If you are buying real estate right now, there’s an argument to be made you are either rich, brave, or foolish.

Every time I evaluate a deal, there is a better chance I will do nothing at all than take action.  Good deals are far fewer than bad ones, and I’ve made a lot of money in real estate NOT buying something.

With all of the low prices, distressed properties and desperate sellers out there right now, it is really tempting to start snapping up bargains.

But the wise move may still be to wait.   If you are buying real estate right now, there’s an argument to be made you are either rich, brave, or foolish.

You’re rich: You’ve watched as real estate prices plummeted. Now signs of recovery mean it’s time to invest. If you have the spare capital, you stand to make a lot of money in this market of incredible opportunity. You can afford to gobble up the discounts and hold them for three years. It’s great to be you, and you are part of a fortunate and elite crowd.

You’re brave: You have both ends of the financing worked out, and you buy bargains to sell, for the most part, at small margins. Most likely you are forced to run a volume business. Do enough deals and you can still cash in on the current market conditions. But you are probably working yourself sick to make the same money that will take half the effort as the market improves.

You’re foolish: You know you can get bargains, so you buy them any way possible. But did you plan how you are going to get rid of them? If you’re trying to make a killing and price your resale high, your short-term financing may come due before you can resell. Quick sell it at a discount, and you may have so little margin by the time you unload you could wind up breaking even. If you get stuck holding, you still have to pay off your short-term lender. The unhappy possibilities are endless.

You could be wise. Even though there are juicy discounts out there, as the siren song of equity beckons, you could remind yourself about the resale profile of your deal in this market. It’s simple, really: don’t buy, and you don’t have to sell. You’ve waited all this time, maybe there’s wisdom in waiting just a little while longer.

You would think that hungry contractors would always charge less. Sometimes it doesn’t work that way.

You would think that hungry contractors would always charge less.  But lately I have been getting sticker shock on invoices from contractors I have known for years who always give me builder’s rates.

Your logic keeps saying that in the market slowdown your contractor would charge you your same old rates, or maybe better, to keep you calling him first.  He obviously doesn’t want to drive you away, especially if you’re one of the few builders offering him work during the slump.  Sometimes it doesn’t work that way for some reason.

It seems like exactly the opposite of what should be happening.  If they have fewer jobs, they obviously need money more.  Exactly.  Maybe the longer they sit around thinking about that truck payment they need to make, the more they try and maximize cash flow every time the phone rings.

What you can’t see is how the dead air is affecting them between your phone calls.  With less coming in, your contractor may be in kind of a panic, and when he gets your call, he might have a lot of ground to make up.  Bingo, you get the platinum plated price.

This will only work in the contractor’s favor for the first job.  Then he will start to get the reverse of what he’s looking for.  You will have a tendency to look for new contractors who are also hungry, but who are in a position of courting you as a new customer.  In contrast, the old contractor will be spending his longstanding goodwill by breaching your trust, charging you that price you didn’t expect.

When I get a high bill from one of my old guard, the first thing I do is call him on it.  “Wow, Joe – that much for that job?  OK.”  Then I pay it.  Then I start calling around.

If Joe doesn’t hear me call for a while after that, he’ll start to get the message.  Meanwhile, on the next job I try to get a good rate from somebody new. 

Hungry new contractors don’t always give good rates either.  They have nothing invested in you, and not every one is looking for repeat business.  Some treat you as a one shot deal.

But I’m always looking for that second and third contractor so I can get multiple bids on jobs that come up, and to call in case my regular guy isn’t available.  It never hurts to have a few more contractors on your call list.

At some point, I’ll call my regular contractor back and ask for a bid on a job.  By then, the price is usually back to normal, and he’s got my business again.