Just canceled my 3rd deal… time to start over
Member since 2023 · 41 posts · 32 votes
Hey guys,
So I recently got out of my 3rd deal in Cicero, IL (Chicago Land Area). I’ve gone through the process 3 times (Offer accepted, appraisal, inspection) and for some reason something always needs to come up. So it’s time to start looking again. I have faith that it’s all in Gods hands to decide when it’s the best time for this to go fully through, however, I’d like some pointers from the BP community.
Has anyone else gone through this? What did you do differently? Is it the location I’m trying to work in? The state? The town? Is there something I should consider?
For the past 7 months I’ve listened to several podcasts and read books.. I truly feel like I just need to execute now to get that hands on experience. I refuse to stay in the “analyzing” stage.
For now, I’m going to take a month or so to readjust, read more books, save more money.
Thank you.
I'll take what may be an unpopular stance with some - you did the right thing by backing out of those deals. You didn't know what you didn't know. I've learned that pain is the best educator. I bet you'll check tax records for double lots, look at foundations and plumbing, and inquire about water being turned on for inspections much sooner on your future deals.
@Hector Serna PLEASE take Jonathan up on his offer to talk through your situation. I have no dog in this fight, but the point of these forums is to connect people with more experienced investors and get answer to common (and uncommon) questions or problems. I don't know Jonathan, but from my experience seeing him on the forums, he knows what he is doing and has nothing to sell. You'd be wasting a golden opportunity if you did not get on the phone with him.
Proud of you! I'm trying to do the same. Best of luck!
Likewise!
@Hector Serna - Sorry to hear about the struggles so far.
Take those first 3 deals as learning lessons and use that to grow. Going into the next deal you should have a lot better idea of what to look for and red flags to avoid. Don't give up!
@Hector Serna sounds like some of these things could be resolved/noticed before actually getting under contract
Looking for advice
Thank you though
For properties where the utilities are off, this can help you discover potential plumbing issues:
At the home improvement stores, you should be able to find the fittings to make an adapter for connecting an air pressure tank or portable compressor to a hose bibb. You need a male quick-connect fitted to a female hose fitting. Even just a pressurized air tank can help you find if the plumbing will hold pressure. Turn off all the faucets and the shut off under the toilet(s), then apply air pressure to the hose bibb and open it. City water pressure is around 50 PSI in many places, so no worries. If the pressure doesn't hold or you notice water being forced out of any pipes, you know it may have plumbing issues.
For electrical, FHA inspectors use a generator connected to the power panel. I don't actually recommend anyone to do that. However, what you may be able to do is use a power inverter - 12V to 120VAC. Make a connecting cable so you can plug the output of that into a wall socket. Turn off all the breakers, unplug the fridge, and test circuits one at a time by connecting the inverter output to a socket and test other sockets on the circuit with a drop light or a lamp. If the converter reports an issue or the light doesn't come on, there are likely electrical issues.
Gas, of course, is another matter. Don't mess with it.
Just some ideas. Others may provide better input for you.
If you can find a class on home inspections, that might help you know what to look for. Especially around older communities like Cicero or any older homes, you want to look for what's known as "knob and tube" wiring - individual conductors, possibly uninsulated, strung inside walls and other spaces using ceramic "knobs" as insulating suspension. The tubes are ceramic pieces insulating a wire passing through a rafter, stud, etc.
Hope this helps ...
Hey guys,
So I recently got out of my 3rd deal in Cicero, IL (Chicago Land Area). I’ve gone through the process 3 times (Offer accepted, appraisal, inspection) and for some reason something always needs to come up. So it’s time to start looking again. I have faith that it’s all in Gods hands to decide when it’s the best time for this to go fully through, however, I’d like some pointers from the BP community.
Has anyone else gone through this? What did you do differently? Is it the location I’m trying to work in? The state? The town? Is there something I should consider?
For the past 7 months I’ve listened to several podcasts and read books.. I truly feel like I just need to execute now to get that hands on experience. I refuse to stay in the “analyzing” stage.
For now, I’m going to take a month or so to readjust, read more books, save more money.
Thank you.
I think you've received a lot of good feedback here.
