Like most of us, I’ve had a few bumps along the road in my life’s journey…
…and my real estate career is no different.
The lessons I’ve learned have proven themselves invaluable to me as a professional – and they’ve been integral to my success (in addition to helping some of the amazing people with whom I have the pleasure of working).
So I now share my story with other professionals, in hopes that they too might be able to learn from my past mistakes and (hopefully) benefit from my longtime enrollment in the School of Hard Knocks.
My First Day of Class
When I was in the military, I attended a real estate investing seminar which was truly unforgettable – both for good reasons and bad ones alike.
The instructor told us, “Getting started in real estate is as easy as buying a property from the classifieds.” So, naturally, I thought I had found my “diamond in the rough”. After dutifully buying his book, I proceeded to follow his advice immediately.
And I will never forget that first property I found: a 3-bedroom, 2-bathroom concrete block property in South Tampa.
The seminar book told me to call a Realtor, so I did. The comp he gave me said this property was worth more than its current asking price, so everything seemed like a good deal for me thus far. I was asked to sign a contract on the property, and I agreed.
I had no mentor and no knowledge (or general life experience) on which to base my business decisions. But the people at the real estate seminar made everything look so easy! If they could do it, surely I could as well, right?
Piece of cake, right?
Blindly confident, I took out a VA loan to buy that first property – at the tender age of 21.
Next comes the fun part…
My First Mistake
Right before my first deal was scheduled to close, I followed the book’s advice to “consult with other investors”. Consequently, at a local REI club meeting, some guy offered me $5,000 on the spot for the property contract.
Thinking it was a scam, (because my book didn’t say anything about this) I rejected this guy’s offer.
It was the first mistake that cost me real profits – five grand actually.
It Gets Worse…
Continuing to follow what the good book told me, I decided to “add value” to the property.
In my young, inexperienced mind, a 4-bedroom 1-bath with a carport would surely carry more property value than the original 3-bedroom 2-bath property I had recently purchased. (This might have been the dumbest thing I did back then.)
But it doesn’t stop there, folks.
The book told me to put all my rehab costs on credit cards.
“Great!” I thought to myself. “I will max-out my credit cards with rehab costs for this property! What a marvelous idea!”
When the property was ready to sell, I got a call from a military woman who is interested in purchasing it from me, because it was close to her base. She offered me $8,000 upfront and $1,400 monthly to do a lease option on the property.
Even though my mortgage on the house was only $700 per month, my book did not cover the type of transaction this woman proposed – so I told her that the deal would not work for me.
This was the second mistake that cost me real profits – a nice chunk of change upfront, and approximately $700 in monthly net income.
The Biggest Mistake of All
Then someone else called me and asked to buy the house outright, and I settled for the price they offered.
I had no clue what the percentages were. And I didn’t even know that closing costs were “a thing”.
But I agreed to pay them, because the book told me to do so…
…and this was the third (extremely costly) mistake that cost me real profits.
I was downright giddy on closing day. It was finally time to close! I was ready to take my earnings, walk away from the day, and be rich, right?
A title agent tells me I owe their company money.
“How the hell do I owe you money!?” I shrieked. “YOU should be paying ME!”
But she said, “Nope. There’s title insurance, closing costs, taxes, and some other costs too. Because of everything you owe, you’re almost selling this property at a total loss.”
The Morals of the Story
On my first deal, I lost a whopping $17,500 – representing my entire life savings at the time.
I made three critical and very costly mistakes which, if avoided, could have earned me some good money.
- I could have assigned the property for a profit of $5,000 at the REI club meeting! But I didn’t, because my book hadn’t taught me anything about assigning properties.
- I could have taken the military woman’s lease option for $8,000 down and $1,400 per month – netting me $700 monthly. But because that (expletive deleted) book didn’t say anything about lease options, I rejected her deal too.
- I understood very little about closing costs and associated fees, etc. So when it came time for closing, I was appalled to discover that I owed money to the Realtors. (And I was unaware that I could have backed out of the undesirable contract.)
The number one thing I want people to take away from my story is to get a mentor. As I reflect on all the mistakes I’ve made, I see in hindsight that it would have been much more cost effective (and much less maddening) for me to hire a coach or a mentor.
I just needed somebody to help me find my footing in this sometimes confusing and complicated industry.
Back in my early days of investing, I wish someone had told me to build a “Power Team” around me. Because I have since learned that the heavy hitters in this real estate investing game all have skilled teams of contractors, title agents, attorneys and CPA’s at their disposal.
Anyone rookies who think they can go it alone are sadly mistaken, as I myself learned the hard way.
And lastly, but definitely not least, I will leave you with these final words…
Suck up your pride.
Although it may be painful to admit (especially at first), you don’t know it all. And you will lose money if you don’t proactively learn from other people’s mistakes.
Good luck in your property- and mentor-related hunts! And always read the fine print!
(Now, no excuses… Make this happen!)