Real estate investments come in all shapes and sizes. Unfortunately there is no golden formula or magic ball that allows us to look into the future and tell which ventures will and will not be successful. In fact, we can't always tell from the beginning, which will not even land us in more debt than we started the venture in. For this reason, it is very important that you pay attention to your gut instincts a great deal when planning and executing real estate ventures. More importantly, it is vitally important that you pay attention to cold hard facts and figures. If you begin to have doubts and the numbers are beginning to look even slightly less than promising might be time to reassess the situation and walk away while you still can.
Even taking some loss in many situations, such as appraisal fees, earnest money, or costs that are related to inspections along the way is preferable to taking a major hit on an investment as large as a house. If, after a few hundred dollars invested in the property the original numbers aren't adding up it is time to revisit your offer and see where and if it can be adjusted or pull out all together. A clean break with good will on all sides is always preferable but is not always possible.
If you find that there is little to no profit potential on a house before expenses are added into the mix and budgets are blown it is not a good sign for a profit potential later on. You enter into the business of real estate investing in search of profits not for the sake of charity. In other words, you must decide when the time to walk away may be and if you are willing to accept the potential consequences of doing so. Better yet, are you prepared to face the consequences of not walking away when you should?
Having a plan of action based on reliable facts, figures, appraisals, and estimations before making an offer is almost always the best way to avoid this particular type of situation. At the same time there are instances where the situation is something that is beyond your control. Real estate investments do after all involve other people in the process. When the situation changes and you find that the original positive cash flow situation is beginning to appear as though it is anything but you will need to put the profit potential ahead of everything and decide if it is in your best interest to pull out now.
Most of the time, once the tides have turned, it is best to pull out of the deal. If you wish to salvage the deal in some way, shape, form or fashion it is best to begin from scratch with an entirely new set of conditions and parameters rather than trying to muddle through and make changes to an existing contract that could prove confusing to all involved. Essentially though, the time to walk away is the earliest possible moment after the original deal is changed or amended to a less than favorable deal for you.
