Investing

Investing without Emotions

In recent weeks, we have been on the losing end of two transactions. First, we tried to acquire a multifamily investment property in Columbia Heights and then we went after a full-gut rehab project in Capitol Hill. In both cases, our offers were substantially over the asking price - $60k over for the multifamily investment property and $70k over for the rehab project. We visited each property multiple times, did our due diligence, walked both of them with our General Contractor, discussed renovation plans and more importantly waived all contingencies including financing and inspection. We knew there was going to be a lot of interest on these deals and didn't want to miss the opportunity; so our offers were best and final. We were initially given positive feedback by the agents and were feeling good until they stopped returning our calls or texts and eventually hit us with the famous "even though your offer had the best terms, the seller has decided to go with another higher dollar offer"....not a good feeling, I'll tell ya! We later found out that the investment property had six offers and the rehab property received 16 offers....talk about a HOT market!

Losing on a real estate deal is nothing new and is part of the business, but this is a good reminder on how competitive and frustrating real estate inside the District has become these days. Hindsight is 20-20 but we lost on these deals because we didn't want to pay a penny more based on our assessment of the market and more importantly the principal guidelines that we have established. I tend to look at things at a high-level and realize that this won't be the last time that we lose on a deal but it gets really exhausting after a while and I have to keep reminding myself that this is the way things are and we just have to be that much more diligent and tenacious in our investing. 

The entire process of acquiring a property is not only time-consuming but it also requires a tough mental and emotional adjustments with respect to principal investment guidelines. Warren Buffett once said "it is an easy game if you can control your emotions" and that saying is very true in real estate investing. Good investing doesn't require an in-depth proforma analysis or analyzing macroeconomic conditions but controlling your emotions, however, is very, very difficult. When people get their emotions involved, they do things that they shouldn't do and end up in trouble. My partner and I were very excited about each one of these deals and it would've been very easy for us to escalate our offers higher to ensure that we win them both but that would've come at the expense of disregarding our investment guidelines and the type of returns and profits that we intend to achieve on each one of our deals. 

We are still bullish on the real estate market in DC long-term and will go after more investment opportunities in 2017 but will only do so if they make complete sense. This means we will have fewer options but I am willing to take that risk knowing that our investments were made on principal guidelines without any emotional attachments.