Are You DTF or Just Ready to Cuddle?

Outraged does not begin to explain it. In less distinguished company I’d probably use some colorful language to describe my anger. I’ve absolutely had it with myself right now. And the reason for my intense frustration is the fact that I’ve been here before.

About five years ago I got a call from a woman that wanted to sell her house. She’d just inherited the property and lived out of state. She scheduled one or two other investors to see the place. She told me over the phone that she was going to sign an agreement within the next few days, but first she wanted me to make an offer.

The property was a standard 3 bedroom, 1 bathroom row house located just blocks from Temple University. For those of you that don’t know, student housing can be an incredible income generator. But five years ago a few blocks from Temple could just as well have been downtown Bagdad. The area was on the upswing (and on a side note has really developed into a great student community). I just had a difficult time getting past the boarded buildings blighting every block and the gun fire sounding in the streets each night.

I was more than willing to buy the house . . . at the right price.

After meeting the seller and inspecting the property I made my offer: $12,000. That’s when I found myself in a very advantageous position. I went in last. The two other investors that looked at the house made their best and finest. The property owner let me know that. She said I was a little lower than the other offers, but she felt most comfortable with me. If I could raise my offer by $1,500, we’d have a deal.

And that’s where I made my mistake. I passed.

The truth is I got scared. The property needed everything – roof, windows, heater, electric system, kitchen, bathroom, flooring, drywall, and, and, and. I ignored all the upside to buying the property like the changes going on in the neighborhood, the $80 million dollar commercial development, or the 34,000 students that were significantly under-housed. I even neglected to consider the monstrous cash flow that the property would generate. Instead, I found myself dwelling on everything that could go wrong rather than the logic of the deal.

For $1,500 I walked away cuddling the security of what was comfortable instead of manning up and looking at the extensive potential reward compared to the minimal added risk.

That house sold in 2010 for $198,000 after generating $1,500 per month in rent for the owner. I know because I’ve followed that property. It’s served as a valuable lesson. Stop cuddling and get DTF (it’s not what you think).

For the last five years I’ve heeded that lesson. Each time I felt the temptation to stay within my comfort zone, I’d remember that little three bedroom on Carlisle Street.

Fast forward to today. I just got off the phone with an investor friend of mine. We both bid on the same REO property in January. My offer was $2,800 less than his and I declined to raise my price when I had the opportunity. My friend bought the house and did a nice rehab. Yesterday the property went under contract. He’ll clear over $45,000 after all is said and done.

In the past few years I’ve been involved with dozens of successful projects. So why didn’t I pull the trigger on this deal when I had the chance?

I could blame it on the poor housing numbers blasted all over the news. Or I could explain it away with excuses about my busy schedule. The truth is I wasn’t DTF – Down to Flip. This time it cost me $45,000.

How about you? How many opportunities have you let slip through your fingers because you were content to stay in your comfort zone instead of trying something new? This is not a soap box. I’m not here to brow beat anyone. I’m certainly not encouraging anyone to get into an investment without first doing their homework. But the next time a deal comes across your plate that makes sense and has a lot of upside, ask yourself this question. Are you DTF or just ready to cuddle?