Rental Property Investor · Overland Park, KS · Member since 2018 · 49 posts · 30 votes
We recently had a deal go south, which was disappointing enough itself, but as I’ve been reading the forums and listening to the podcasts, I feel like a big ignoramous when it comes to REI. It’s made me realize that the properties we have probably weren’t good investments, and it’s got me feeling a little discouraged. Any tips or words of wisdom from the seasoned professionals out there?
Long story short, right now they are turning into money pits. There’s not much equity, and I’m not sure how to go about funding the rehab that needs done. I feel like I might be at a point where it’s best to just dump them and start new.
...and there's your answer.
Do you know the similarity between Poker and REI (not gambling)? The secret to success in both is the same.
The answer: Stay in the game.
If you continue to hold a property that is taking your cash (negative cash flow), you will be out of the game just as fast as if you were to keep putting chips in the pot of a really bad hand.
You haven't lost any money when you lose hands in poker, just like you haven't lost any money when you have negative cash flow...as long as you still have money left, and you get out of those bad "deals". In poker, the chips from lost hands, are just in differents pile on the table...and can be recovered as long as you have chips left to stay in the game. Money from negative CF, or properties with less value than cost, are not lost unless you let those properties bleed you dry.
In both cases, you can always recover those funds...on the next "deal". The secret, is to get out of the current ones first...before they take away all your chips/cash, and eliminates you from playing in either game.
Rental Property Investor · Tampa, FL · Member since 2018 · 251 posts · 124 votes
8y
@Erin Auman congratulations on getting started!! Many people never make it this far.
I bet you are learning a ton and with such a low purchase price, it won't break you.
It sucks when you're in a money pit, it feels like quick sand and for the life of you, you just want it to stop. We had a money pit on our 3rd investment house, similar to yours, it cost us $20K to buy it, and we ended up having to spend $35K in renovations ( getting weaseled out of $11K roof hurt the most), and I hated it... oh, our contractors stole the copper pipes, so we had to do all new plumbing ($3k), so even just talking about it-- I remember how pissed off I was, and it's just like.. make it stop. Now, 1 year later, that's probably our most solid rental-- since everything is new we really don't have any problems with it, and it looks AMAZING-- we call it our "Show Pony." It sucks, but keep going, not all of them will suck, and hopefully you can learn what to avoid with this experience.
Another tactic I do, is when I get bad news.. I give myself a solid 15 minutes to yell, *****, complain, the whole 9 yard... let it all out, and then move out, this isn't a cheap or easy business... just move forward.
Regarding the rehab, just a suggestion... is you can tell the current tenants. .. hey, each year we are going to make your house even better, and slowly increase the rent by $100 each year. This way you keep them as tenants, have the cash flow, and slowly but surely improve it so that you can demand the $1K rent. Hope this helps!
Rental Property Investor · Overland Park, KS · Member since 2018 · 49 posts · 30 votes
8y
@Ian Walsh
The definition of ignoramous is basically someone who is ignorant, or in other words doesn’t know. You said you didn’t know what it meant, so I was asking if you were intentionally being ironic with that statement. Of course, that was before I read your later post about it being ironic, so I guess I should have just kept reading before responding. :-)
Normally to replace a roof, we pay around $5-6K. Honestly, I think it's because I'm a girl, the guy purposely ripped me off and essentially charged me double... they did replace some roofing boards, but overall it was just BS.. did work that wasn't agreed upon.. going from a $5200 quote to $10,300 is BS in my book. Shady contractors are definitely out there :-\
Rental Property Investor · Overland Park, KS · Member since 2018 · 49 posts · 30 votes
8y
@Aaron Taylor
It’s in Osage City (near Topeka). I see I’m in your neck of the woods, now! There are a handful of similar sized, similar aged houses in town. Sticking with it for the cash flow at this point seems like my best option, I think. I need to start getting more bids for the repairs!
Rental Property Investor · Indianapolis, IN · Member since 2018 · 7 posts · 7 votes
8y
Congratulations. You have been compensated with the gift of knowledge. Sounds like you are learning about the criteria you want to have on your next deal. Seek out private money for the rehab if the ARV makes sense for what you own.
Rental Property Investor · Columbus, OH · Member since 2018 · 23 posts · 5 votes
8y
Hey Erin, most answers on here say to keep going, I'd like to suggest to throw in towel. Since poker seems to be the analogy here, you need to know when to hold 'em and when to fold'em. No reason staying in a bad deal. There is no shame, you've learned a lot, and Turner constantly says if you can break even on your first and second deal you're off to a good start. This bad deal is weighing on your ability to move forward on the good deals.
