Investing in NYC real estate can bring huge rewards but with that comes a degree of risk. As any long-time investor will tell you, eventually, you’ll end up with a deal gone wrong. Maybe you bought a property that’s now worth far less than what you paid for it. Perhaps you’ve got one you can’t rent or are renting for significantly less than you planned for. Whatever the reason, you’ve now got an investment you need to get out of and move on from. Bad deals can shake the pride and confidence of any investor. In such times, it’s easy to give in to self-doubt and regret.
But that’s not the way to handle it. Every mistake has a lesson buried in it, and if you’re determined to succeed as a real estate investor, then you have to be willing to take a hit from time to time. So, if one of your deals has gone bad, here are some actionable steps you can take to help minimize your losses.
1. Face reality and accept the situation
Every moment you spend agonizing over your mistakes and imagining what you should have done is time wasted. Yes, you have taken a loss, maybe a bad one. But the sooner you can set to work recovering from it the less you stand to lose. Face the grim reality of what happened and start drawing up a response plan. You may have a lot of work ahead of you so you’ll need to conserve as much energy as you can. Use the bad situation you’re in to motivate you to climb out. After all, once you’re at the bottom the only way is up.
2. Cut your losses and get rid of it
Never hold onto a bad investment. The longer you do, the more you’ll need to pay out on loans and other costs tied to it. Better to cut your losses and start looking for an exit strategy as quickly as possible. Most often, your best bet will be to sell the property at a lower cost then you’d hoped. If you can come out of it breaking even or taking a slight loss, then you should consider yourself lucky.
3. Assess what happened
Once you’ve put a recovery plan in motion, take the time to sit down with yourself and assess what happened. You made a wrong move somewhere, and you need to find out where so it doesn’t happen again. Did you miscalculate the time and costs of a renovation? Were you too excitable at an auction and bid too high? Perhaps you failed to do a full inspection and found extensive damage once renovations started. Maybe you just didn’t do your market research and bought in an area experiencing a downturn. Whatever your mistake was, it’s one you can learn from with the right perspective. Go over it in detail and look at what you could have done differently. When the next deal comes along, you’ll know what to watch out for.
4. Don’t be too hard on yourself
Mistakes happen to the best of us. Even when it’s one that was staring you in the face don’t dwell on it too much. If you allow your mind to be clouded with statements such as “Why didn’t I….” or “I should have…” then you’ll get nowhere. It’s fine to be critical of yourself when assessing your mistakes. Just don’t allow yourself to become completely discouraged with making further investments. Which brings us to the final step.
5. Pick yourself up and get back in the game
How do you come back from a bad investment deal? Simple, make a good one. Real estate investment is something you very much learn on the spot. All those books on theory and best practice are good for getting started, but you won’t get a feel for it until you’ve been in the game awhile and taken a few hits. Each mistake carries an invaluable lesson which will serve you well in the next deal. So get back in the game and look for how you can make good on your losses. If you’re serious about becoming a real estate mogul, then you won’t let one bad deal ruin your aspirations.