In the past few years I have done over 3,202 land investment deals. I want to take a few minutes to answer one question that most people have when first hearing about land investing and that is “What are the risks involved?” This is a valid question and is something that I thought long and hard about before I began building my wealth through land investing.
One of the major potential risks that I hear about frequently from real estate investor “newbie’s” is “What do I do if I get myself locked into a bad deal?” Well for sure there are times when you may realize that after being half-way into a deal, it turns out to be not as good as you expected, or you come across some unforeseen circumstance that has swayed the deal in the wrong direction and you have to back out to avoid loss of profit.
Certainly in my years of experience I have come across a few of those.
What I do to protect myself from these unknown or hidden “landmines”? Well there are couple things that do.
- I always structure my purchase contract in a way that it allows me to have no money into the deal until the time of closing. This allows me to make all my final checks on the property within the escrow period without any obligation to pay to any money to back out of the deal.
- Make sure you have escape clauses that state that you have the right to back out if it does not pass your inspection.
With no money down and the option to back out, I feel that there is almost zero risk involved in any kind of real estate transaction that is structured this way. This empowers me with the ability to shore up a deal very quickly while still allowing me to sleep easy at night. Whenever I feel that there is something wrong with a deal, I can simply back out. Even though I don’t do this often, it is still comforting for me to know that I could exercise this right, if needed.