One of the most common mistakes investors make is rejecting a deal simply because someone else passed on it earlier. It sounds like a reasonable question at first. If the opportunity was so good, why has no one snapped it up already? But in reality, that logic often leads people to walk away from deals that could have been very successful.
The Story of a Missed Deal
A few months ago I was speaking with a friend who invests in real estate companies and in urban renewal projects. We were catching up, talking casually, when he mentioned that he had once been in early negotiations with a company that my firm, Propdo, eventually acquired.
He congratulated me on the acquisition and admitted that in hindsight he regretted not buying it himself.
When I asked why he had hesitated, his answer was telling. It was not that he thought the deal was bad. It was not that the numbers did not work. It was simply that he had heard other investors had already passed. That alone made him nervous.
This is not unusual. Investors often interpret the actions of others as hidden information. If multiple people looked and walked away, maybe they saw something you do not. That is the fear. But most of the time, that fear is misplaced.
Why Others Walk Away
The truth is that every deal you ever see has been looked at by someone else before. That is simply how markets work. The fact that others did not take it tells you almost nothing about whether you should.
Why do investors pass on deals? There are countless reasons.
Not every investor knows how to execute a specific type of project. Some lack the operational expertise. Some do not have the right partners. Others are focused on a different niche.
Not every investor has liquidity at the exact moment the opportunity comes. Timing matters, and cash availability is a real constraint.
Not every investor needs that particular type of deal in his portfolio. An investor who already owns three multifamily projects in Phoenix may not want a fourth, even if the deal itself is excellent.
Not every investor believes in the market at that time. Sentiment plays a role. One investor may be bearish on the sector while another sees opportunity.
All of these factors can lead people to pass on a deal. None of them mean the deal itself is bad.
The Auction Analogy
Think about an auction. Many people submit bids. In the end only one bidder wins. By definition, that person offered the highest bid. Does that mean he made a mistake? Of course not. Someone has to win.
The fear that the winner must have missed something is known in economics as the winner’s curse. It describes how people often second guess themselves simply because others did not go as far. But in many cases, the winner is simply the one with the clearest conviction or the best alignment of circumstances.
The same applies to real estate deals. If you acquire a property, you should assume others looked at it before you. Their decision not to move forward has no bearing on whether your decision is right.
Focus on Your Own Analysis
The key is to block out the noise. What matters is not who passed on the deal, but whether the deal makes sense for you.
Does the project fit your portfolio? Does it align with your strategy? Do the numbers work under your underwriting? Are you comfortable with the risks and the timeline?
If the answer is yes, then it does not matter how many others looked and walked away. Their reasons may be irrelevant to you.
One investor may have passed because of a capital shortage. Another may have passed because he is overexposed in that market. Another may have passed because he lacks the operational team to execute. None of those reasons change the fundamentals for you.
A U.S. Real Estate Example
Let us put this into a United States context. Imagine a multifamily property in Dallas is marketed for sale. A large institutional investor looks at it but decides not to bid. His reason is simple. His fund already owns several assets in Texas and he does not want more geographic concentration.
A family office also passes. Their liquidity is tied up in another project that has not closed yet.
A private equity fund passes as well. Their underwriting model assumes a higher cost of capital and they cannot make the numbers work.
Then you, as an investor, look at the same property. You have liquidity. You have appetite for Texas. Your financing terms are better. Under your assumptions, the deal is attractive. Should you ignore all of that because others passed? Of course not.
The property is the same property. The market is the same market. What is different is the context of each investor. That is why you must always focus on your own context, not on the actions of others.
The Psychological Trap
This is easier said than done. Human beings are social. We take cues from the crowd. If many people walk away, we instinctively feel that maybe we should as well. It feels safer to follow the herd.
But investing is not about safety in numbers. It is about judgment. If you always wait for others to validate your decisions, you will never get the best opportunities. By the time the crowd agrees, the upside is gone.
The real edge comes from being willing to act when others hesitate. That requires confidence in your own analysis and the discipline to separate your decision-making from the noise of what others are doing.
Final Thought
Every real estate deal you ever sign will have been reviewed by someone else before you. There will always be a prior investor who passed. That does not matter.
What matters is whether the deal fits your portfolio, your strategy, your liquidity, and your convictions. Ignore the background noise. Do the work. Make the call for yourself.
Do not let the fact that others walked away cause you to miss an opportunity that is right for you.
👉 For more straight talk on real estate and finance, based on real deals not theory, hit subscribe to Getting Real with Peleg.
Leave a Reply