{"id":52345,"date":"2013-12-26T16:08:25","date_gmt":"2013-12-26T23:08:25","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=52345"},"modified":"2021-03-16T10:14:29","modified_gmt":"2021-03-16T16:14:29","slug":"2013-12-26-worst-real-estate-deal","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2013-12-26-worst-real-estate-deal","title":{"rendered":"The Worst Real Estate Deal I&#8217;ve Ever Done (And How You Can Avoid the Same Mess)"},"content":{"rendered":"<p><span style=\"line-height: 1.5em;\">Stupid. Stupid. Stupid. <\/span><\/p>\n<p><span style=\"line-height: 1.5em;\">The house was formerly a duplex and I decided it would make more sense to turn it into a big single family home and try to flip it.<\/span><\/p>\n<p>After all, the TV shows made it look so easy.<\/p>\n<p><em>I&#8217;m a frickin&#8217; genius, right?<\/em><\/p>\n<p>I started work on it (yes, physically) and myself and a few friends spent the next nine months remodeling this monster of a home. Hardwood floors, granite counters, open concept, new windows, new drywall, new doors&#8230; pretty much everything was re-done.<\/p>\n<p>And it was beautiful.<\/p>\n<p style=\"text-align: center;\"><img loading=\"lazy\" decoding=\"async\" class=\"alignright\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2013\/06\/Screen-Shot-2013-06-22-at-10.00.32-AM-300x230.png\" alt=\"\" width=\"300\" height=\"230\" title=\"\"><\/p>\n<p>I put it on the market at $170,000 and waited for the offers to roll in.<\/p>\n<p>But they didn&#8217;t.<\/p>\n<p>Month after month I waited, dropping the price slowly until I was at my break-even point. It finally sold after almost 52 weeks on the market, and I ended up clearing nothing. After two whole years, I had nothing to show. My Hard Money Lender made a lot of money. My friends (who I paid as we worked on it) made a nice profit &#8211; but I made nothing.<\/p>\n<p>I&#8217;m thankful it wasn&#8217;t worse- I didn&#8217;t lose any money. However, I lost almost a year of my life physically working on this home.<\/p>\n<p>And you know what?<\/p>\n<p>All this could have been avoided had I simply been smart.<\/p>\n<p>This brings me to my #1 tip today for avoiding the mistakes I&#8217;ve made and find more success in 2014.<\/p>\n<p>Are you ready for it?<\/p>\n<p>Here it is:<\/p>\n<p><strong>Sign up for a BiggerPockets Pro.<\/strong><\/p>\n<p>&#8220;What?&#8221; A commercial? \u00a0What is this&#8230; Little Orphan Annie and the Ovaltine Decoder Pen?<iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/zdA__2tKoIU\" width=\"210\" height=\"157\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>Well, sorta. But hang on &#8211; I have a point here.<\/p>\n<p>Are you still with me?<\/p>\n<p>Good, cause this is important.<\/p>\n<p>There are <a href=\"https:\/\/www.biggerpockets.com\/pro\" target=\"_blank\" rel=\"noopener noreferrer\">a lot of reasons why you should upgrade to BiggerPockets Pro<\/a> &#8211; but there is one reason above all else why I think that becoming a BiggerPockets Pro will help you take your real estate game up to a whole new level in 2013:<strong> it will help you do smarter math.\u00a0<\/strong><\/p>\n<p>Seriously.<\/p>\n<p style=\"text-align: center;\"><strong>Bad Math = Bad Deals<\/strong><\/p>\n<p style=\"text-align: center;\"><strong>Smarter Math = Good Deals <\/strong><\/p>\n<p style=\"text-align: center;\"><strong style=\"line-height: 1.5em;\">More Good Deals = More Success.<\/strong><\/p>\n<p><em>See? <\/em><\/p>\n<p>Let me explain further, and show you a tool that you should be using <em>every single day<\/em> in your real estate endeavors.<\/p>\n<h2>How to Avoid the Real Estate Mess I Made<\/h2>\n<p>Let me go back to the story about the terrible investment I did. \u00a0I DID the math before I started &#8211; but I didn&#8217;t do all of it. \u00a0I used my spreadsheet and I looked at how much it would cost me to buy the property, how much I would put into it, and how much I could sell it for. \u00a0I even remembered to account for the extra costs like Realtor fees and more.<\/p>\n<p>However, I forgot to include a lot of numbers.<\/p>\n<p>For example, had I used the <a href=\"https:\/\/www.biggerpockets.com\/flip-analysis\/\" target=\"_blank\">BiggerPockets House Flipping Calculator<\/a>, I would have realized that it was going to cost me almost $1200 per month just to hold onto the property. Had I entered in &#8220;24 months&#8221; into the House Flipping Calculator, I would have quickly realized that my numbers were WAY off and I was destined for failure. Had a accounted for going 20% over budget, like the calculator will demonstrate for you, I would have realized how thin the deal really was.<\/p>\n<p>Additionally, I screwed up in an even bigger way.<\/p>\n<p><em>Did you notice I said this property use to be a duplex?<\/em><\/p>\n<p>In fact, the property was almost completely RENT READY, just needing a little bit of paint and carpet to make it ready to rent, for a total of $1545 per month.<\/p>\n<p>I bought the home for $40,000 &#8211; and it was in a GREAT location with an amazing view of my entire town. However, for some reason I got the bright idea that flipping this home and turning it into a single family was the best solution.<\/p>\n<p>Stupid. Stupid. Stupid.