First deal - Obviously without a home inspection, there wasn't much you could do to catch the foundation and plumbing issues. That's just bad luck but at least you avoided that nightmare.
Second deal - The listing agent normally discloses if there are multiple parcels associated with a given property, which it sounds like they did not in this case. At least your attorney caught it though.
Third deal - Getting the utilities turned on was a preventable issue if the listing agent and your agent were communicating about the inspection. I've had to learn this same lesson so unless you've dealt with it before it can be easy to forget about.
General tips:
-In the Chicago suburbs, be aware of the village compliance inspections and is the buyer or seller responsible for those? A lot of times the listing agent will post the inspection report on the MLS and have the property sold as is, so the buyer has to take on those repair items.
-Get a sewer scope inspection to make sure the sewer line is in good condition. You don't want to get saddled with an expensive sewer repair.
-Get a radon test. It's not expensive and if it turns out there are high radon levels you can use that as a negotiating tool.
If you keep analyzing deals and making offers, eventually you will close on the right property!
@Hector Serna PLEASE take Jonathan up on his offer to talk through your situation. I have no dog in this fight, but the point of these forums is to connect people with more experienced investors and get answer to common (and uncommon) questions or problems. I don't know Jonathan, but from my experience seeing him on the forums, he knows what he is doing and has nothing to sell. You'd be wasting a golden opportunity if you did not get on the phone with him.
On that now! Followed him on IG a few days ago too haha
The first deal is the scariest and so many of us have been where you are and especially since you're looking at deals that are more money out of pocket than a 50k investment property. It's okay to be cautious, but don't get trapped into the fear that you're making a bad move. Learn from each experience and when it's your time, it will feel right.
@Hector Serna sounds like some of these things could be resolved/noticed before actually getting under contract
Looking for advice
Thank you though
For properties where the utilities are off, this can help you discover potential plumbing issues:
At the home improvement stores, you should be able to find the fittings to make an adapter for connecting an air pressure tank or portable compressor to a hose bibb. You need a male quick-connect fitted to a female hose fitting. Even just a pressurized air tank can help you find if the plumbing will hold pressure. Turn off all the faucets and the shut off under the toilet(s), then apply air pressure to the hose bibb and open it. City water pressure is around 50 PSI in many places, so no worries. If the pressure doesn't hold or you notice water being forced out of any pipes, you know it may have plumbing issues.
For electrical, FHA inspectors use a generator connected to the power panel. I don't actually recommend anyone to do that. However, what you may be able to do is use a power inverter - 12V to 120VAC. Make a connecting cable so you can plug the output of that into a wall socket. Turn off all the breakers, unplug the fridge, and test circuits one at a time by connecting the inverter output to a socket and test other sockets on the circuit with a drop light or a lamp. If the converter reports an issue or the light doesn't come on, there are likely electrical issues.
Gas, of course, is another matter. Don't mess with it.
Just some ideas. Others may provide better input for you.
If you can find a class on home inspections, that might help you know what to look for. Especially around older communities like Cicero or any older homes, you want to look for what's known as "knob and tube" wiring - individual conductors, possibly uninsulated, strung inside walls and other spaces using ceramic "knobs" as insulating suspension. The tubes are ceramic pieces insulating a wire passing through a rafter, stud, etc.
Hope this helps ...
this is solid progress - just keep doing what you're doing. it took me about a year of looking at properties and making offers and backing out of a couple deals to get my first rental in Pittsburgh, and it took me THREE YEARS to find a seller finance deal.
a lot of people never even get a single deal under contract.
The first deal is the scariest and so many of us have been where you are and especially since you're looking at deals that are more money out of pocket than a 50k investment property. It's okay to be cautious, but don't get trapped into the fear that you're making a bad move. Learn from each experience and when it's your time, it will feel right.
Hector,
Keep your head up and you'll find the right deal for you.
Once you make your purchase, you'll be learning even more.
One area that always seems to be an issue in older homes is the water supply lines. Older galvanized water pipe deteriorates from the inside out. If you remove the screens from any interior faucets (kitchen/baths) and find some rusty sediment on a property with town water, you're looking at having to replace the supply line from the street into the home.
It's easily fixed but an expense much like any other roof, foundation, old knob and tube electrical or root filled old sewer line. Eventually you'll find these challenges are really opportunities to ask for credits at closing or price adjustments.
