Real estate investments are a huge deal. Therefore, the deals done in this regard should be considered with a lot of thought and care. Many of us do not want to lose even a single dollar, and the pain of losing a single penny is even more than earing a couple of bucks.
You can save yourself a lot of time and money if you back out of a deal that you think is not good for you. There is real mathematics behind exiting a bad deal. And all successful real estate investors know how to analyze a deal at any point in transaction. They evaluate the potential losses and the potential gain and then they make a logical decision based on the outcome. This is all the math that you have to do. You have to analyze how much would you lose if you back out of the deal or how much would you gain if you back out of the deal right now. The secret is not to think about how much you would lose but think about how much you would save. For example, assume an investor acquired a rental unit for $100,000 and is now losing $225 per month with a 12 month lease on the unit, the potential loss for the investor is $2,700 per year. Now the investor has to create a strategy to minimize the loss. What he can do is he can pay $1000 to the tenants and ask them to move out after three months. Afterwards, the investor has two options, he/she can either get profitable tenants to move in, or he/she can sell the rental home. The loss here is only $1,675 ($225×3 + $1000). You see, that was simple mathematics.
The best bet is to determine when you are in a bad deal and try to make ways to get out of it as soon as you realize it. You have to decide how much you are willing to lose on a bad deal. Learning to exit a bad deal will allow you to minimize you loss, and will let you get back in the game more stronger than before.
In order to exit a bad deal you, as an investor should first have an exit strategy. Having an exit strategy minimizes your losses to a very huge extent. When a deal hits a certain loss, the investor should understand how to exit the deal automatically and immediately, and the best time to create this loss limit is at the same time when the investor is entering the deal. The idea is to know and understand that how much loss can you bear and then make the deal accordingly. Set this as a benchmark rule and then do your investment.
There are no hard and fast rules that would ensure that you will always having profits. As an investor you will land on many bad deals and with time you will understand what works best for you and how you can successfully exit a bad deal with minimum losses.