<\/p>\n<p>Had I used the <a href=\"https:\/\/www.biggerpockets.com\/buy-and-hold-calculator\" target=\"_blank\">Rental Property Calculator<\/a> from BiggerPockets- I would have been blown away with the cash flow potential. Just take a look at what the potential, as a rental, could have been:<\/p>\n<p><a href=\"\/renewsblog\/wp-content\/uploads\/2013\/12\/Screen-Shot-2013-12-26-at-1.36.17-PM.png\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-52346 aligncenter\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2013\/12\/Screen-Shot-2013-12-26-at-1.36.17-PM.png\" alt=\"Screen Shot 2013-12-26 at 1.36.17 PM\" width=\"634\" height=\"546\" title=\"\"><\/a><\/p>\n<p>Not only would this have been a &#8220;3% rule&#8221; deal and produced a 71% cash on cash return on investment &#8211; I would have cleared almost $1,000 per month in cash flow after setting aside reserves! Ah!<\/p>\n<p>Do you see now why I feel so strongly that if only I had used the BiggerPockets Calculators, as well as asking for feedback in the BiggerPockets deal analysis forum, I would have been so much better off? Instead of making no money, I could have had a cash flow positive rental, in a great neighborhood, with maybe two weeks of work.<\/p>\n<p>It hurts just to think about it.<\/p>\n<p>However, after this deal, I began to look at ALL the numbers, and began to tweak my excel spreadsheet to incorporate all of this. Over the next few years, I tweaked and changed my spreadsheet until it was perfect&#8230; and then we turned that spreadsheet into the BiggerPockets Calculators.<\/p>\n<p>This is why I&#8217;m so passionate about this. This isn&#8217;t just a sales pitch &#8211; this is the difference between wasting unbelievable amounts of time and money and finding incredible success.<\/p>\n<p>Now &#8211; you may be asking &#8220;What does Math have to do with being a BiggerPockets Pro?&#8221;<\/p>\n<p>Here&#8217;s the low down:<strong> The calculators are exclusively for BiggerPockets Pro and Plus members<\/strong> (&#8220;Plus&#8221; is like a miniature version of &#8220;Pro&#8221;. Still cool &#8211; but not quite as fancy.) In other words, if you aren&#8217;t a BiggerPockets Pro or Plus member, you can&#8217;t use these calculators. (Well, you can use them once, to test drive them, but after that &#8230; nada.)<\/p>\n<p>(If you wanna see a video of the calculators in action check out <a href=\"\/renewsblog\/2013\/11\/28\/analyze-rental-property\/\" target=\"_blank\" rel=\"noopener noreferrer\">this video<\/a>\u00a0to see how I used the Rental Property Calculator to buy an Ugly Purple Triplex and<a href=\"\/renewsblog\/2013\/07\/31\/how-to-analyze-a-fix-and-flip\/\" target=\"_blank\" rel=\"noopener noreferrer\"> this video<\/a> to see how I used the House Flipping Calculator to analyze a potential house flip.)<\/p>\n<h2>What Will You Do?<\/h2>\n<p>You don&#8217;t need to become a <a href=\"https:\/\/www.biggerpockets.com\/pro\/\" target=\"_blank\" rel=\"noopener noreferrer\">BiggerPockets Pro<\/a> member to analyze deals. There are millions of people who have succeeded in life without out it. However, I CAN tell you that these calculators were designed by investors, for investors, with the purpose of saving you time, money, and risk on your next real estate deal.<\/p>\n<p>Whether you are a house flipper, buy and hold investor, wholesaler, or not quite sure yet &#8211; these calculators, and other tools for BiggerPockets Pro members, can help you avoid mistakes and find success in 2014.<\/p>\n<p>Even if you don&#8217;t care about the calculators, there are benefits to being a Pro member that you probably do care about, such as:<\/p>\n<ul>\n<li>Helping out BiggerPockets<\/li>\n<li>See who&#8217;s looking at your BiggerPockets Profile<\/li>\n<li>See who&#8217;s investing nearby you &#8211; and connecting with them<\/li>\n<li>To stand out in the Forums as an expert<\/li>\n<li>To download unlimited files from the BiggerPockets Fileplace<\/li>\n<li>To post ads in the BiggerPockets Marketplace<\/li>\n<li>And much, much more.<\/li>\n<\/ul>\n<p>To upgrade to BiggerPockets Pro or Plus memberships today, or simply to learn more about the many benefits to going Pro, <a href=\"https:\/\/www.biggerpockets.com\/pro\" target=\"_blank\">click here<\/a>. If you are not even a part of the BiggerPockets Social Network &#8211; I invite you to join! Basic memberships are totally free and get you access to a TON of great features on the site. If this is your first time here &#8211; be sure to check out the <a href=\"https:\/\/www.biggerpockets.com\/starthere\" target=\"_blank\" rel=\"noopener noreferrer\">Start Here<\/a> page!<\/p>\n<p><em>Okay &#8211; I&#8217;m off my soap box. Now go sign up and avoid the mistakes I&#8217;ve made.\u00a0<\/em><\/p>\n<p style=\"text-align: center;\"><a href=\"https:\/\/www.biggerpockets.com\/pro\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-52352 size-full\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2013\/12\/button.png\" alt=\"button\" width=\"408\" height=\"39\" title=\"\"><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Stupid. Stupid. Stupid. The house was formerly a duplex and I decided it would make more sense to turn it into a big single family home and try to flip [&hellip;]<\/p>\n","protected":false},"author":710,"featured_media":69289,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4252],"tags":[],"class_list":["post-52345","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-deal-analysis"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/52345","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/710"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=52345"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/52345\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/69289"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=52345"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=52345"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=52345"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}