Secondly, it looks like your investing in Kansas. I just got done listening to episode 282, Tim and Jay mention how Kansas isn't the best place to invest. Please don't take this out of context, I've only been to Kansas a handful of times, so I'm definitely not qualified to give advice on your state. However, I saw you were investing in Kansas and it just reminded me of the podcast, take it for whatever its worth!
Rental Property Investor · Overland Park, KS · Member since 2018 · 49 posts · 30 votes
8y
@Courtney M.
I’ve only been listening for a couple months, so I haven’t heard the scary starting out stories yet. It’s nice to know I’m at least in good company!
Rental Property Investor · Overland Park, KS · Member since 2018 · 49 posts · 30 votes
8y
@Travis Weitthoff
I’ll have to look up that episode. Having lived in Kansas most of my life, though, I do know there are places where the rental market is good and properties still appreciate here. I definitely want to start investing in more densely populated areas and college towns.
Baton Rouge, LA · Member since 2018 · 2 posts · 1 vote
8y
@Erin Auman
Just starting out also, so I understand. There is so much to learn. We've flipped two properties. Turned out really good and sold quickly, but we didn't really make any money. We have one rental and it's working out pretty good. Trying to learn how to buy property cheap enough to make money. I really feel overwhelmed.
Real Estate Investor · Washington, DC · Member since 2014 · 236 posts · 328 votes
8y
@Erin Auman most important thing is to not get discouraged and see things objectively. How many of the improvements are "must haves" to get it rented vs "nice to have". Can you repair some things vs replace them? Can you partner with someone with more experience and sell them half and that would relieve 1/2 the pressure on you? And yes, get more quotes...and negotiate!
We recently had a deal go south, which was disappointing enough itself, but as I’ve been reading the forums and listening to the podcasts, I feel like a big ignoramous when it comes to REI. It’s made me realize that the properties we have probably weren’t good investments, and it’s got me feeling a little discouraged. Any tips or words of wisdom from the seasoned professionals out there?
Gurlfriend, a deal goes south.. means you are doing it right. I would be worried if you made 3 offers and all 3 got accepted. THEN something is wrong.
So everyone says to be a REI is to be a marketer. I disagree. You need to be a marketer and you need to be a block of stone! Thick skin, you need your inner Buzz Lightyear to be awakened.
"To Infinity And Beyond!!"
wait wait wait ...that doesn't sound right.
Wait give me a sec..
OK you need to have your inner.. Galaxy Quest, .. alien ugly dude with huge head.. be awakened.
"Never Give Up, Never surrender".
Go watch that movie with the kids.
You will thank me and you will become rich and filthy.
Wait.. I mean filthy rich!
Seriously... REI is hard. Getting discouraged is actually good. Yo need to get used to it and train yourself.. and train your mind to overcome it because it is going to happen and more brutally as you become more succesful.
Let me make up a quote and you heard it here first.
OK let me think...
"Successful people didn't get there because they were good. They got there because they fell, stood back up, and learned from that fall"
Specialist · Detroit · Member since 2018 · 14 posts · 12 votes
8y
@Erin Auman wow I know how you feel. What I try to keep in mind (as a person who is prone to discouraging thoughts) is that a lot of people want you to feel inferior, to be scared of rei, but really you know what you’re doing, and things will work out just fine for you, and in the end if this whole thing goes south and you lose money, remember people pay MUCH more than that for the same education you got, only you’ve applied what you’ve learned haha. Don’t think for a second that you can’t do this, the only way the greats became great was falling on their face. 100% of entrepreneurs fail, but the ones who keep moving after a failure are who we call the greats... even if this doesn’t turn out to be a failure (which it doesn’t sound like it will) you WILL fail eventually, and you need to remember, it MUST happen to you on the road to greatness, there is no other way to learn.
Flipper/Rehabber · Baltimore, MD · Member since 2018 · 265 posts · 387 votes
8y
If it hasn't been mentioned - YouTube motivational speeches. I listen to one or two or more every day. I do this while doing some mindless task like washing dishes (or when the kids are... being kids) and I want to keep "working" but can't use my hands or take notes. They may seem cheesy to some but seriously, they will help put your mind right if nothing else around you is helping and you feel like quitting.
Quitting is easy! Most people in your life will encourage you to quit - because they don't want to see you upset and suffering. Do not go to most people in your life when feeling discouraged. Only go to those who are working towards or are doing what you what you want for yourself. That's where good advice and motivation will come from.
Personally, I've found BP to be hit or miss with that. However, after some brain training, the positivity and encouragement presented will carry much more weight than the negative.
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
8y
I have found that if I make mistake on my numbers and a deal is not where I want it to be, getting out of it as fast as possible has been the best move. There is always another deal somewhere else that I can buy at the right numbers. I would strongly suggest against a refi for more leverage. I am not sure if that's what you were alluding to in a prior post. If not, then disregard. Adding leverage in a refi when a deal is already thin is doubling down on a mistake.