San Antonio, TX · Member since 2009 · 86 posts · 13 votes
Thanks to everyone for sharing their insight and advice. I'm a new investor and this site is of great help to me. I've read a lot about success stories...I was wondering if anyone would like to share the mistakes they made and what they learned from them? I'm not so much interested in generic issues but I'd really like to hear about specific issues.
Real Estate Investor · North Plainfield, NJ · Member since 2010 · 36 posts · 2 votes
15y
buying property with a partner who i was emotionally tied to, then she needed to occupy the property. getting money from her became a task like pulling teeth. needless to say she hardly ever paid. so in the between times of us not having tenants i paid the full balance of the mortgage. on top of all else our relationship began to sour and work needed to be done on the property but i didn't want to be around her so i was reluctant to do what i needed to do to make the deal work.
point is; no more emotional partnerships. they do more damage than good. and someone is going to lose! or both in the end...
Specialist · San Antonio, TX · Member since 2011 · 81 posts · 97 votes
15y
There is a book out there that does just that...
MY LIFE & 1,000 HOUSES:
Failing Forward to Finacial Freedom
...but I must warn you; I'm the author.
I talk a lot about what I tried that didn't work for me. I am a product of self-education after high school. The book describes my thought processes on the way to the money as I navigate my way after the "Get Rich" books, CDs and seminars. I fall down a lot in this book. Get the first 100 pages free at 1000Houses.com
SFR Investor · Virginia Beach, VA · Member since 2010 · 150 posts · 36 votes
15y
Biggest Mistake:
Taking professionals for their word. I learned quickly after my first purchase that you never take an RE agent, contractor, PM, etc for their word no matter how professional they appear. Always get verbal promises and fees documented.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
15y
Originally posted by Mitch Stephen:
There is a book out there that does just that...
MY LIFE & 1,000 HOUSES:
Failing Forward to Finacial Freedom
...but I must warn you; I'm the author.
I talk a lot about what I tried that didn't work for me. I am a product of self-education after high school. The book describes my thought processes on the way to the money as I navigate my way after the "Get Rich" books, CDs and seminars. I fall down a lot in this book. Get the first 100 pages free at 1000Houses.com
Thought this was brought up in your other post about financial freedom, guess they were right. :roll:
Most mess up buying books and trying to follow startegies someone else did insome other state. RE is local!!! At least for residential investors and small commercial. If you need entertainment, buy a guru book, if you want to learn, investigate RE in your area first.
Real Estate Investor · Elgin, IL · Member since 2009 · 135 posts · 9 votes
15y
Originally posted by Jon Klaus:
#1 Buying a rental in a bad area. I rationalized to myself: "but look at the cash flow."
#2 Underestimating rehab time and cost on an older home.
#3 Not properly screening and qualifying tenants.
Jon hit the nail on the head...though mine would be:
1, 3, 2
with 2 being the continous repair from dealing with crappy repair/rehab work or repairs getting done with a purposeful problem left behind so there would be a second or third service call...
Real Estate Investor · Fishers, IN · Member since 2009 · 408 posts · 196 votes
15y
biggest mistake I made was partnering without an exit strategy. You need to be in control of the deal and of your future. Always have the exit strategy in mind from the start.
Professional · Collingswood, NJ · Member since 2012 · 10 posts · 2 votes
15y
Paralysis by analysis. Waiting until everything is absolutely perfect before starting your first deal. I can only speak for myself by I learn tenfold more by actually partaking in the task as opposed to reading or listening about how it should be done. You're going to make mistakes, better to get them out of the way asap.
Specialist · MA · Member since 2009 · 858 posts · 306 votes
15y
My first investment property went GREAT. My mistake was thinking my second investment property was going to be the same as the first. No two are the same and I bought my second one at a very different time in the market.
What I learned was I needed to be a MUCH stricter landlord than I was. I'm not their friend, just their landlord.
Real Estate Investor · Select a State · Member since 2010 · 79 posts · 17 votes
15y
One of the first deals turned out great actually.
An apartment with market value of 490k as-is. I offered 295k, bought for 328k and sold 23 days later for 475k. Only repairs were picking up a dead bird from the balcony. (Which is very difficult in the winter... but that's not a dinner story :))
Mistake #1 - I thought it will always be this easy. (hint - I was wrong.)
#2 - All the profit from that first deal? It was good for 10 months of well-above-average salary for myself :) Plus taxes. Gone.
#3 and 4 - Several times I fell in love with a property, overestimated market value and ARV. Paid too much for it.
#4a - Listed a property for a lot more than it was worth. Got rid of it 11 months later. Should have priced it right the first time and sold in 2 months.
#5 - Stopped looking for properties and making offers due to a low point in a relationship. Have to keep personal life and professional life separate.
