Episode 76: Walking away from a deal

Everyone talks about the deals they close in real estate… but nobody talks about the deals they walk away from.

In this episode, I break down a flip opportunity that looked like it had over $100K in spread — until the numbers got tight and the risk started stacking up.

Sometimes discipline in real estate isn’t about the deals you do. It’s about the ones you don’t.

I also share a big update: my first investment property is now under contract to sell, completing my first full cycle as an investor.

Buy. Rent. Sell. Recycle the capital.

🎥 Watch the full video episode on YouTube:
 youtube.com/@therickyricardoshow

📲 Instagram:
 @rickyricardoshow

About the show:
The Ricky Ricardo Show documents the real journey of building financial freedom through leverage, better decision-making, and real-world lessons — in real time.
Real estate is the current vehicle, but the principles apply far beyond it.

Transcript

SPEAKER_00 0:00

You know what's funny? Everyone talks about buying real estate, but nobody talks about the deals you walk away from. Last week I walked away from one. And in the same week, my very first investment property went under contract to sell. And that moment made me realize something about this business. This is the Ricky Ricardo show, and you guessed it. This is your host, Ricky Ricardo. And I'm just documenting my journey from beginner investor to financial freedom, hopefully through real estate, the wins, the mistakes, the numbers, and everything in between. I give you real information, every move I make, everything that's going on, and trying to formulate this business into something that can actually give me those freedoms we talk about financially and time. And, you know, I actually skipped last week's episode because I was in New York. If you followed me on Instagram at Ricky Ricardo Show, you would have seen that I was out there with my parents and family for a family funeral. My dad does have dementia, and you know, we're working through that. And I took him out there to be with the family. Real estate kind of paused for a minute, but the deals didn't. I was still out there, still having conversations, still trying to move the needle, as I say. And while I was gone, I had a deal sitting there that I had to make a decision on. I shared with you guys on Instagram not too long ago, after I closed the most recent Alabama property, not talking about that one, but I was contemplating jumping into another one that would have been strictly a flip. Now we're talking about a spread of possibly, potentially, uh a little over $100,000. And, you know, I'll just share that. And the numbers had to make sense. I had to get the price right because I, you know, you make the deal on the buy, not on the sell. Um, because you want to go into and make sure that you are having enough wiggle room should things happen. You know you're gonna have to do renovations, you're gonna have to spend some money to make it look good. Well, just to share with you guys, uh, it was listed at $115,000. That's what they wanted. And my initial offer was about $80,000. And they sat with that and told me that's not gonna be enough. Well, the comps of the sale of homes in this area would be around $200,000. Uh $215,000 would be pushing it. Uh $220,000, $225,000 would be on the higher upside scale of this sale, if if we were to say the range. Now, what it involved was taking a three-bedroom, one and a half bathroom, and bringing it back to that. And you're probably like, what do you mean? But the property currently was or is a one-bedroom, one and a half bath. So it was initially uh 3 1.5, and the owner had you know changed up the house, the floor plan to be more uh friendly to being elderly, being handicapped. And so they they made it a one one bedroom and just completely made extra space all over the house. So, I mean, it looked like it was in decent condition. However, you're not gonna get loans, you're not gonna get certain things from banks on a one-bedroom. So it was only going to sell for 200,000 plus based off the comps if we got this property back to a three-bedroom. So we're gonna have to do quite a bit of renovations, you know, walking through the home, the videos and the pictures I saw, it was kind of hard to tell where the rooms were originally. And, you know, that's the nice thing about having experts on the ground out there. So, you know, boots on the ground, and being real familiar with the town, the neighborhoods is a huge plus. Come to find out there was only four floor plans used in this neighborhood. So it wouldn't have been too hard to figure out what the original plan was, and we put that into our cost basis to determine if this is actually gonna make any money at all. So, with that, we originally had put about $55,000, $60,000 in rehab. The problem with that is I still don't know what my bottom number was because I offered 85, they told me no. And then I started to feel like I was the only offer that they were getting because the conversation continued, it didn't stop. And, you know, they just came back to me one day, said, you know, if you can get six figures, then let's talk. We can have a deal. I said, sure. It's verbal. You know, I didn't put any money