Three Major Real Estate Investor Mistakes That I’ve Witnessed

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Let me make one thing clear up front. This article isn’t intended as an “I’m better than these bozos” sort of thing.

I’m always talking about my mistakes and what I’ve learned from them. It’s time to talk about mistakes I’ve seen other real estate investors make. This way we can all learn from them as well.

Besides, they’re really interesting stories.

1.) Partnering With A Seller

Before you start thinking that there are times when partnering with a seller makes perfect sense, hear me out.

I’m not sure I can think of when I would ever really want to do this unless they had absolutely no control. Even then, the thought of them all of a sudden being angry about how much you are making and causing problems is just not a risk I’d be willing to take.

In this case, the seller was not quite business partner material. Actually he was the furthest from it. Sure did make for an interesting story though.

A bad sitcom?

Imagine a horrible sitcom where the two main characters are opposites. This is just what I imagined, as I didn’t really know the investor that partnered with the seller and am unaware of any hijinx that may or may not have transpired. I’d wager that there were plenty, however, as I got a pretty good read on the seller.

It all started on a sunny afternoon. My wife and I were driving around neighborhoods looking for vacant houses when I got a call from the seller. He told me he had a house that he neeeded to sell quickly. He mentioned that it needed a lot of repairs. On top of that, nothing was owed.

Ok, this was something worth going to take a look at.

He mentioned the address and a quick look at my map book showed that it was only about 5 minutes from where we were. I told him we would be there in a jiffy.

Upon pulling up, we were pleased with what we saw. Although overgrown, the yard was a good size and the house was sided in stone. Paint was peeling and cats were running quickly from hiding place to hiding place. Sure were a lot of cats.

We both walked up to the front porch. As I knocked on the door, it creaked open just slightly. If I had only been using my sense of smell, I’d of thought the door had swung WIDE OPEN!

That was real stink!

The seller came to the door and opened it the rest of the way. I walked in and my wife just stayed where she was. She had a look on her face I’ll never forget. She then said she would just stick around outside.

The smell was just too unbearable.

The house was a complete wreck. The roof must have been leaking for years. The cigarette smoke stains on the walls had run marks where the leaking water from the roof had run down the walls. Chunks of insulation and sheetrock laid on the floor everywhere. On the bare spots of floor, the cat feces was visible.

This was just the living room.

We made our way into the kitchen where the seller had been busy cooking a hamburger. It was still in the pan frying while cat after cat quickly jumped over it to the other side of the counter top. I won’t even attempt to describe the countertop and kitchen. Unbelievable.

We stayed in the kitchen until he had finished preparing his hamburger. I was doing all I could to not throw up.
He enjoyed his hamburger as I got a tour of the rest of the house. He showed me every room except one. The room was locked with a pad lock from the outside. That made me start to question my safety. I clutched my large mag-lite tighter and positioned it in my hand for better leverage to strike. This made me glad the wall of stink kept my wife outside.

Thankfully, that was never needed.

I worked up my offer, which was very low. He told me he would think about it and I quickly left to the safety of fresh air.

Over the next 2 years or so, I followed up religiously with the seller. This entire time, he never commited to a yes or a no. He always made it sound like he was going to accept and just had one thing to clear up. I didn’t want to pressure him because that’s not the way I operate.

Then, one day I found myself looking at a house near that one and thought I would go by to see if anything had every happened. Oddly enough, something had.

There was now a roll-off dumpster in the front yard. He was finally doing something!

When I got back to my office, I called him up. He mentioned that he had worked out an agreement with another investor. He would do the cleanup and some (or all – can’t remember) of the repairs. WHAT???

This guy had let the place go for so long and could never make up his mind to do something. What made this other investor think that he would all of a sudden start taking charge and getting things done. At the time, I thought he might prove me wrong.

He didn’t.

Several months went by and the roll-off stood there unfilled. I’m sure the other investor had to have been irritated to say the least. Of course, I don’t know the exact details. But, from my perspective, this was an idiotic move.