#6 - Offering too much for property during the first phone call and did not built rapport with seller. Happened more than once. Now I do my best to pre-qualify sellers before committing my energy and attention to a deal.
Real Estate Investor · Denver, CO · Member since 2011 · 17 posts · 8 votes
15y
I bought a rental property 6 years ago that is negative cash flowing and has zero equity.
A few things to remember.
1. Figure out what the house will rent for
2. Figure out what the mortgage payment is
3. Determine if you want to deal with the type of tenant who will live in the house.
4. Have an exit strategy.
You would think these would be elementary, apparently not for me at the time.
Developer · Cedar Rapids, IA · Member since 2009 · 97 posts · 42 votes
15y
- Feeling sorry for a tenant and giving them extra time to pay rent. I'm naturally more friendly with my tenants which helps longevity but when people start to take advantage of you, you gotta see it and take the steps to evict or cut ties while minimizing your losses. Get a process/system & know the laws. Big one for me.
- In a hurry and not taking the proper approach/time to evaluate situation or individual
- Underestimating cost of rehab
- Trying to make everything perfect, eventually it wears you and your wallet out
Real Estate Investor · San Antonio, TX · Member since 2011 · 57 posts · 16 votes
15y
I'd say the biggest mistake when I was first starting out was not collecting everyone's name and number when I went to networking events.
I was so focused on learning and on what I needed to get started...that I didn't realize the huge resource that was right there in the room for me.
For example, I can tell you with certainty that one of the following 4 factors is holding you back right now (this is true even for investors that have done a few deals): Money/Credit, Time, Knowledge, and Fear.
Well, all those resources were available to me in the networking groups I was going to. There was someone there who had each of those things.
Not to mention the fact that IF I got a deal...who better to turn to than one of these "investors" to flip the deal to or partner with.
So network and make contacts...these are obviously people looking for what I may find!
Real Estate Investor · Southern, CA · Member since 2010 · 84 posts · 30 votes
15y
I still make mistakes :jawdrop: , but its because I've entered a lot of different areas and expanded to different parts of RE.
My biggest mistake cost me $12K. I trusted someone and switched my HML to a supposed PML that was going to finance $30K more for a point less and 1.5% less than what I had locked down. I was assured by the slick talker the whole time and kept hearing that I would get something in email in writing. It never came. 3 days before closing, bait and switch; points went up by 5, interest rate went up by 5%, with a laugh and a 'take it or leave it'. They saw the great spread, they knew that I had to close in 3 days, and it was a Thanksgiving holiday and finding another lender and switching wouldn't be possible. I either lose my $10K EMD and my great deal or go with the financing. Dumb! And, I know better. This was my first HML and I was reassured the whole time.
2. Renting to a family member to help them out. My ex aunt was trying to adopt my cousin's kids. She already had the oldest one who loves to take apart cars. Needless to say, grease all over EVERYTHING and brought into the house through the garage. All the sob stories of not being able to pay rent. And, I even ran her credit and took an application and she was definitely someone I wouldn't rent to, but I was thinking more about the kids. :(
3. When I first started renting properties, I didn't realize the bank only took 75% of my rents even having long term tenants.
4. Trusting a real estate agent I shouldn't have. Took a deal right from under me.
5. Right now I have a tenant out of work and I'm working with her because she's been a great tenant since 2004. I will probably lose my shirt helping her, but I worked with her and put a note against her car (worth $9K) so at least I'll have that if she doesn't pay the rents I've let slide.
I'm sure there's more. Moral of the story... you will fail, and you will succeed through your failures. Don't give up for any reason!
Real Estate Investor · San Antonio, TX · Member since 2011 · 57 posts · 16 votes
15y
Chuck, these were great even for me. I love learning lessons....especially when they aren't mine...unfortunately even we still have "learning lessons". It's all part of the gig my friend.
Multifamily Investor · Toledo, OH · Member since 2008 · 296 posts · 308 votes
15y
My very first deal I bought from a wholesaler. I trusted his numbers...all of them. 8 years later I still own that house. It cash flows NEGATIVE $1,000 per month. Yes, that's per month. I call it my monthly tuition.
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
15y
Originally posted by Ryan Pyle:
My very first deal I bought from a wholesaler. I trusted his numbers...all of them. 8 years later I still own that house. It cash flows NEGATIVE $1,000 per month. Yes, that's per month. I call it my monthly tuition.
Investor · Groves, TX · Member since 2009 · 44 posts · 25 votes
15y
1st Mistake: Waiting too long to get started. I considered buying rental properties in my mid 20s but instead spent the money on stuff like Saltwater Fish tanks and corvettes. Bought my 1st investment property when I was 30.
2st Mistake: Taking advice from the wrong people, one person was an ex landlord and the other is a small time landlord. I thought someone who owned 2 single family rentals was an expert.