The Real Estate Journey Begins

In 2009 - yes that long ago - I attended one of these 'free' guru seminars. I was intrigued. My current business was on track, but I knew that in the long run it would always be a hand to mouth business. So, I purchased a very expensive program, thinking I would be able to recover the expense in a matter of months! (I had run a few businesses and thought I was smart - so was confident I could do this!)

So, after attending a 5 day workshop - describing all aspects of the Real Estate Business, I narrowed it down to the areas I wanted to pursue - Mobile Home Parks and Apartments

The journey began.

I spent a fair amount of time reading the materials given at the workshop and signed up for Loopnet to get an idea of what was out there in the commercial space. Of course, now I got a lot of 'Take my course and we'll make it easier for you' solicitations. And, naive as I was I did just that! I don't necessarily regret what I did, as I did most certainly learn a lot. The one I chose was Apartment investing.

I chose to attend one of their specialized workshops on Mobile Home Parks (included in the price of the original course) in another City & State. And as I had also started looking at apartments, I chose to look into some apartments in that city. Again, a very good experience, though nothing came of this research. 

But the mobile home park course got me going! I was also able to get a mentor (from the original class) and I chose to get one focused on Mobile Home Parks.

To make a long story short, after several weeks of working with this mentor, I was able to find a mobile home park with fabulous seller financing (I found the park on a mobile home park store) I also was able to get a non-recourse loan for the down payment. I thought I was off to the races.....

Here are the lessons I learned from that experience:

1) I used the seller agent as my agent - dual agency - (against the advice of my mentor)

2) After doing some serious due diligence and sharing this with my mentor, I was advised to seriously consider NOT doing the deal. I did not take his advice. :-(

3) Some issues came up during the inspection period that I chose to ignore, (I was so keen to get this deal and get started, I turned a blind eye to some issues that should have been a red flag.

4) During the walk through, prior to the closing, I noticed some repairs that I asked the (dual) agent to rectify. He promised me these would be done after closing as closing was the next day. I trusted his word and needless to say they were never completed!

Besides all the above, some things were never disclosed to me and I was naive enough not to ask.

1) On a commercial property, I had to pay a deposit equal to 6 months average electrical usage to the utility! This was $7,000 that I had to borrow, as I had squeezed out all the money for inspections, closings etc.

2) When doing the Estoppels, I found that some of them were not forged, but not correct, so our rent roll was not what it seemed.

3) I found the previous manager had made promises to some of the tenants that we were unable or unwilling to fulfill, so lost those tenants!

4) The property itself had some issues that were not disclosed - like flooding in wet weather.

5) I did not have a reserve for issues like the above. 

6) The park was occupied by low income (no income) tenants and with the downturn in the economy, most lost their jobs and/or benefits.

So, even though this was technically a no money down deal, it cost me more than I bargained for.

I landed up selling the park at a loss in 2012.

Lessons Learned:

1) If you are getting a mentor - LISTEN to him/her!

2) Don't be so keen to get your first deal that you ignore red flags

3) Delay the closing if the seller does not complete contractual items

4) Ask and ask and ask again questions about what you may have missed. There are many resources - Bigger Pockets - that can help you see through the cloud of inexperience. (I did not know about BP when I did this deal!

Stay tuned for my next 'what not to do in real estate' lesson