2.) Wasted Advertising Dollars

We had just started our own billboard campaign and I had been doing quite a bit of research on marketing through outdoor signage. Without that, I might have made this very same mistake.

Something you have to understand with regards to marketing with signs, whether they be billboards or bandit signs, is the limited time someone has to read your message.

Don’t just become a blur.

People only have a number of seconds to view your sign as they drive past it. In that short amount of time, they have to be able to get your message. Your main message needs to be very obvious within seconds.

Your message needs to be HUGE, clear and to the point.

While scoping out my billboard competition, I noticed one that smacked of an idiotic mistake. This sign had way too much going on. I had to literally stop and hunt for what the sign was even advertising.

The worst part was the giant paragraph of text that would have been more suited to a flyer or postcard. I don’t who would have ever been able to read that whole blob of text, even if stopped at a nearby traffic light.

3.)Negotiating After The Fact

Many people don’t know that my wife is a kick-butt negotiator. We run our house flipping business together as a team. Though the situation irritated the heck out of me, we both ended up just have a hearty laugh over it and still like to recall it from time to time.

I had just put a house under contract with intentions of wholesaling it to another investor. This was going to be an assignment of contract. We had been wholesaling houses to a local company that consisted of two guys. I called them up and told them about the deal. They quickly went over to the house and called me with an offer.

We negotiated a little and agreed to a price over the phone. Melissa, my wife, prepared an assignment contract and went over to meet them to get it signed.

I guess their word was worthless.

What unfolded next was told to me by my wife when she returned. She didn’t call me in the middle of it or anything. She just handled it all and came back to tell the tale…and laugh at the idiots.

She sat down at a table and proceeded to listen to the two guys use the oldest negotiating tactics in the book. I don’t remember what they were, but she listed them when telling me what happened. I do remember that they tried the good cop, bad cop tactic.

This was all a giant waste of breath for them because she just remained silent the whole time. She was just grinning on the inside and waiting to hear what they would come up with next.

When they finished with their lame attempt at RE-negotiating the deal, she calmly told them she knew what they were doing and didn’t appreciate it. The deal had already been agreed upon and she was just there to get their signatures and deposit. If they weren’t willing to do that, they weren’t going to get the deal.

She rocks.

Bonus Idiotic Move

Just to prove that this isn’t just about talking about others’ mistakes as if I am above them, I decided to give you a bonus.

This one is a mistake I made.

I used to put out bandit signs myself. This was always done on Sunday morning several hours before light…when everyone else in the world was sleeping soundly. I just didn’t like standing out on a street corner, nailing up signs while cars pulled up and stared.

My wife came with me on several occasions. She was there on this occasion.

I was nailing up a sign to a telephone pole on a street corner. The ground around the pole was rocky and very unlevel. While standing on my 2 foot ladder, at the very top where you’re not supposed to step, the ladder shifted.

As it fell over, I grabbed for the telephone pole with both hands. It wouldn’t have been a big deal, but the pole was covered with hundreds of rusted, old nails.

It was quite painful, but my ego was what was most damaged.

From the ground, the first thing I did was look over to see if she saw. She must have because she was crying she was laughing so hard.

It didn’t take long to realize I should be paying someone to put the signs up.

Takeaways

The main points to remember here are:

  • If you’re going to partner, make darn sure who you are partnering with is going to be an asset rather than a liability.
  • When marketing, make sure you research how to best use the medium you intend to use.
  • Don’t be a jerk. Your word should be everything.
  • Even I make idiotic mistakes.

If you enjoyed this article, this would be a great time to ‘like’ it and be sure to check out my other articles.

Thanks!

Photo: Pascal Willuhn

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About Author

Danny Johnson (G+) is a real estate investor in San Antonio, TX. Visit his blog: Flipping Junkie - A House Flipping Blog to follow along with him as he shows, in detail, the marketing he is doing, the leads being generated, the lead and deal analysis, the rehabs and really, just about everything. He also provides real estate investor websites at LeadPropeller.com.

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