How I Botched My First Wholesaling Deal (& What You Can Learn From My 3 Mistakes)
Everyone is different, but I have always thought that the best way to learn is by following through with actions. My firm belief is that failing at something and learning from it increases the learning curve of gaining a brand new skill. While you can read articles and purchase services from “gurus,” there will always be a certain point in time where you just have to move forward and take full control over your actions. In order to help you out, here is a story that helped me on my path to becoming a better investor. I sincerely hope it will give you something to learn from.
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To give you a brief overview, this particular story is about one of my first ever attempts at acquiring a business deal as a real estate investor — and like all novices to the field, I made just about every single mistake you could possibly fall prey to.
My Deal Story (& the 3 Mistakes I Made)
To start the story off, the property lead came from a former colleague who knew I was a real estate investor. They mentioned that a particular seller (who they knew from childhood) was tired of managing their property from afar. This was a tip off that they were motivated to sell. So once I was able to get the contact information of this potential seller from a former colleague, I called on the property. She had an asking price in mind that was between $80,000 and $90,000. I had a buyer in the area that paid $60,000, top dollar, for a similar house in that location as a rental property. I even had recent solds to show the seller that they were asking a retail price.
She wasn’t budging on price, and I decided to go to the house anyway to determine amount of rehab so I could give her a set-in-stone figure.
Mistake #1: I forgot my comps.
The house needed quite a bit of work, and I managed to forget to bring my comparables to show them what was selling in the area. Therefore, I had absolutely no leverage to back up my statements, making it impossible for me to negotiate my way to convincing her to lower her price to meet the $60,000 where I needed to be.
Mistake #2: I miscalculated the rehab cost.
A week went by and she called to accept my offer at $60,000. So now it was time to get paid, and I had my buyer do a final walk through to vet the deal for themselves. As was most horribly unfortunate, it turned out that my rehab number was off due to a need for replacement of mechanicals.
Now, the buyer had to purchase the property at $50,000 in order to get a fair deal, so I went back to the seller to try and re-negotiate. At this point, the seller was furious and hung up the phone when I called with a even lower offer. However, luckily, two weeks went by, and they accepted the offer! Yes! It was finally time to get paid, have the contract signed, and all the legalities dealt with.
I went to meet the seller with the contract, which is a standard purchase agreement used in my state. This is where I ran into my third mistake.
Mistake #3: I didn’t understand the purchase agreement.
I had zero experience in going over a purchase agreement when talking with a seller, and guess what? I completely butchered it! The seller backed out, and I lost the deal.
The point of this story is I learned so much from the experience, and I tend to never make the same mistake twice. It wasn’t fun failing, but it is better going out there and taking action versus standing on the sidelines. I hope you can learn from my past failures to help you in your endeavor.
Investors: What did YOUR first deal look like? What mistakes did you make — and learn from?
Let me know with a comment!