Deal Breaker VS Preference

Remember Jack and the Beenstalk? Jack spent the grocery money on what he believed were magic beans. He wanted them so badly he compromised everything to get them. It’s lucky for him things worked out but he went through some tough battles he didn’t expect before that happened.

Normally a motivational speaker would use this illustration to encourage you to chase your dream no matter what the cost. That’s fine if you live in a fairy-tale like Jack does. However truly successful people “count the cost”.

Successful people decide what the deal breaking aspects of a transaction are and what preferences they might be prepared to compromise on. Knowing which priorities fit where is essential. The only way to do that is to have enough passion for the deal to pursue it, but still keep a cool enough head that you don’t lose perspective.

When buying a property it is important to know what features you are looking for before investing your money. I cannot expect a three bed, 1 bath home on a small block to return the same rent as a larger home unless there were other features to compensate, such as location.

Know what you would like but be flexible. Make a list of qualities that are deal-breakers with another list of preferences. For example, “must have 4 bedroom” could be a deal breaker unless there is room to renovate or turn an office into another bedroom. A particular suburb could be a deal breaker and the individual block or street might be a preference within the essential suburb.

When we buy a house we have a checklist of features and a checklist of warning signals. For example, getting a building and pest inspection warns me of any hazards that I can choose to either A) ignore B) treat or C) exit the deal D) Renegotiate the contract.

Where we come unstuck is when an aspect of a house or deal is so attractive that we compromise too much on the preferences. Given time, what you thought was tolerable could make you miserable and become the reason you sell later. I know people who have fallen in love with the space an acreage property gives them and then sell within a short time because the upkeep was too demanding.

More common is the situation where people borrow to the maximum for their dream house and within 2 interest rate rises or the arrival of a baby, they can no longer afford the repayments.

A business deal or job requires the same delicate balance of essentials vs preferences. Don’t fall in love with one aspect so deeply that you later regret the ground you gave.

Posted in Due-Diligence.

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