Real estate is one of the most lucrative investments available. However, as with any investment, there are potential risks and rewards that come with it. While everyone is focused on the rewards of real estate investment, many people miss the fact that lost opportunity can sometimes add up to more than the targeted reward. One of the biggest risks in real estate is actually missing out on buying or selling opportunities. In this article, we will explore the impact of lost buying and selling opportunities in real estate.

One of the biggest risks in real estate is actually missing out on buying or selling opportunities

Missed Buying Opportunities

First, let’s examine the concept of missed buying opportunities. In real estate, a missed buying opportunity occurs when an investor fails to act on a property that is available for purchase at a reasonable price. This can happen for a variety of reasons, including lack of available funds, indecision, or simply not being aware of the opportunity. The impact of a missed buying opportunity can be significant. For example, if an investor fails to purchase a property that is undervalued, they may miss out on potential profits from rental income or appreciation in value. Additionally, the investor may miss out on the opportunity to acquire a property in a desirable location, which can impact future returns.

When asked to provide an example, Managing Director of QCR Steve Maher, had this to say; “I remember one developer who said he was desperate to buy a good development site in a particular location that was ready to go and if one became available, he is financed and ready to buy. When we presented him with a cleared site, in his preferred location, with DA approval and priced at cost, the buyer hesitated. We advised that this seemed to be an excellent purchase because it met all his criteria, was very well priced and was indeed ‘ready to go’. But he became frozen with indecision. Fear of being wrong kept him out of a truly great buying opportunity. We had to move on and tell others about it. The property ended up selling to another party for $1,200,000 more than what the first buyer could have purchased it for – only 3 months earlier. That is a monumental lost opportunity that is hard to reconcile. We did everything we could to help him see how good it was, but at the end of the day; you can lead a horse to water, but you can’t make him drink.”

You can lead a horse to water, but you can’t make it drink

Missed Selling Opportunities

On the other hand, missed selling opportunities occur when an investor fails to sell a property at the right time. This can occur for various reasons, including emotional attachment to the property, a lack of understanding of market conditions, or simply holding out for a higher price. The impact of a missed selling opportunity can also be significant. For example, if an investor holds onto a property for too long, they may miss out on potential profits from a rising market. Additionally, if an investor sells a property too soon, they may miss out on future appreciation in value.

Mr Maher recalled another example; “We were working with a seller who was wanting to sell his development site for around $12,000,000. At the time, it wasn’t too far off the money as a boom market was just unfolding. We advised that even though prices were increasing, they won’t increase for long and when the market turns, the only way is down. We thought we were very near the top of the market and urged him to consider our valuation of around 8 – 10% less than his price. He was sure his property was worth his asking price and declined the 3 genuine offers we had at around the mid to high $10 million mark. Fast forward to today, and the seller is still sitting on a vacant block with the best offers now down to $7,000,000. So that’s $3,500,000 he has missed out on, so far. And it’s not over yet.”

It’s essential to understand that missed buying and selling opportunities are not always apparent at the time they occur. In many cases, it may take years to realise the full impact of a missed opportunity. However, by taking proactive steps to identify and capitalise on potential opportunities when they occur, investors can reduce the risk of missing out on valuable returns.

There are several steps investors can take to minimise the risk of missed buying and selling opportunities. First, it’s essential to stay up-to-date on market conditions and property values. This can be done by regularly monitoring comparative real estate listings, and more importantly, recent sales of similar nearby properties and noting the price per square metre achieved. And of course, speaking with local expert real estate agents – and heeding the advice of those who have a good track record and who have been in the game for a long enough time to have weathered the storms and several market boom/bust cycles.

Take ego and fear out of the equation

Additionally, investors should have a clear understanding of their investment objectives and risk tolerance. This will help them make informed decisions about when to buy or sell a property. It’s also important to have a plan in place for selling a property, including a target price and a timeline for selling. Maher continued; “The price and time may not always line up exactly as you plan, so you have to be flexible. Remember to take ego and fear out of the equation. This is the number one reason people miss opportunities. It’s either ego, thinking they know best and the entire market will bend to meet their price. Or they’re frozen with fear of losing money or not making enough”. As the saying goes; fortune favours the bold.

Summary

In summary, lost buying and selling opportunities in real estate can have a significant impact on your long term financial goals. By staying informed, removing emotion (ego and fear), having a clear understanding of your investment objectives and risk tolerance, and having a plan in place for buying and selling, investors can minimise the risk of missing out on valuable opportunities. Ultimately, the key to success in real estate is to remain proactive and flexible in a constantly evolving market.