Walking Away: The Secret Weapon of Smart Investors

No Deal!

There are over 7,500 posts on Bigger Pockets forums detailing regret and remorse. Many seasoned flippers can recall a deal they should have walked from. Where do you look for deal advice to help you dodge a bullet?

“Sometimes the best deal you make is the one you didn’t.” Joe Latson, Director of Member Success, Backflip

Joe Latson is a face familiar to many Backflip members. As their expert lending advisor, he helps them secure the deals they want. But one of the less expected parts of his job is saying to an eager loan applicant: “Hold on. Are you sure about that?”

The Backflip lending executive and adjunct lecturer in Real Estate Development at Tulane University sees hundreds of applications and associated properties—enough for his Spidey-senses to tell him when a deal might not be as good as it initially looks. And Joe will tell his clients as much.

“I would never coach an investor out of a deal, but I would let them know what properties need due diligence before pushing the button. And I’ll always point them to a solution or de-risking strategy.”

This phone snippet Joe shared with us is a good example of how he combines both local knowledge and subject matter expertise to advise even seasoned investors looking for truth.

A Partnership View

It’s part of Backflip’s culture. Backflip does something not every hard money lender can afford to do: take the long view. Backflip’s goal is not simply to create clients, but to create repeat clients. That means making sure an investor aces their first deal with Backflip, and the next one; always earning trust. 

“It’s about alignment of interests. If the borrower is not successful, we are not successful. That means taking a partnership view, not a transactional view. We are always doing everything in our power so you can get the returns you need on your investment.” —Joe Latson

For any investor, the pressure to close a deal can be immense, but pulling the wrong trigger makes everything else an uphill battle—potentially even one’s last battle. Whether it’s a matter of purchase price, reno plan, exit strategy, or how stretched you are right now, your Backflip lending advisor will help you pencil out the deal’s pros and cons. And they know that walking away can save you money, avoid headaches, and leave you to find a better deal later.

If you are weighing up a deal, the rules of thumb below may help you distinguish a “Let’s go!” from a “No deal!”

*

The Walkaway Checklist

Is it going to pass the 20% rule for a flip?

Do you look to make 20% on your flip, including purchase price, renovation, and financing costs? 

Is it going to pass the 30% rule, if for a BRRRR?

The standard for a BRRRR should be even higher: a 30% or more in margin, all costs included.

Is the expected annual income of the property at least 10% of the property’s cost?

If not, but the math is still good, consider a flip.

Will the effort over-extend you, financially or personally?

We all put in sweat equity for cash. But don’t bite off more than you can chew.

Do you have viable exit plans for all foreseeable changes in the market?

If interest rates go up; if local rents go down; if the house doesn’t appraise like it should, do you have a plan to stay above water?

Remember, any and all of these questions, you can discuss with Joe and the Backflip team. Reach out to them!