One of the hardest things to learn in the investing process is how to figure out what constitutes a "good deal." This is true whether you are the buyer or the seller. Often, this issue manifests itself (painfully) when the parties start second-guessing themselves and stop being able to make a decision. The result? They get very frustrated with the investment process and start missing opportunities. Or maybe they overreact and rush into a deal that they should have moved more slowly on.

Or, perhaps most frustrating, they keep reexamining their past actions. Did they pay too much? Did they sell too soon? Did they forgo a golden opportunity by failing to pull the trigger? When this happens, they fall further down the well of indecision and frustration.

How do we know this? Because we've been there. Unfortunately, it's just part of the learning process. If you remain an investor, it will be because you ultimately learn (as we have) that investing is a type of game. Sometimes you win; sometimes you lose. Most of the time, though, you're happy to be in the game, giving your skill and your luck a chance to prove themselves. Most people, sad to say, never give themselves that chance.

One key point to remember is that a "good deal" is very often in the eye of the beholder. As a result, both parties can walk away from a successfully completed deal thinking that they got a good deal¡ªand they can both be right! Why? Because a good deal is not necessarily a "win/lose" situation, in which one party's loss is the other party's gain. In many cases, either the two parties have different goals and objectives or their timing is different, and so everyone's most important needs can be met. And having been there, too, we can honestly say that few things feel better, in a business situation.

Now, when you love buying real estate and you drive by a property that you really like every day, it can really begin to get to you. And this piece of real estate was getting to us, particularly because it had two features that are absolute gold in real estate: a great location and waterfront. Finally, we couldn't take it any more. We called the Realtor and told him that we were interested and wanted to make an offer. But the Realtor advised us that the owner had just started the process of rezoning the property into six lakefront lots that she planned to offer for a total of $4 million, when completed.
We were crushed. As we saw it, we had just lost $2 million of profit that we could have realized if we had just followed our instincts. Well, losing $2 million (even when it never really was your money to begin with) really hurts. It hurt so bad, in fact, that we did a very foolish thing: we bought the property for the full price without the lots even being finished. The seller thought we were nuts. The Realtor thought we were nuts. And if the truth be known, we weren't too sure, either. What we did know was that the property was one of the most prime pieces in the area. In the worst case, we thought, we could build our own houses on them and live happily ever after¡ªor perhaps sell the houses after we built them if someone made us an offer we couldn't refuse.
Note that we fell in love with a property. As we explained in the last chapter, that is a very dangerous situation to put yourself in. You start seeing opportunities that may not be there, and you stop seeing problems that definitely are there.

Fortunately, as it turned out, our gut feeling was right. The lots proved to be the best lots in the area. And although we had absolutely no idea at the time we bought the property about how we would market the lots, we came up with a unique marketing plan¡ªwith the help of the Realtor who had sold us the property and who became an ally¡ªthat gave them an air of prestige and seclusion, creating a residential conclave on the lake. Ultimately, we didn't build our houses, after all¡ªbut we doubled the prices again, and we now have contracts on five of the six lots, which
will bring a total sale price of more than S8 million in less than 12 months.

We relate this story not to celebrate our good luck (for which we are thankful), but to show two things. First, a "good deal" is determined by many factors, not the least of which is being in the right place at the right time. Second, if you don't get in the game, being in the right place at the right time won't help you a bit.

Perspective is also important. There is not one piece of property that we have sold that isn't worth more today than it was when we sold it¡ªand most of them are worth a great deal more. So in one sense, you could say we were pretty dumb to sell those properties when we did. And maybe we were. But in each case, time and perspective are different. At certain points in time, we needed to sell the property to raise money for other ventures outside of real estate. At other times, we sold a property to free up funds to buy another property that seemed to present greater opportunities. The point is, you can't second-guess your decisions because you are always looking at an investment based on your reality at that moment. If you don't learn that lesson very soon in the real estate business, you will make yourself very unhappy. So here's a basic rule: no second-guessing yourself!

 

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