Below is a guest post by by Ryan Webber. I like this post because of the point he makes about integrity at the end. I met Ryan on Bigger Pockets. He consented to let me use on of his posts here. Ryan canbe contacted via his contact page o his website http://www.AmarilloHomeBuyers.com.
Here is Ryan’s Post
I had a newbie wholesaler hit me up a couple months ago with a house that I could buy for $35,000. I crunch numbers in my head and think that it might be a deal. He tells me all about it and makes clear that I had to pay ALL closing costs. Then I finagle out of him that there are $7,000 in back taxes and he says that they will “carry” with the property.
So as we talk about it and I explain to him that back taxes don’t “carry” with a property that they have to be paid at closing, I end it with, “Okay so you really need $42K for this house. “ He says, “No, I need $35K.” So I ask him about the back taxes again. He says, “Well yeah I told you that you have to pay all closing costs.”
I love newbie wholesalers.
I would recommend that you always include back taxes into your price. ALWAYS. I hung up the phone not wanting to do business with this guy. Think about it like you are trying to build a long term relationship of trust and rapport with professional investors. Jickiness and not being totally up front is NOT the way to build trust with anyone, especially professional investors. Having an investor find out later that they have to pay more than you told them they would have to is a BAD idea to build trust.
I have taken money out of my profits before to make sure the relationship with my buyer is the absolute priority.
6 years ago, I was trying to sell a vacant piece of crap triplex for $28K and I called an investor that I had done several deals with. We walk through it and I tell her everything that I know from the seller that is wrong with it. She says, yes. We sign a contract and drive off. I remember 5 minutes later that I forgot to tell her that it needed a new gas line in one of the units (about a $1,000 fix). I immediately call her and tell her about my lapse. She says its fine. I tell her that I’m not okay with it. She agreed to the price not knowing that there was an issue with the gas line. I tell her that I’d like to drop the price by $1,000 to compensate for my mistake. She responds that she would still have taken it at $28K with a gas line issue, but I insist that we drop the price by $1,000 anyways.
My priority was to build the relationship of trust, not to make an extra $1,000. Fast forward a couple years and that same investor bought several more larger multifamily properties off of me. I would estimate we cleared over $100,000 in profits on those later deals.
I’ve had investors screw me over for $1,000 before, and what it does is destroy any future potential of business. If you want to maximize your greediness and make the absolute largest amount of money in this business, then have integrity. Integrity will make you so much more money in this business than being a snake.
So that’s it. I hope you liked it. If you did, leave a comment.
Happy investing – Ned