You may have heard the saying, “pigs get fat but hogs get slaughtered.” This saying is essentially preaching the pitfalls of greed. However, in real estate, greed in moderate amounts is good. Because there are so many different aspects that make up a successful real estate investment, you have to be careful where you choose to be greedy. If you pick the wrong spot, you may be stuck making unscheduled mortgage payments, and/or you may be stuck with a vacant property.
As stated above, greed can be good in certain situations. However, you have to be able to support your decision. For example, if you are selling a property and you want to make a certain amount of money on the property, you have to be willing to let the property sit on the market in order to make your desired amount. If your desired amount is too high for market conditions, you have to be willing to pay the additional mortgage payments and/or risk present profits.
Even if you are willing to hang on to satisfy your greed, it has to make financial sense. There must be a time when you “throw in the towel,” so to speak, and take the profit that is currently in hand. It does not make sense to spend more money to make less profit. You can be greedy until it no longer makes financial sense. After that point, take your profit and do another deal.
The same holds true if you are trying to rent your property. You may advertise your lease rate at a price above market in attempts to make more money. However, this may decrease the interest in your property. As a result, your property may sit on the market unrented. During this time, you will have to pay all costs and expenses associated with owning the property. As such, like before, you can be greedy until it no longer makes financial sense.
You generally make money in real estate when you lead the market, not when you follow it. This means that you should price competitively and give the best value to the buyer or tenant. Real estate is a competition. If you price too high for the market or even the neighborhood, you could see your potential profit dwindle with each passing month that your property sits on the market.
Remember, there are times when it will be financially viable to be greedy. However, you have to be smart and plan accordingly. If it no longer makes financial sense to be greedy, take your profits and move on to the next deal.