You've already made some excellent financial choices so I'm sure you'll have success in REI. Don't let issues and speed bumps get you disheartened or dissuaded. The big gains come over time after lots of headaches, heartaches and hiccups.
Also, living near Lowe's helps. :)
@Hector Serna, I'm also pretty new. I have my first BRRRR in progress and almost to the rent stage. Before closing on it, I too had 3 properties under contract. Like others have said, learn from each and keep trucking. Success will come if you improve from every experience.
Here's my path.
1. Near turnkey but still needed work. The seller had flipped and was wanting full ARV but cut a lot of corners doing it themselves. I realized I needed to improve my negotiating skills and find properties at the discount needed to force equity and get capital back for another deal.
2. Got it under contract, inspected with my contractor, made a second offer during inspection to account for everything we needed to work on. The seller gave me a "final counter" so I cancelled and watched it sell at a price that would've worked with a different exit strategy. I again realized I needed to improve my negotiating skills and to be open to more than one exit strategy.
3. Same as number 2. In this case, I got caught up in wanting it so bad, I agreed to a price that wouldn't work and waived the inspection period. Thankfully I kept a financing contingency, and I wasn't able to get the financing because the numbers didn't work. I learned to trust my numbers and not get too excited about getting something under contract. This one still has not sold 3 months later.
4. I found this one through a wholesaler referred by my GC, and I negotiated directly with them. I stood by my numbers and was more confident in the negotiation because I could ask real time questions and respond to counter offers in real time. I was even able to add a commission for my agent for helping me with other deals, even though he did not source this specific lead. Fast forward to now, I was expecting a 2-3 month rehab, and we're almost done before the 30 day mark. My contractor also found ways to save money so we should be about 10-12% under the original budget. I learned that agents can be amazing to help find deals and can help you learn (be sure to get them paid if they're good), and a great contractor can make a big difference, even if they cost a little more than the other guys.
@Hector Serna "and for some reason something always needs to come up" - Can you explain what this means? What was (is) your strategy and what stopped you from closing?
Everyone has anxiety and stress when buying real estate. What we tend to forget is the risk of NOT buying something. RE, stocks, bonds, mutual funds, it all comes with a level of risk and you have to be comfortable with that risk. You have to be happy with the return you seeks. If you're knowledgeable enough to avoid the pit falls and understand the exit strategy it's time to buy. Time is against you if you don't own any assets. Big or small.
Hey Jaron,
First deal (MU)- After inspection, in the crawl space, found out foundation of the home was in horrendous condition, on top of that it had plumbing issues. Took a contractor with me and I was looking at 70k-80k in repairs
Second deal (SFH) - Great home, once we got closer to closing, turns out the property was on a double lot. Double lot = 2x property taxes. Skyrocketed my mortgage by $400+.
Third deal (SFH) - Short sale. Water shut off. With inspection day nearing, the seller and town weren't willing to turn the water on for a thorough inspection. I was going to pay $1k to turn it on and on top of that, the bank wasn't willing to negotiate the property price to give me a hand to proceed. Just red flags all around.
I have been investing consistently into the S&P 500 and other “safe” ETFS/Index funds for the past 3 years now. On top of that, I have my 401k building, I have zero debt. I’m just looking to expand beyond that.
You're moving too fast bro. This is all due diligence you should be doing before wasting other people's time and erroneously putting properties under contract. You're contractor is probably going to quit working with you here real soon.
Hi Hector,
I'm sorry if you mentioned it but I didn't catch it. Are you working with an agent that specialized in or has enough experience in working with investors interested in distressed properties. I started out with such a person here in New Jersey and it has made a big difference to me and in my success. I am a buy and hold investor though I'm switching to flipping because of interest rates. It sounds to me like you are getting close to your first deal. For me, I did go a little outside my parameters of what I thought was a perfect deal in order to get my start and I was glad I did that because the analysis paralysis was killing me. So my contribution to this discussion is to make sure your agent can walk into a distressed property and point out some of the flaws on day one. Agents will give a disclaimer before they say anything because they are not fully qualified to give advice on building structural integrity but a skilled agent can weed out the worst and save you time and frustration. Good luck, Hector. You are heading in the right direction my friend!