down, let's just continue this conversation. So we had agreed on a hundred thousand. That would have put me, you know, a hundred to a hundred and twenty thousand dollar spread um that I could make on this flip, you know, minus the holding costs, minus fees, minus all of the the renovation costs and and what have you, right? But there's there's a pretty number in that that could have been, you know, $40,000, $50,000 in profit if it worked out uh after all fees. However, my team actually looked at the property again and found that there were additional issues that would have probably needed to be addressed. Electrical, uh, some other things that probably added another $20,000 to $30,000. So now for the analysis of it, I'm at a $100,000 purchase. I'm about $80,000 in that's without anything going wrong. So let's say that the property sold at the low end, let's say it sold at $210,000. Well, we're looking at agent commissions of about $15,000. We're looking at about a four to six month holding cost, fee structure, so that's going to be another $10,000. Then we could look at capital gains tax. I mean, we could look at everything else, and now it's a tight squeeze. There's not much meat on the bone left. And I've told you guys this before. I'm not doing flips just to just to say I'm doing it. Because in this case, once I took the walls down, once I did certain things, there was a high probability there's gonna be a possibility that something else is gonna be wrong that's not on my scope of work. And I realize this. I know I've been telling you guys from the first flip, add everything to the scope of work list because that's you know going to be less money out of pocket. The reality of that is there's almost something that's always gonna be not on that list, especially when you when you don't see everything. You're gonna pick up the floors, you can take the walls down, and you're gonna see a bunch of things, and you're gonna cross your fingers and hope that you nailed it. But the reality is you're probably gonna miss something. So I just would hope in this case that we don't miss the major things like it did on my first deal. And so that was one of the big things that held me up, and part of me just wanted to do it. I'll be completely honest. Part of me just said, just do it. You know, there's you have momentum, you have one property, and just get another one and let's see what happens. But now I am gonna just gamble, and I'm not in the business to just gamble money away. I think when a lot of us get into a deal, it's hard for us to say no. When someone gets a cash flow deal of $50, $100, $200, we get so excited that we're going to do this that we just you know start talking ourselves into continuing to go through with the deal. Even if it doesn't give us any pressure on, you know, leaving our W-2. We're trying to change, we're trying to, you know, change our path, get out of the rat race some. And, you know, when I've heard other investors out there get $50, $75 in cash, but I'm like, wow, you're really in this for the long term. And if you are, that's completely okay. I I don't want to knock it because some people just want real estate, just some want some of the tax benefits, and so on, and that's that's fine, but that's not me. I don't think that's a lot of you. But there are people, there are different investors out there that want to be as passive as possible, you know, and and it is what it is. However, that's not me. If I continue with this flip, there's a good chance even a small item would have been added to the scope of work. I would have came out of pocket, and when it was all said and done, I would have been negative. And I'm not willing to take the risk because I've learned, right? I'm I'm not just gambling money. This is my business, and I want to make sure it succeeds. So I understand and I know I can get a better use of this. And if I don't close on this house, that's fine. I'll wait for the next one. Sometimes the best decision when I'm learning, sometimes the best decision is waiting. And I have all of this momentum, I feel really good, and I feel like I'm behind. I'll be completely honest. I feel like I'm behind right now. It's March, I got my one deal, and I don't know why. I don't know why I should feel like I should have more deals right now. I mean, there's a full war happening that's changing the market. There's a lot of things, you know, people are being scared with right now. People are trying to hold on to their monies, the market, the interest rate. I mean, everything has an impact right now in real estate. Uh, so it is what it is. I'm still gonna be hungry. I'm still going to try and make sure I stay active. Uh, absolutely, by all means, uh, but I'm gonna be smarter about it. Um, you know, one thing that I will say is that I'm continuing to learn is not every deal is supposed to be your deal. And I just kind of talked about that. But when you're new, when you're just now investing, you want every opportunity to work. And you start convincing yourself the numbers make sense. But here's the reality: discipline in real estate isn't about how many deals you do, it's about the ones you do not do. Walking away from a deal is actually power. I felt good that I walked away from that