I know a lot of people talk about what happened right in the previous year. Most of the time, to me at least, this sounds like bragging.
Instead of bragging or talking about what went right in 2013, I’m going to talk about two big mistakes I made in 2013 and the one thing I did to fix both of the mistakes.
How I Bought, Rehabbed, Rented, Refinanced, and Repeated for 14 Rental Properties
This is the dream right? Going from zero to 10+ rental properties, providing stable cash flow and long-term wealth for you and your family, and building a scalable business model to boot! Learn how this investor did just that, in this exclusive story featured on BiggerPockets!
Mistake #1: Criticism of Hard Money Loans
For perspective, I underwrite over 1,000 loans a year. Because of this, I meet several hundred real estate investors every year. Not a single one of them has made money on a deal, when hard-money was involved.
Therefore, at the beginning of the year I wrote emphatically in the BP Forums about staying away from these type of loans.
J Scott was very professional in his disagreement with me saying that I was being “unjustly unfair” to hard-money lenders.
Without speaking for him, here is the summary points of what I have taken from his arguments:
- Hard Money Lenders allow you to buy a property without any cash up-front
- Hard Money Lenders don’t require an appraisal
- Generally, Hard Money Lenders can close faster than standard banks
The above three points should not be mitigated. Yes, HML’s are very expensive with a very high rate and points-they charge. However, in-fairness so is waiting on a bank and waiting for appraisals. Additionally, as Brandon Turner has pointed out several times, if its between getting a deal with expensive financing and not getting a deal, its usually better to go ahead and get the deal done
“Time is Money” – Benjamin Franklin
Note: Be sure to the check out the BiggerPockets Hard Money Lender Directory
Mistake #2: House Flipping
Unlike real estate investors who use hard money lenders, I know a ton of people who have made money flipping houses. Of-course I also know some people where it didn’t work out so well.
However, I’m an underwriter (read: cynic) and the majority of these house flippers that brag at cocktail parties simply “profit” by not doing accounting right. Leaving a lot of major expenses out like mileage, closing costs, and holding cost.
I HIGHLY encourage anyone who is even thinking about flipping to buy his book on flipping houses.
He does all his accounting like a CPA would, applying fixed-overhead costs, mileage, holding costs, etc…
J Scott does all this, and yes, still manages to make a profit.
Not only does the guy make a profit, but he has built a scaleable business doing it.
In summary, I want to encourage everyone to not have so many absolutes in 2014.
Be open to not only learning about new things, but be open to the possibility that you might be wrong. I know I was in 2013 and plan to change that in 2014.
What about you? What do you plan to do differently in 2014?
Photo Credit: ktpupp