@Hector Serna what made you walk from the last deal? That house was in a nice pocket in Cicero in the quietest area close to everything. Was it the water being off? A few repairs?
At the end of the day, you have to take a risk at some point. Every property will have issues, and the cheaper ones always have the most issues. The main thing is to really dig in with local investors so you have as much knowledge as possible.
Unfortunately the buying process is so incredibly emotional, especially as a first time buyer. I would say protect your emotions from now on until you are at the closing table. I know that's easier said than done, but try to find a team around you to think as logical as possible and keep emotion out of it until you know it's a done deal!!
@Hector Serna keep motivated and truck along my friend. For the 2nd and 3rd instance, in my opinion you should have been working with better professionals. How was your agent and/ or attorney not aware about the tax situation or size of the lot you were purchasing towards the beginning of this.
Regarding the water shut off on a short sale, I once again allude to not being guided properly by the professionals you are working with. It should be noted either in the MLS or on your initial tour that the water was shut off. Therefore in your offer/contract state that water MUST be turned on to properly evaluate the property during due diligence.
I'd look into investing in the Columbus, Ohio market. While these things still happen, pulling the trigger here is something that you would not regret with the appreciating market and cash on cash return.
Hey guys,
So I recently got out of my 3rd deal in Cicero, IL (Chicago Land Area). I’ve gone through the process 3 times (Offer accepted, appraisal, inspection) and for some reason something always needs to come up. So it’s time to start looking again. I have faith that it’s all in Gods hands to decide when it’s the best time for this to go fully through, however, I’d like some pointers from the BP community.
Has anyone else gone through this? What did you do differently? Is it the location I’m trying to work in? The state? The town? Is there something I should consider?
For the past 7 months I’ve listened to several podcasts and read books.. I truly feel like I just need to execute now to get that hands on experience. I refuse to stay in the “analyzing” stage.
For now, I’m going to take a month or so to readjust, read more books, save more money.
Thank you.
@Hector Serna I'm reading a lot of chitty-chitty-chit-chat in replies but not much for actionable advice. So I'll have to be the contrarian here.
On your cancelations, they make sense, I commend you on it, reads to me like you did things exactly as you should have, including with the later adjunct info to it all.
Would it be better if you were experienced in home building and could have sniffed it out earlier, a master of process's and hammered bank into accepting something else, well of course but your not those things, your new, without those skillset's or knowledge base so ignore the banter that your should have done something out of your depth. It's one of those most valuable skills in investing, knowing what you don't know, and not trying to pretend ones way through it.
Every time I've seen an "investor" hit those BIG losses, and BIG problems, it's when they ignored that important principle, and had to reap the consequences of it.
Now, what I suggest going forward, is rethinking your focus of properties; what your targeting, how your targeting them. Sounds to me like it's all MLS hunting. Doing that you gotta understand it's a big #'s game, totally reasonable to be a hard slog to find a "deal".
I suggest stepping back, refocus mind on answering the question of what problems your solving. Because THAT is when one can get a "deal", by solving problems, your kind of problems, the problems you can readily, skillfully solve, for profit.
The nauseating expectation some have that it's buying paychecks, it gives me the verp's.
I am betting there is a slew of properties in your target market that are listing and expiring, having never sold. I suggest looking into those. Asking yourself why it didn't sell. And don't just say "too much", if that's the case ask yourself WHY it was too much, was agent just doing a pizz-poor job of things? Look up records to see what that owner bought at, current mortgage on record, estimated equity, by date of mortgage at what %lock are they at. Because you know, those people have a desire to sell. And a problem, it didn't sell. Sometimes, there is a potential solution one could introduce, for profit.
Could be a place that just needed some updating or repairs and it would be worth what was wanted and more. Or sometimes it could be a seller financed deal. Or a JV to reno and retail. Or or or. Point is, there is a known desire to sell, and a known problem that it didn't sell, put in efforts to answer the why's and how's, and you WILL find gold in those fields. Maybe not 1st, 2nd or 5th, but I assure you WILL find gold if you dig there.
Properties all have issues and real life returns look worse then what people post about on this site. My most successful clients are the ones who were not picky, they got the wealthiest.