FAST Nickels vs. SLOW Dimes: As a Real Estate Investor, Which is Better?
It seems that I have found myself having the same discussion with many small business owners, especially my personal real estate clients, as of late. I have found myself posing this question to all of them:At this moment in time, with both the knowns and unknowns regarding our economy, the general credit markets, and mortgage availability and underwriting specifically — is it better to take the best deal now, even it means you take less profit or hold out for greater profits?In essence, we’re talking about taking Fast Nickels over Slow Dimes.I first heard this phrase from the individual I engaged to mentor me when I first got started in real estate. While that relationship didn’t last too long – you can read about how I fired him here – at the time I just couldn’t get my mind around his statement, and as a result this mentor lost a lot of credibility in my eyes. You see, I am sure I am like many of you. I WANT DIMES. I wasn’t in business to chase a bunch of nickels. To make less on my deals or take less in rents then what I believed was possible . . . that was just not going to happen. I just couldn’t fathom anyone accepting that less was better.
OH… What Eleven Years of Experience Will Teach You!After literally hundreds of deals and offering insight and advise to others on hundreds more, I have learned that in almost every case Fast Nickels are indeed far superior to Slow Dimes.Let me explain via a series of real life examples:1. A comment made by Joel Owens, to a recent Bigger Pockets article I wrote (see comments here) drives this point home. Joel made the following suggestion, “make sure your rent is not top of the market so that you can screen the most apps for the best tenants.” Joel gets it. It is more important to secure the “fast nickel” by lowering your rents thereby increasing your pool of tenants so that you can select the best tenant from a large pool. Joel, whether he knows it or not, is very happy with Fast Nickels, and I am sure his cashflow reflects his approach.2. Another individual I am working with found himself in an investment, not real estate related, whose payout was constantly being delayed.
Of course the longer any business deal takes to get completed the greater the danger of it not being completed at all. This investor was recently informed that they could get their principle back and receive approximately 16 cents on the dollar if they cash-out now (yes this was a high risk, high potential payoff investment). I found myself providing this counsel: TAKE THE MONEY AND RUN. In other words, be very happy with the “fast nickel” because to wait for the slow dime at this time drove the risks beyond his ability to mitigate them.