deal and I said no. You know what also helped is when I told my team, you know what, let's stop wasting our time, let's stop doing research, let's stop going to the property and try and figure out if we can make this deal work. Because if I can't buy cheap enough, this deal will not work at the current cost of a hundred grand, it's too tight of a squeeze. So, what do I do? I let them know, like, at this point, I have to back out unless you guys are willing to come down in cost and or a price, and then we can continue our conversation. I left it at that. Guess what happened? There was a price reduction the moment not long after I said I'm out. I had a feeling I was the only offer they had and they were holding on to that. It is what it is, it's just the name of the game, it's the business that we are in. Is you're gonna win some, you're gonna lose some. And this one I felt like we backed out of it. My team agreed with me and said, if the purchase price can get down to 70,000 to 75,000, then let's continue talking about it. And that's my sentiment as well, because the numbers got to work in order for this to work. Like without forcing it. I need to look at at my paper, my sheet, and say, Oh, yeah, there's money here. Like, I don't want to look at it and say, Well, what if I took away this or what if that? What if what if the market changes? This wasn't a long-term play, this wasn't a uh uh hold for my portfolio play. I was strictly looking at as a flip, and knowing my destination, knowing what I was wanting to do with the property, helped. I didn't look at it and look at all different strategies. I only looked at it as a flip and it didn't work out as such, and so I moved on. But here's an interesting part about this week and and what took place is when I bought Alabama, the first home, I kind of told you guys I was kind of scared, I didn't want to use my flip money, but I'm getting some of that money back. How am I getting that money back? I told you I was trying to sell Indiana, and I am. I'm I'm still trying to, I'm not trying to, I will leave Indiana. Uh, and my first property that I bought two years ago, exactly two years ago, is under contract. I have a buyer, and you know, I'm probably gonna double my money or close to it based off the sales price that I'm I'm going with. And, you know, that's that's nice. I didn't expect that, to be honest. So basically, the last property I bought in Alabama, I mean, you could look at it all kinds of ways, right? You could say, well, technically it only cost me 10 grand, but that's the reality of it, because I'm recycling a lot of money. I'm recycling a decent amount of money to pay back what was just spent on buying a home to get ready for the next deal. There's a lot that's happened in this. It's not some crazy home run deal. It's not this huge sale that you know the money I'm making is changing my life. I still don't have any pressure on leaving my W-2, but it's my first full cycle as an investor. I'm proud of that. There's a lot to say in that I feel good. Like I bought a home two years ago. I realized that's not the strategy I want. I wasn't confident when I bought it in the first place, but whatever, it got me started. But I didn't feel good about it. And guess what? Two years, I'm like, I'm out of there. You know, people say wait forever before you you determine if your properties are doing good or not. I I identified pretty quick that that's not what I'm interested in, and and I'm done. So I bought it, I rented it, and now I'm selling it and recycling the capital into my plan to get higher cash flow returns and more potential flips, to get more active money to keep buying real estate as much as I can with house money. That is my goal in repurposing this capital. I'm also realizing real estate isn't just about buying homes, it's about managing my capital. Sometimes the right move is buying, sometimes the right move is holding, and sometimes the right move is walking away. I feel like I'm on to something, and I had to step back and say no to this uh most recent deal. Now that this property is under contract, I'm gonna get some money back, and the journey keeps moving forward. Two years ago, I was just trying to buy my first investment property. I let you guys know that already, and now I'm learning how to operate this like a business. So I'm excited, I still am hungry, I still think there's some money to be made in this, and I can, you know, obtain some of those financial and time freedoms that I've always talked about. That's the real journey I'm documenting. That's what you guys are listening to. I'm going to try and scale this business, set up systems in place, and be able to share with you guys exactly what I'm doing. And hopefully you guys can, you know, cheer me on and implement some of them as well. You know, if you guys want to jump in deals together, partner, we can also look at that as well. Um, but this isn't a perfect version of real estate investing, but it's a real one. There's no sugarcoating. This is the real version. The decisions, the emotions, the wins, the mistakes, and everything in between. I appreciate you guys always following along with the journey. This is the Ricky Ricardo show, and I will see you guys on the next episode.