ve been thinking a lot lately about how I have come back from a few really devastating deals and what I did to keep my head straight and keep investing.

First, Don’t Hold On to a Bad Flip Deal

If you find yourself with a bad investment on your hands, you need to figure out a good exit strategy. Sometimes, the best thing you can do is sell at a lower cost than you’d hoped. If you can break even or just sustain a small loss, you will be doing a lot better than if you hold on to the property hoping to sell it eventually. If you do that, you’ll be responsible for making payments on any loans associated with the property, and you’ll be responsible for other costs associated with it, too. So, if you can’t get the price you want, figure out the best strategy to cut your losses.

Examine What Happened

Next, take a look at exactly what went wrong. Did you go overboard on rehabs? Did you get overzealous at the auction and bid too high? Did you find out about hidden damage that needed to be taken care of after you’d already started rehabs?

These are all mistakes that you can learn from if you have the right perspective. Examine every step of the process you went through to make this deal. Think about where you could’ve done more research, what rehabs you might’ve been able to save more on, your marketing strategies, etc. Then you can get a good idea of what to do differently next time.

Don’t Beat Yourself Up

But don’t sit there saying to yourself, “I should’ve done this,” or, “Why didn’t I do that?” Beating yourself up about your mistakes won’t help you learn from them. Instead, think to the future and be positive. Instead of thinking, “I won’t buy a bad flip house next time,” think something like, “I’ll pay closer attention to my budget, including rehabs, before I commit to buying my next property.”

Start Looking for Your Next Deal

Ultimately, the only way to really come back from a bad investment is to make a good one. The more good investments you make over your house-flipping career, the more confident you’ll be, and the more easily you’ll deal with it when things do go sour. Plus, you’ll learn how to spot signs of trouble before you’re committed.

So stop worrying about bad investments. If you’re a savvy real estate investor, they’ll be few and far between, and you’ll be able to bounce back, even when you have a deal go completely south.

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